a. The v s Experience
Prior to 1900, althouơh in the u s there had been no statutory provisions prohibitina com m ercial banks irom carryins, out securities business, such a
121
T o v v a r d s a W c l l r u n c t i o ni ne, S e c u r i t i e s M a r k e t in V i e t n a m : C h a p t e r IV
prohibition vvas m ade by case law.:,6:> With the adoption o f the M cF adden A ct in 1927, the us has adopted a universal banking system in which commercial banks can carry out securities activiúes.366
O w ing to the stock m arket craslì in 1929, a large-scale reform o f the íìnancial system was initiated. Causes o f the m arket crash o f 1929 were attributed to the speculative abuses in securities that infectcd com m ercial banking; unsound loans given by banks to their affiliates; and the com bination o f investment and com m ercial banking.367 As a result, com m ercial and investm ent banking has been separated. A strict segregation between banking and securities business has been entrenchcd in the B anking A c t o f 1933 (the G lass-S leag all Act).
Such a segregation includes: (1) the proscription o f banks from acting as underw riters o f any issue ot' securities or stock, from dealing in securities or stock; 368 (2) prohibition o f a m em ber bank from being affiliated with an organization that is principally engaged in un d en v ritin g securities and in certain o th er securities activities;369 prohibition o f securities firms from doing banking b usiness such as receiving demand deposits;370 prohibition interlocking officers, director or employee between securities firms and m em b er banks.371
In practice, beíore the market crash, banks could carry out various business activities. Many banks, especially national banks, invested heavily in speculative securities; they entered the business o f investm ent banking by buying original issues íor public resale. Banks lent their alTiliates m oney to shore up securities’
prices or to secure the lìnancial posiiion o i'th e aiTiliales. Banks even advised their cuslom ers to purchase securities which the bank needed to sell for the pecuniary sake oí' the bank itself.37 These íầcts Rave rise to potential risk o f loss to depositors and w ere subject to íầilures thai in turn took avvay public coníìdence in the b an k in a system. Furthermore, vvhen banks provide investment banking services
S e e .lenniíer Manvel l Jeannol, “ An International Perspect i ve 0 1 1 D o me st i c Banki ng Reform:
Co ul d the European UnioiVs S e c o n d Bankinii Di rect i ve R e vo l ut io n i z e the Way the United States Re gul at e s its Ovvn Pinancial Se r vi ce s Industry?", ( 1 9 9 9 ) 14 A m e ric a n U n ìv e rsity In te rn a tio n a l L a w R e v ie w 1715, 1723.
■1M’ I b i d , 1 7 2 4 .
’<)7 S e e Ge o r u e J. Benston, “The Separalion o f C o m m c r c i a l and Investment Banki ng”, ( 1 9 9 0 ) , ] 1 - 14. Hereinafter, Ge or ge J. Benston.
'<l8 S e e B a n k in g A c t o f 1933 s 16, (Richard w. Je nni ng s et al, F e d e r a l S e c u ritie s Law : S eỉected R u le s a n d F o n n s , 1999 ed).
m S e e Ibid, s 20.
170 S e e I b i d , s 2 1 .
371 See Ibid. s 32.
■'72 S c e Georuc J Benston, above. n. 367, I I .
T c n v a r d s a W e lỉ R i n c t i o n i n g S e c u r i t i e s M a r k e t in V i e t n a m : C h a p t e r I V
and mulual íunds, they íầcc conílicts o f interest betvveen them selv es and Iheir custom ers, as well as other abuses.
