The financial regulatory reform committee held its 8th meeting on July 17. At the meeting, participants discussed (a) measures to ease rules on domestic financial companies’ ownership of subsidiaries in overseas markets, (b) ways to improve licensing standards on mergers between savings banks and (c) recent progress in the implementation of financial regulatory reform agendas sought by the committee.
With regard to the measures to ease rules on financial companies’ ownership of subsidiaries in overseas markets, the proposed measures will first ease rules on domestic banks, insurance companies, specialized credit finance companies and fintech businesses making investment in foreign financial and non-financial companies within the scope of regulatory boundaries exhibited in overseas markets. For instance, a specialized credit finance business specializing in auto finance products may be able to acquire a rental car business in an overseas market to expand its sales operation. An insurance company will be able to own a foreign bank operating in an overseas market. A fintech business belonging to a domestic financial holding company can acquire an investment advisory or investment consulting business as a subsidiary. As many financial companies have been making requests to ease regulations regarding their foreign subsidiary holdings, it is expected that business diversification driven by local demand will help boost their competitiveness in overseas markets.
Second, the proposed measures will ease rules on the maximum level of credit extension allowed for foreign subsidiaries. Through a revision to the supervisory regulations on financial holding companies, authorities plan to increase the maximum level of credit (within 10%p) that can be extended by a financial company to its foreign subsidiary for certain period of time (i.e. for first three years).
Third, for the rules that have been set up for domestic environment and are thus not quite suitable to be applied on foreign subsidiaries, authorities will prepare rules on exemptions or ways to exclude their application.
Fourth, the proposed measures will improve the entire reporting and disclosure rules to eliminate redundancy and the administrative burden associated with domestic financial companies’ business operation and expansion overseas.
Lastly, the proposed measures contain ways to make the supervisory inspection and sanctions administration over foreign companies more centered on prevention and improvement of operating practices based on their prudential management and internal control.
With regard to the easing of licensing standards for mergers between savings banks, the proposed measures will allow savings banks to expand their business operating area through mergers, which will help strengthen the competitiveness of regional savings banks and improve their prudential management practices.
At the meeting, the committee members also reviewed the progress of financial regulatory reform initiatives implemented over the year.
* Please refer to the attached file for details.