Japan's "Glass-Steagall" Act

Among the world's major international financial centres there are some countries which have traditionally combined banking and securities business (notably West Germany and Switzerland both of which have a long history of ‘universal’ banking), others which are currently experiencing a fusion of these activities (UK and Canada for instance) and a diminishing group which retain laws separating commercial from investment banking (by far the most important being the US and Japan). The prevalent view appears to be that both public policy and commercial considerations point to eventual adoption of the universal banking model by all the major financial centres. Certainly, the co-existence of universal banking systems and regulatory regimes that prohibit the mixing of banking and securities business give rise to competitive disparities as well as supervisory problems. This article examines the present legal and regulatory constraints on Japanese banks' securities activities, the increasing pressures for relaxation of such constraints and the various options open to the authorities should they wish to adopt a more permissive approach to the mixing of banking and securities business