In addition, the 1933 Act has taken account o f the tact that commercial banks could enter the business o f investment banking was d e e m e d as a cause o f unfair competition. Commercial banks have market pow er sin ce Ihcy can access cheap deposit funds. Thus they have an unfair competitive ad v antag e over non- bank competitors; i f they w ere permitted lo provide investm ent banking services, or own corporate stock, they would be dominant and could take over securities brokers and undenvriters.374
However, a num ber o f studies conducted before and after the enactm ent o f the G ỉass-Steagall A c t375 have shown that the above-m entioned p r o b l e m s were not the cause o f the financial crisis in 1929. The íailure o f the Bank o f United States376 has been examined thoroughly and no evidence shows that tầilure o f the bank or its use o f affiliates had any connection to securities operations. Rather it was due lo the b a n k ’s heavily lending money to aíTiliates; because it used acquisitions as a measure for rapid expansion, which was money-consuming and beyond its ability;
and to avoid criticism by bank examiners and depositors, it rem oved bad loans from the bank's books to aíTiliates.377 Also, among more than 200 banks engaged in securities operations, only 15 banks lầiled. Their securities trading amounts, however, accounted for a very small percentage ol' Iheir total assets. The actual cause íồr the failure was found to be the bad hankine s itu a tio n .378 Neither securities activilies nor securities investmcnt (regardless o f w hether or not purchased 1'rom bank securities affíliates) vvas a cause o f bank lầilure. Rather, the causative lầctors include: demographic chanees, over-banking, fraud and m ism anagem ent, and poor íầnning conditions.
Jordi Cannals seems lo have a clear observation concerniim the cause o f the market crash o f 1929:
// cannot be conclucled from the resnlts ìve have ju s t p resen ted that (he cause o f the Ỉ93ŨS bonking crisis in the U nited States
m Ibid, 13.
374 I b i d , 13 - 14.
375 l b i d ’ 1 6 - 1 9 .
376 T his b a n k is a c o m m e r c i a l h a n k . In l l i e u s , t h e P e d e r a l Reserve S y s t e m p l a v s t h e r o l e o f a Central bank.
177 S e e G e o r ô e J Bcnston, above. II. 3 6 7 , 30 - 31.
•17“ lbid, 32. "
379 lbicl, 38.
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T o v v a r d s a W e j j P u n c t i o n i n ụ S c c u r i t i es M a r k e t in V i e t n a m : C h a p t e r IV
was the slock rnarket activities carried out by som e banks.
Som e results even seem to indicate thai (he losses could have been higher i f the banks had not been able to count on íhe gains fr o m the operations in jìn a n c ia l assets
All the íĩndings thus tend to argue againsl Ihe belieí' that banks' securities activities or investmcnt caused the collapse o f the financial system. In practice, the íìrew all separating com m ercial and investment banking in the us has been eroded.
T h e involvement o f banks in securities markets has been broadened over the tim e.381 The separation betw een banking and securities businesses has been o f little practical significance. As pointed out by Poser:
Today, A m erican com m ercial bcinks, like ihose o f the United K ingdom a n d other conntries, conduct a w ide variety o f securities activities, while investm ení banks a n d securities com panies are m ajor providers o fb a n k in g services.382
The B anking A ct o f 1933 had thus been a major target o f banking reform since its enactment, but it remained unchanged for a long time. Recently, the adoption o i'the F inancial Services M odernìiation Act o f 1999 (the G ram m -Leach- B illey A c t) has made considerable alterations to the B anking A ct o f 1933, the Securỉties E xchange A ct o f 193-1, the ỉnveslm ent A dviser Act, and Investm ent C om panies Act.
The 1999 Acl makes signilìcant alterations to the B anking A ct o f 1 9 3 3 ? ^ It eliminates the prohibition o f a member bank from being aíììliated with an organization that is "principally eneaged" in underwriting services, under Section 20. Accordingly, (1) Bank Holding Companies can now acquire or set up subsidiary securities firms that can engaee in the Aotation, underwriting, public sale, or distribulion o f securities; (2) securities iìnns can acquire banks or do
'S() J o r d i C a n a l s , “ U n i v e r s a l B a n k i i m - I n t e r n a t i o n a l C o m p a r i s o n s a n d T h e o r e t i c a l P e r s p e c t i v e s " , ( 1 9 9 7 ) , 7 7 .
