Japanese long-term credit banks
In the immediate post-war period high inflation resulted in a shortage of capital for long-term investment in plant and equipment. This prompted the promulgation of the Long-term Bank Law of 1952. This was a carefully crafted act that gave three banks, which had been privatized by the occupation forces, oligopolistic rights in the area of long-term lending. The city banks could not extend long-term loans to corporations. Only the long-term credit banks could provide loans of five years or more.
The city banks and long-term credit banks were further separated in that the credit banks could not compete with the city banks for deposits. Credit banks had a limited number of branches, and could take only deposits from those corporations to which it had extended loans. Also, instead of obtaining funds from the interbank market like the city banks, the credit banks acquired funds by issuing long-term debentures. Neither city banks nor most corporations could issue debentures during most of the post-war period, so credit banks essentially became surrogates for a corporate bond market by funneling funds from investors to corporations through bank loans and bank debentures.