Foreign Bank Agency Business

The Foreign Bank Agency Business regime (FBAB) was introduced in 2008. Until then, the Japanese Banking Act had not clearly set out provisions governing cross-border banking services provided by banks, both Japanese and foreign. While Japanese banks need only file a simple notification, foreign banks are required to obtain specific approval from the FSA if they wish to act as an agent or intermediary on behalf of their head office and branches outside Japan, even though such foreign banks already operate under a banking license in Japan. In 2017, a partial relaxation was made, allowing foreign banks licensed in Japan to obtain an approval for multiple, rather than individual, overseas branches at once. However, these foreign banks licensed in Japan are still subject to various requirements, including the need to update the detailed profile of each overseas branch on whose behalf they act. The requirement is onerous, particularly for larger institutions with extended global presence. As a result, foreign bank tends to be restrictive in choosing branches covered by the FBAB. No other major country has such a regime requiring another license/approval in addition to the initial banking license, and the current rule causes unnecessary constraints for foreign banks to provide adapted services to Japanese customers.