381 S e e "United States: A Special Report Prepared by Warren F C o o k e and Lynn Stofan Kaplaiì o f Milbank, Tvveed, Hadley & McCloy, N e \ Work", International Pinancial Lavv Review Special S u p p le m en t 2 0 7 , (Sep. 1991), 211 - 212: see also Jolina c . C uaresm a, “ B u sin e ss Lavv: The G r a m m -L e a c h - B lile y A c t ” ( 2 0 0 2 ) 17, B e rk e le y T ech n o lo g y L a\v J ou m ciI 4 9 7 , 4 9 9 .
382 S e e N . s. P o s e r , In tern ation al Secu rities Reguìaíion: Loncloỉ/s “Big CỈÌUỈ the European S e c u r itie s M a r k e ts, ( 1 9 9 1 ) , 185. Hcreinafter. N. s . Poser.
T h e F in a n c ia l S e r v ic e s M o d c r n iia lio n A ct o f 1999, section 101 (a), (b) repealed respectively s e c l i o n s 2 0 a n d 3 2 o f t h e Banking Ací o f 1933. T h e Financial scrvices M oc/crniiaíion A cí o f
1 9 9 9 : a v a i l a b l e at hl 1 p : / / v v w v v . s c n a 1 c ■ a o \ - b a n ki n u c o n í / e o n i r p l . h t m , l a t e s t v i s i t : D e c . ỉ 8 , 2 0 0 2 .
T o v v a r d s a W eJJ r u n c t i o n i rm S e c u r i t i e s M a r k e t in V ị c 11 QỊìa p t e I Y
banking husiness through a Pinancial Holding Company. It repeals ĩh c prohibition ol'interlocking directorates betw een securities íìrms and banks u n d er S ectìon 32
However, the Act does not alter sections 16 and 21 o f th e ììiViking A ct providing the fram ew ork for permissible securities u n d erw ritin £ activities Consequently, Banks are still proscribecỉ from engaging in m o si securities underwriting activities, and from acting as an agent or dealiix^ in certain governm ent securities; and banks may not purchase securities to r their own account. Securities ĩirm s are still forbidden from banking business s u c h as taking deposits and providing loans.
Securities íìrm s and banks can carry out such activities throuiìh the holding company arrangem ents envisioned by the Act or through a securities subsidiary o f a national bank.384
The A ct also altcrs the Securities Exchange Act o f 1934 b \ \\h ic h banks would not be deem ed as brokers or dealers for some speciíìed “b a n k activities” . Banks are now perm itted to conduct certain limited brokerage and đeulcr activỉties without registration as a broker-dealcr under the Securities E x d u m g e Act o f
1934.385
The Act m akcs some revisions to the Investm ent A dvisers ariiỉ Investm ent C om pany A c t m ' Previously, banks were excluded from the "investnicni adviser”
deíìnition. The nevv “ investment adviser” deíĩnition novv includos ;uiy bank or bank holding com pany thai provides investment advice or serves as an investment adviser.
To date, the lcgal environm ent in the us allovvs com m ercial biinks to enter in to th e business o f securities companies through their subsidiaries. 1 luxvcver in so doing, certain conditions must be met by both the banks and their suhsidiaries, as stipulated in Section 121, the Financicil Services M odernization A ci. As Ibr banks onl) national banks that are not alììliated with bank holding com panics and have tota: Consolidated assets oi' 1 billion USD or less, are eligible Ibr conducting financial activities as principal through operating subsidiaries. Aparl iVom beino wei: capitalized, such banks must be vvell m anaged.’87 I f satisíying Ihcsc criteria.
•m Ibid, s 1 2 1 .
■s5 Ibid, ss: 201 - 202.
186 l bi d, ss: 21 I -220.
