Japan Banking License: Requirements, Process and Foreign Bank Entry

Series “Japan Financial Licenses: A Practical Guide” (3 parts), Part 3: Part 1 covered the license for a management-type trust company and Part 2 the registration of a custody-type trust company. This final part turns to the banking license, one of the most demanding financial licenses in Japan.

Accepting deposits and making loans together, or carrying on exchange transactions (funds transfers) as a business, requires a license from the Prime Minister under the Banking Act (銀行法). Only a stock company with a board of directors and other prescribed organs and stated capital of at least 2 billion yen can hold one. The examination covers the applicant’s financial base, earnings outlook and personnel. A foreign bank can choose between licensing a Japanese branch and setting up a Japanese subsidiary that obtains its own license.

What banking business is and when a license is required

The Banking Act defines a “bank” as a person that carries on banking business under a license from the Prime Minister granted under Article 4(1) (Article 2(1)). “Banking business” means a business that does either of the following (Article 2(2)):

• accepting deposits or installment savings together with lending funds or discounting bills and notes
• carrying on exchange transactions (funds transfers)

A business that only accepts deposits or installment savings, without lending, is also deemed to be banking business (Article 3). Lending alone is not banking business; it is generally a question of registration under the Money Lending Business Act. Exchange transactions are generally understood to mean moving funds between distant parties without physically carrying cash. Anyone designing a remittance or payment service needs to address this point first.

A non-bank can offer remittance services without a banking license by obtaining registration or authorization as a funds transfer service provider (資金移動業) under the Payment Services Act. It helps to think of the banking license as the license for a business model that takes deposits itself and uses those funds for lending or investment.

How it differs from neighbouring licenses

Lighter alternatives to a banking license

If you want to offer remittance or payment services without taking deposits, look at funds transfer services. If you want to sell or broker a bank’s products, look at bank agency business. If you connect to bank accounts, as budgeting apps and accounting software do, look at electronic payment agency services. Our overview Japan financial licenses: types and registration explains each regime. Note also that a bank wishing to conduct trust business needs a separate authorization under a different act, in addition to its banking license.

Banking license requirements at a glance

The main requirements are set out in the Banking Act, its Enforcement Order and its Enforcement Regulation. The key items are as follows.

The 2 billion yen minimum is only a floor. The examination looks at whether capital is adequate for the business plan and whether the bank can survive the loss-making early years. In the case of a bank licensed in February 2025, preparations for opening were made with 4 billion yen, being 2 billion yen of capital plus capital surplus. A bank must also use the word “bank” (銀行) in its trade name, and a non-bank may not use it.

The personnel review places weight on securing a management team versed in banking and on staff to run risk management, compliance, internal audit and systems. The FSA’s supervisory guidelines expect an extremely high calibre of the directors and company auditors of a bank.

Major shareholder rules and bank holding companies

Shareholders that hold voting rights in a bank above a set level need authorization under the Banking Act. The Act sets the “major shareholder threshold” at 20% of all shareholders’ voting rights, or 15% in certain cases where facts suggest the holder has a material influence on the company’s financial and business policy decisions. Anyone intending to acquire or hold voting rights at or above this threshold must obtain prior authorization from the Prime Minister (Article 52-9). An authorized holder is called a “bank major shareholder”. These rules also apply to foreign parent companies and investors that invest in a Japanese bank.

A company that intends to become a holding company with a bank as its subsidiary, or a person intending to establish such a holding company, must also obtain prior authorization (Article 52-17). The examination looks at matters such as the earnings outlook of the applicant and its subsidiaries and the adequacy of their capital (Article 52-18). There is also a provision under which an authorization lapses if the authorized act is not carried out within a set period (Article 55).

Supervisory focus when a non-financial company owns a bank

The FSA’s Comprehensive Guidelines for Supervision of Major Banks, etc. deal with new entry into banking in a separate chapter (VII). The main points where a non-financial company or similar is the parent are as follows.

• Parent’s finances and credibility: when examining the applicant’s earnings outlook and social credibility, the financial condition and social credibility of the parent company are also taken fully into account.
• Independence: the bank must be able to make management decisions independently of its parent.
• Ring-fencing business risk: arrangements must stop failures in the parent group’s businesses from spreading to the bank.
• Majority ownership: where a non-financial company or similar holds more than 50% of the voting rights, the FSA checks arrangements, such as cash-flow provisions, prepared for the case where the earnings plan is not met.

A foreign company investing in a Japanese bank should also check whether a filing is needed under the Foreign Exchange and Foreign Trade Act (FEFTA, 外為法). See FEFTA inward direct investment: prior notification and post-investment reports for the procedures.

