Japan enacts bill to ease curbs on banks' investment in firms

Japan's parliament passed a bill into law Wednesday to ease a curb on banks' investment in industrial firms, punish leaks of corporate information used for insider trading and toughen penalties on investment managers using false information to win contracts.

The bill revised the banking law to relax the so-called 5 percent rule that limits banks' stakes in industrial companies to 5 percent in principle.

The revision allows banks to hold 100 percent stakes in liquidated companies for up to three years and in small and medium-sized firms for up to five years.

The government devised the measure to support small and medium-sized companies after a special law for a moratorium on their loan repayments expired in March.

The revision also enables banks to use their investment units to hold less than 40 percent stakes in hotel and other companies for up to 10 years if they are expected to contribute to regional economic development.

The bill also amended the financial instruments and exchange law to impose penalties on insider leakers of corporate information used for insider trading in shares.

So far, only those who have obtained such information and used it for stock trading had been subjected to punishment. The amendment came after employees at securities companies were found to have leaked such information to their clients for sales promotion purposes.

Following a fraud scandal where AIJ Investment Advisors Co. used false information to win pension fund investment contracts, the bill raised the maximum prison term from three years to five years and the maximum fine from 3 million yen to 5 million yen for such acts.

The bill also modified the deposit insurance law to allow the Deposit Insurance Corporation of Japan to invest public funds in securities and insurance companies to help prevent financial crises. The corporation's investment targets had been limited to banks.

Most of these new measures will be implemented by fiscal 2014 ending in March 2015.