,S7 T h e t e n n ‘' w c l l m a n a í i c d " is c o n s t r u e d in S e c t i o n 1 2 l ( a ) ( 2 ) . It r e a d s :
"(6) ỈVell mamiỊỉưil. —The lc n n trc'// niam iịiơi/' mưan.s
125
the national bank m ust then go through another step. It has lo get the approval o f the O ffice o f the C o m p tro ller o f Currency before it can actually conduct íìnancial activities th rou g h its subsidiary. The firewalls to maintain safety and soundness vvill be put b etw een a national bank and its ĩmancial subsidiary only w hen the latter engages, as a principal, in activities, vvhich the íb rm er can only conduct Ihrough a financial subsidiary. In such a case, Ihe subsidiary can engage in íinancial activities subịect to restrictions imposed on affĩliate transactions. When acting as an a s e n t, the subsidiary will not be subject to such restrictions.388 In addition, i f the activity is one in w hich the national bank could not engage directly, the subsidiary is only allowed to engage in the activity as an agent, and not as a p rincipal.389
T ovva r d s a W e ỉ l F u n c t i o n i n .g S e c u r i t i e s M a r k e t in V i e t n a m : C h a p t e r I V
"(A) in th e c a s e o f a c ie p o s ito r y in stitiitio n th a i hcis becn e.xamined, u n ỉess o th e n v is e d e íe r m in e d in \v r itin g b y th e a p p r o p r ia íe F e d e r a l han kin g a g e n c y—
(ỉ) th e a c h ie v e m e n í o f a c o m p o s ite r a tin g ()f I o r 2 uncier /h e U n i/o rm F incincial In síiíu íio n s R a lin g S y s te m (o r an e q u iv a le n t r a íin g u n d er an e q u iv a le n t r a tin g systern ) in c o n n e c íio n w i(h th e m o s t re c e n í ex a m in a tiu n o r s u b se q u e n t reviexv o f th e d e p o s ito r y in síiíu íio n ; a n d
(ịi) a t le a s t a r a tin g o j 2 f o r rncm agem ent, ÌJ su ch r a lin g is g iv e n ; o r
"(B) in th e c a s e o f u n y d e p o s ilo r y in síilu íio n th a i hus n ot b e en exam inecl, th e e x is te n c e a n d use ()f m a n a ^ ư ria l r e s o u r c c s th a i the u p p r o p r ia te F ecleral b a n k in g a g e n c y d e íe r m in e s a re s a tis /a c to r ỵ . "
m S e c t io n 1 2 l ( a ) ( 2 ) ( B ) e x p l i c i t l y prohibits b a n k s f r o m e n g a g i n g in four types o f ĩ i n a n c i a l a c t i v i t i e s t h r o u g h b a n k s u b s i cỉ i a r i e s : i n s u r a n c e 01* a n n u i t y u n d e r w r i t i n g , I n s u r a n c e c o m p a n y p o r tío lio investm ents, real estate investm ent and dev elo pm ent, and m erchant banking. (M erchant b anking a ctivities are su b je c t to section 122.) T h e se types o f íìnancial a c tiv itie s m a y o n ly be undertaken by su b sid ia r ic s o íT m ancial h old in g com p an ie s fs 103(a)].
A national b an k 's Hnancial subsidiary thereỉore may e n g age in a w i d e range o f activities p r e v io u sly barred to a national bank or its operatiim subsidiaries, such as underw riting, or dealing in securities (incltiding market-making); se llin g insurance [ss 121, 151 & 3 0 2 ].
Hovvever, in order to protect the d epo sit insurance system from the increased risk it might incur by the e xp a n d ed a c tiv ities permitted to íìnancial subsidiaries, a financial subsidiary and its parent national bank are subject to certain requirements. T h o s e requirements include: the amount the b ank has invested in its su b sid ia ry is to be deducted from its Capital [s 121 (c ) ( 1 )(A )]; the í ì n a n c i a l s u b s i d i a r y ' s a s s e t s a n d l i a b i l i t i e s m a y n o t b e C o n s o l i d a t e d vvith t h e n a t i o n a l b a n k ' s a s s e t s and liabilitie s [ s l 2 1 ( c ) ( l ) ( B ) j ; the assets o f all o f the bank's fm ancial subsidiaries, on a com bined b a sis, may not e x c e e d $ 50 billion or 45% o f the bank's total assets, vvhichever is less [ s l 2 l ( a ) ( 2 ) ( D ) ] ; and a financial subsidiary is treated as a holding c o m p a n y affỉliate rather than a bank subsid iary for purposes o f the anti-tying provisions o f the B ank H o ld in g C o m p a n y A ct. [s
121(0 ].