Scope of business, subsidiaries and restrictions on other business

The business a bank may conduct is limited by law. Article 10(1) sets out the core business: accepting deposits or installment savings, lending funds or discounting bills and notes, and exchange transactions. Article 10(2) permits business incidental to these. Article 12 prohibits any business other than this statutory business and business conducted under the Secured Bonds Trust Act or other acts (the prohibition on other business).

The reasons given for the prohibition include preventing the risks of other businesses from reaching the bank, preventing conflicts of interest and keeping the bank focused on its core business. As a rule, therefore, a plan to run non-financial business inside the bank itself will not work.

Limits on subsidiaries and shareholdings

• Permitted subsidiaries: the companies a bank may hold as subsidiaries are exhaustively listed in Article 16-2. There is also a framework under which fintech and similar companies can become subsidiaries after authorization or other procedures.
• 5% and 15% rules: as a rule, a bank and its subsidiaries may not together acquire or hold more than 5% of the voting rights in a domestic company. For a bank holding company and its subsidiaries the limit is 15%. Exceptions require approval or other procedures.
• Licenses for a limited business: the supervisory guidelines contemplate applications for a narrower business, for example without lending or exchange transactions. In that case a condition is attached requiring prior approval before the bank starts any new business not contemplated at the time of application.

It is important to map out from the start both the business scope at opening and the business you may want to add a few years later.

Prudential rules and ongoing obligations after licensing

Capital adequacy

Under Article 14-2 of the Banking Act, the FSA sets capital adequacy standards by public notice (FSA Public Notice No. 19 of 2006). The international standard applies to banks with overseas offices and the domestic standard to banks without them.

• International standard: a Common Equity Tier 1 ratio of at least 4.5%, a Tier 1 ratio of at least 6% and a total capital ratio of at least 8%. Capital buffers and other add-ons generally apply on top of these.
• Domestic standard: a capital ratio of at least 4%, measured on core capital centered on common shares and retained earnings.

The two are calculated differently, so the figures cannot simply be compared. A bank whose assets are concentrated in government bonds and similar rather than loans has a small credit-risk capital requirement. The supervisory guidelines state that, even then, the FSA checks whether capital matches interest-rate risk and operational risk and whether ALM controls are in place.

Deposit insurance

Japanese banks are covered by the deposit insurance system. General deposits, such as interest-bearing ordinary and time deposits, are protected up to 10 million yen of principal per depositor per institution, plus interest up to the date of failure. Payment deposits that meet the conditions of bearing no interest, being repayable on demand and being usable for payment services are protected in full. Japanese branches of foreign banks, however, are outside the deposit insurance system. A new bank must pay premiums and must also build data and systems that can aggregate deposits by depositor.

Main ongoing obligations

Expectations on governance and AML/CFT

The FSA published a revised version of its Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism dated 31 March 2026. The guidelines require a risk-based approach: identifying and assessing one’s own risks and taking mitigating measures that match them. Required actions include a firm-wide risk assessment with senior management involvement, risk ratings for all customers and enhanced due diligence (EDD) for high-risk customers. A new bank needs these arrangements in place before it opens.

For banks that operate only non-face-to-face without branches, the supervisory guidelines require the functions traditionally performed by branches to be replaced by rules and internal arrangements. For system security, management of outsourcing contractors and crisis management in the event of outages, an evaluation by an external body must be submitted.

The banking license application process

The FSA examines and grants banking licenses and announces each grant. The typical flow is as follows.

1. Business model and capital plan: decide whose deposits you will take and where you will earn money. Under the Enforcement Regulation, the application must include documents such as projected income and expenditure for the first three business years.
2. Preliminary consultation with the FSA: explain the business, shareholder structure, management, systems and risk management approach, and identify the issues.
3. Preliminary examination: a procedure exists for requesting a preliminary examination before the formal application. If preparations are almost complete, the reply says so; if the issues have been narrowed down, the preliminary examination may close with points to note.
4. Incorporation and build-out: establish a stock company as a preparatory company, then hire officers and staff and put in place internal rules, systems, outsourcing management and AML/CFT arrangements.
5. Application and examination: submit the application and attachments. The examination applies the criteria in Article 4(2).
6. Grant of license: conditions are attached where necessary in the public interest. A license for a limited business carries a condition requiring approval before the business is expanded.
7. Start of business: after licensing, the bank opens following final system checks and deposit insurance arrangements.

On the standard processing period, Article 40 of the Enforcement Regulation provides that the authority should endeavor to decide within one month, as a rule, from the arrival of the application at its office. The period does not include the preliminary examination, and it is not a legal deadline. In practice, preliminary consultation and the preliminary examination generally take a long time. The overall timeline varies widely from case to case, so plan with ample margin.

