Securities subsidiaries of Japanese banks
Many Japanese banks effectively control smaller securities firms. Although the banks are only allowed to own 5 percent of these securities firms, many banks somehow are able to send their employees to friendly securities firms for training and even management positions.
This is how banks do their equity trading. For bond trading, banks can take a more direct approach.
Although Japanese banks have been allowed to underwrite and deal in government bonds since the mid 1980s, corporate bond underwriting was forbidden until recently.
This deregulation occurred because corporations were replacing bank loans with bonds. The Ministry of Finance thought it was better to allow banks to underwrite corporate bonds than to see the banks lose even more business.
These bank subsidiaries already are underwriting corporate bonds in the Euromarkets and will soon be allowed to do the same domestically. It is unlikely, however, that bank subsidiaries can underwrite equities in the future.