m S e e Sec tio n 122.
T o v v a r d s a W e l l P u n c t i o n i n u S e c u r i t i e s M a r k e t in V ie t n a m: C h a p t e r I V
/;. T he E u ro p ea n E x p erìen ce
The European countries do not seem to have such a strict segregation betw een banking and securities businesses, compared with that in Ihe us, even beíore the issuance o f the Seco nd B anking D irective-390 E x c ep t for Belgium, where banks are strictly limited in engaging in securities activities, and the ƯK, Prance and Greece, vvhcre commercial banking and securities activities are separated by Chinese walls, other countries such as Germany, Ilaly, Switzerland and the N etherlands employ a universal banking sy stem .391 In the universal banking system, there is no firewall between banking and securities businesses or com m ercial and investment banking scrvices. As such, com m ercial banks are eligible to engage in both kinds o f business.
Since the Seco n d B anking D ìrective came into force in 1989, a universaỉ banking model has been vvidely adopted throughout European countries. Pursuant to this Directive, commercial and investment banking functions can be carried oul by the same corporate entity, and the involvement oí' com m ercial banks in securities business is perm itted.392 The Second B anking D ireclive reílects the EU position in prom oting the banking sector as well as in fostering EU financial markets. Under this position, il is intended that the participation o f banks in the sccurities industry will diversiíỳ market participants, vvill provide liquidity to commercia! banks, and vvill help banks to maintain overall earnings where proíils Irom convcnlional banking business ía 11. And the EU sees a llexible universal banking system as powerful means thai enablc EU llnancial markets to compete wilh other markels around Ihe world.
Perhaps it is necessary novv to see how such a system vvorks in practice. The case o f G erm any might be useful to examine since it is a country that is going aheacl in em ploying a universal banking system in Europe and also in the world.
1,0 See G u stav o V isentini, “ C òm patibility and Competition belxveen Europcan and American Corporate G ov ernance: W h ich M odel o f Capitalism?" ( 1 9 9 8 ) 23 B ro o k lỵn J o n r n a l o / I n l e n u i l i o n a l L a w 8 3 3 , 8 3 9 . I l e r e i n a ỉ ì e r , G u s t a v o V i s e n t i n i .
'9I See G u o Li, "The C o lla p se o f ihe G lass-Sleagall Wall and Its Potential lmpacts on C h in a ’s B anking L a v v ” , L e g a l F o n n ằ F calu recl A rticle.
htt p://vv\v vv.Ịavvinfochi na.co m /le ttall;ằrm/Fealurc ci A111 ic le/d è S Ị -) 1 a vCc^ntenl .asp'?10 = 2 8 , visited M ay 5, 2 0 0 2 . Hereinaíìer, G u o Li.
■
w See the A n n e x L i s t o f A c t iv it ie s subịecl to Mutual R ecognilio n (this identifies the securitie s ac tivitie s that a credit institution may carry oul. Sucli activities include: trading for its ow n a c c o u n t o r f o r t h e a c c o u n t o f c u s t o m e r s in l o n ” a n d s h o r l t e n n s e c u r i t i e s ; i s s u i n g o f s h a r e s a n d relaled activities: managint; o f a portíolio and so m e investment banking activities, m cluding thosc concerninti mcruers and acqiiisitions).
Sce G u o ỉ.i. a b o v c II. 39 1.
