TOKYO -- Legislation aimed at aiding growth in Japan's financial technology sector passed the Diet Wednesday, paving the way for banks to acquire technology-driven startups.
Currently, banks are not allowed to own more than 5% of nonfinancial companies. The cap is set at 15% for bank holding companies. The revision to the Banking Law eases this rule, pending case-by-case government authorizations, if the funds are directed toward enhancing financial services through the use of information technology.
The Financial Services Agency will establish guidelines governing which companies banks can buy into.
Mitsubishi UFJ Financial Group and the two other Japanese megabanks have been laying the groundwork ahead of the rules change, such as establishing dedicated divisions and launching contests designed to unearth promising startups. The legislation's passage opens the door to full-fledged investments and tie-ups. Sumitomo Mitsui Financial Group is interested in operating a virtual marketplace much like Rakuten's.