IT Development and the Separation of Banking and Commerce: Comparative Perspectives of the U.S. and Japan

Abstract

Unlike the UK, Germany, France and some major countries that permit entries from banking to commerce and vice versa (“two-way” regulation), the United States and Japan have maintained a policy of separating banking and commerce out of concern that the mixing of the two activities would result in the misallocation of credits, anti-competitive effects, exposure of deposit insurance and taxpayers to greater risks from commerce, and additional supervisory burdens on banking and antitrust regulators. However, this separation is now being reconsidered both in the US and Japan. With IT development, linking on-line banking and Internet commerce may increase profitability through operating synergies between the two firms, and reduce average costs and information costs. Future changes in the financial environment may produce other synergies and the degree of separation should be suitable for such business development. This paper introduces current laws and discussions in both countries and considers the future of the separation policy in Japan.