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A lth o ug h Germany has pcrmitted banks and securities com panies to enler into the business o f each other, it seems that both the Germ an banking system and the G e rm an securities markets have functioned well. ỉt is reported that the German íìnancial m arket has been one o f major markets in E u rope for years; that the G e rm a n banking system is very extensive and effective; that in terms o f the size, the Frankfurt Stock Exchange ranks fourth in the vvorld, after New York, Tokyo and L ondon; and that the German tìnancial center is one o f the most intcnsely com petitive European centers.394
c. The Japan Experience
A similar tendency to that o f the us can be seen in Japan. Prior to the S econ d World War, Japan adopted a universal banking system in which banks could cngagc in any kind o f business, including securities undenvriting services.395 A ite r the Second World War, íollovving the us moáel, a slrict segregation between' b a n k in g and securities business vvas introduced in Japan, i.e., a strict prohibition against securities ĩirms engaging in banking business and banks engaging in securities business.396
Article 65 ol the Securities and Exchange Laxv gives a legal basis fòr such segregation. This Article prohibits banks, trust companies or other such fínancial instilutions from engaeing in any securities business excepl for the purchase and sale o f securilies on a Nvritten order from a cuslomer and ior the account o f the custom cr. The prohibitions are not applied to certain spccilìcd transactions in w h ich the traded commodities are, for example, governm ental, municipal, corp o rate and othcr bonds.
There havc been opposite vievvpoinls concerning the need to eliminate such seereg alio n .''ụ7 I-Iowevcr, the ỉìrcvvall bet\veen bankins, and securities business has been liíted during the 1980s and 1990s/ ‘ A relbrm o f íìnancial lavv initiated in
>M S e e “ Germ any: A Special Report Prepared by Ulrich Koch o f S in ơ le L o ose Schm id t-D ie m itz
& Partners, Stuttgart and Frankfurt Am Maiiì" (Sep. 1991) In te rn a tio n a l F ỉn a n c ia l L aw R e v ie w S /M c ia l S u p p le m e n í 87, 87.
395 S e e Hiroshi Oda, above 11. 2 6 2 , 268.
3% Ibid., 2 7 1 ; s e e also G eorge J. Benston, above 11. 367. 2.
y)1 S e c Y u s u k e Kaxvainura, "The Present Altitiide tovvard tlìe S y ste m for Separating Banks and S e c iir itie s C o m p a n ic s'\J a p a n 's iiììc iiìc h il M arkeís, I -8.
' )s S e e H ir oshi Oda, a bove n. 262, 272 - 273; SCO also Sư curitìư s M a rk c l in J a p a n , (1998), (r e le a s e d by Japan Securilics Kcscarch Institutc). 195 - 7 (liereinaíter. Japan Securities Research Institutc).
T o v v ã r d s a W e l l F u n c ú o n i n g S e c u r i l i c s M a r k e t in V i c t n a m : C h a p t c r IV
1993 has created a signiíìcant legal basis on vvhich banks and securities firms can enter the business o f each other lhroue,h their subsidiaries. Securities íìrms could establish banking and trust bank subsidiaries while banks could set up securities subsidiaries, allhough the scope and size o f s u c h business vvas limited. Finally, the limitation on the scope and size o f such business has been eliminated since the second h a lf o f 1999.3
S om e Remarks
Although the cỉebate concerning the segregation o f banking and securities businesses has been continuing in the us and Japan, both countries have experienced a general statutory tendency tovvard liíting the fire-wall between these two businesses. This fact, together vvilh comprehensive data ỉound in a number o f studies conducted in the us before and after the passage o f the G lass-Steagall A c t,400 has proved that the past restriction was more or less a result o f an over-'
reaction o f the lavvmakers to the market crash in 1929. In the us, the SEC has rccently been aware o f the negative aspect o f such a separation. The SEC views the segregation oỉ' liinctions as undesirablc since it would deprive the securities industry o f an ability to raise Capital.'10
Purthermore, the European experiencc seems to support vvell the elimination o f the íìrevvall bctween the two industries. Lovverina, the barrier betvveen bankin?
and securities businesses llius appears desirable. Hovvever, in the Iranslbnnation period, totally li Túng the firewall miuht be a careless decision because o f the distinguishing nalure o f the bankinsi business. The íầilure o f a bank can be very contagious, to the point that it can cause huge damage to public depositors.