Recent license grants

• Minna no Ginko (announced December 2020) and UI Bank (announced December 2021): the FSA announced the grant of a banking license for each.
• 01Bank Preparatory Company (announced 28 February 2025): its trade name at the start of business is 01 Bank, Ltd., with its head office in Suita, Osaka. Capital is 2 billion yen (4 billion yen including capital surplus), and it is wholly owned by Senshu Ikeda Holdings, Inc.
• Natixis (announced 30 May 2025): a license for a foreign bank branch. The branch handles banking business for corporate clients and others, and was scheduled to open in July 2025.

Entry routes for foreign banks: branch, subsidiary or agency

The FSA permits foreign banks to enter Japan in either subsidiary or branch form, for both retail and wholesale business. There are no scope-of-business restrictions that depend on the form of entry. The main routes are as follows.

The FSA’s list of licensed banks (as of 24 September 2026) shows 57 foreign bank branches. A branch can operate on the strength of its head office’s capital and credit. Because it is outside deposit insurance, however, it tends to be at a disadvantage in gathering deposits widely from individuals. A subsidiary carries the burden of holding capital and corporate organs in Japan, but it is covered by deposit insurance and operates under the same framework as domestic banks.

Foreign bank agency services allow a Japanese bank to act as agent or intermediary for a foreign bank’s business. They give a foreign bank a way to reach Japanese customers without obtaining a license in Japan. The FSA’s Q&A on foreign bank agency services explains which acts count as agency or intermediation.

The FSA’s Financial Market Entry Office (拠点開設サポートオフィス) is presented mainly as an English-language point of contact for overseas asset managers and similar firms entering Japan. Whether and how far it covers banking licenses needs to be confirmed case by case. For choosing a form of presence, see Japan branch vs subsidiary, and for what a non-trading office can do, see What a representative office in Japan can and cannot do.

What the examination tests, and a pre-application checklist

Common pitfalls

• Optimistic earnings plans: if you cannot explain the early-year losses and how capital will be topped up if the plan is missed, the examination tends to stall.
• Assets concentrated in government bonds: even if the capital requirement looks small, separate explanations of interest-rate risk and profitability are expected.
• Dependence on the parent: the more the bank relies on its parent for systems, staff and customers, the more closely independence and ring-fencing are tested.
• Adding scope later: if you open with a limited-business license and later start lending or exchange transactions, fresh approval is needed.
• Non-face-to-face channels: security, outsourcing management and outage response must be prepared, including an external evaluation.
• Leaving AML/CFT until last: customer acceptance policy, transaction monitoring and controls over overseas remittances must be operational before opening.
• Overlooking the shareholder structure: check at the investment-planning stage whether shareholders at 20% (15% in certain cases) or more, or a holding company, need authorization.

Pre-application checklist

• Clarified which of deposit-taking, lending and exchange transactions you will carry on, and whether an alternative to a banking license would suffice
• Prepared capital of at least 2 billion yen and a capital plan that can absorb several years of post-opening losses
• Compiled projected income and expenditure for the first three business years and a response plan if targets are missed
• Decided the corporate organs, including a board of directors and one of a board of company auditors, an audit and supervisory committee or nominating and other committees, and the appointment of an accounting auditor
• Secured candidates for directors engaged in day-to-day business and heads of risk management, compliance and internal audit
• Checked whether major shareholder or bank holding company authorization and a FEFTA filing are needed
• Identified which capital adequacy standard applies (domestic or international) and planned how to maintain it
• Decided the core banking system, outsourcing contractors, outage response and the approach to obtaining an external evaluation
• Prepared the AML/CFT risk assessment, customer due diligence and transaction monitoring procedures
• Built deposit insurance requirements (premiums, depositor data) into the plan
• For a foreign bank, compared a branch, a subsidiary and foreign bank agency services

Banking license in Japan: summary

The banking license is the license for carrying on deposit-taking together with lending, or exchange transactions, as a business. Beyond being a stock company with capital of at least 2 billion yen, the applicant is examined broadly: financial base, earnings outlook, personnel, major shareholders, capital adequacy and AML/CFT. In many cases a lighter option is enough, such as a funds transfer service for remittances only, or bank agency business for brokering a bank’s products. A foreign bank chooses its form of entry by comparing a Japanese branch, a Japanese subsidiary and foreign bank agency services.

Working with partner professionals such as attorneys, TIMOA helps identify the license that fits your business model, set up a Japanese company and prepare materials for preliminary consultation. See our Permits & Financial Licenses service for details.

Other parts of this series

• Part 1: License for a management-type trust company
• Part 2: Registration of a custody-type trust company