A revision to the Banking Law that would allow companies to be agents for banks was enacted Wednesday after it cleared the House of Councilors.
The law, to be implemented in April, will allow nonbank companies, such as convenience store chains, travel agencies and car dealers, to act as banking agents and provide foreign exchange, deposit and lending services, if they are approved by the Financial Services Agency.
Under the current Banking Law, only banks' wholly owned subsidiaries can be banking agents.
The House of Representatives approved the revised law last week.
The deregulation of banking agents is expected to benefit customers by giving them better access to financial services, for example by making it easier to open new bank accounts or enabling the sending of remittances from convenience stores or supermarkets. It is also expected to benefit financial institutions by allowing them to expand their service windows.
The amendment will also enable other nonbank financial institutions, such as community-based "shinkin" banks and agricultural cooperatives, to serve as bank agents.
The FSA estimates around 500 firms will enter the new business in fiscal 2006.
To protect depositors, the financial regulator plans to impose a set of strict rules on bank agents, including controls on customer information and FSA inspections.
The amendment will also prohibit bank agents from extending loans to business clients in return for the clients agreeing to make deals with the agents in the latter's main business areas.
Under the amendment, banks will be liable for any damages customers suffer in connection with agents.