D eỉìning the extent to vvhich the lìrewall should be lovverecỉ is thereíore o f significance. Both ihc us and Japan seem to have a °ood approach in reforming the regulation ol lhe íìnancial sector. The stalutoiy permission on which banks can directly carry out some specilled securities activities and indirectly engage in others throuẹh thcir subsidiaries, can bc deemed as one o f thcir reasonable approaches. ỉt allovvs banks lo enter sccurities business through their securities subsidiaries vvhilc it keeps Ihem avvay irom r i s k . o r course vvhere such an approach is employed, it should be accompanied by necessary precautions, to avoiđ risks thai mieht be incurred by both banks and their subsidiaries.
Ibid (H iroshi Oda).
100 S e e G e o r g c J. Benston, abo vc 11. 367. Chaptcrs II. III, and IV.
',m S e e N. s. Poser, abo ve 11. 38 2, 244.
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2. W h e t h e r an E n t i r e Pr o hi b it io n o f Direct I n v o l v e m e n t o f B a n k s into the V i e t n a n i e s e S e c u r i ti e s M a r k e t YVill Result in G o o d O u t c o m e s
One o f advantages V ietnam inherits from other countries in creating a securities regulation regime is the regulation o f banks' involvem ent in securities markets. H a v in g learnt from the u s and Japan, Vietnam generally does not adopt an absolute segregation betw een banking and securities businesses. Rather, a similar approach to that o f both the u s and .ĩapan in dealing w ith banks in this area has becn em ployed by lawmakers. D ecree 48/1998 prohibits credit institutions, insurance com panies, and holding companies from directly engaging in securities business. T h o se w ho desire to carry out securities business m ust establish separate securities subsidiaries.402
The term “ credit institutions” is broadly defined under A rticle 20.1 o f the C redit Institution Act. The A ct classiĩies credit institutions in terms o f ownership, u nder which credit institutions fall into four categories: state-ovvned, shareholder-' ow ned, cooperatively ovvneđ and foreign-owned. The last-nam ed can be furlher divided into three groups: ịoint-venture credil insũlutions, n on-banking institutions and foreign banks' branches. The term “credit institutions” thus denotes both banks and n o n -b an k ing institutions ovvned by diíTercnl econom ic sectors.
Banks are those institulions vvhich can engage in all kinds o f banking activities (including taking deposits, giving loans and providing settlement scrvices) and olher related activilies. They includc commcrcial banks, developm ent banks, investm ent banks, policy banks, cooperative banks, and others.‘lu4
N on-banking institutions are those vvhich can engage in a num ber o f banking a c t i v i t i e s e x c e p t f or t a k i n g d e p o s i t s a nd p r o v i d i n g s e t t l e m e n t Service. T h e y i n c l u d e Hnancial com panies, íinancial leasing companies, and Olhers.405 Aside from those, cređit institutions also include people credit íuncls and credit cooperatives.406
T he C redit Instỉtution Act đoes not have any article saying that banks can or cannot enạage in securities business, but since 1998, by the introduction o f D ecree 4 8 /1 9 9 8, the question has been clari íìcd. The approach adopted here is to permit banks to carry out securities business throusih Iheir securities subsidiaries. In 1999, the Prim e M inister m ade a íìirther eíTort in issuine, D ecision ì 72/1999 to lay dovvn
102 S e e Alt. 29.1.
103 S e e A n . 12.
‘,<M S e e Art. 20. 2.
405 S e e A rt. 20. 3.
406 S e e Art. 20. 5.