Sony online bank gets government OK

Electronics giant Sony has been given the nod for its plan to pry open Japan's cozy banking sector

In this story: Things can only get better Regulatory hurdles RELATED STORIES, SITES

By Staff and wire reports

TOKYO, Japan -- Japanese financial regulators have given a provisional go-ahead to Sony's ambitious Internet banking plan.

Sony's Chief Operating Officer Nobuyuki Idei received the notification directly from Financial Services Agency (FSA) Minister Hakuo Yanagisawa, paving the way for Sony to set up its online banking unit on April 2.

Armed with a powerful brand, Sony aims to lure individuals with low-cost services in a country where Internet-based banking is still in its infancy and many people remain wary about making online financial transactions.

Idei says Sony Bank would strive to forge its own brand image, rather than simply relying on its parent's name recognition.

The FSA approved Sony's application for special tax breaks on setting up the banking unit under a law aimed at revitalizing the nation's ailing banking sector.

The provisional go-ahead comes as an added blessing for Sony shares, which briefly rose above 9,000 yen, outperforming the Nikkei average's 2.65 percent gain.

Things can only get better

"Things are moving at a good pace," says a Sony spokesman, adding that the notification would allow the company to win a banking license in time to meet a June launch target.

Sony Bank, to be capitalized at $303.3 million, will be operated with partners Sakura Bank and JP Morgan chase, targeting individual online customers.

Sakura Bank will have a 16 percent stake in the unit and JP Morgan Chase four percent, with Sony owning the remaining 80 percent.

Sony expects the bank to raise the company's growing financial profile. It will be the latest entrant into a sector straining under a mountain of sour loans and crippled by slumping stock prices in the second-biggest economy.

Sony's Idei is shrugging off the gloom shrouding the banking sector, telling reporters, "Since we are starting at the worst of times, things can only get better."

Regulatory hurdles

Sony is not the only non-financial company looking to move into banking. Japan's biggest retailing group Ito-Yokado is hoping to launch the first online bank in Japan to use automatic teller machines (ATMs) for most settlements.

But Ito-Yokado's plans have been snagged by delays, partly because of a wrangle over linking its ATMs with networks run by established banks.

An industry source says the launch of Ito-Yokado's banking service could be delayed until July. The retailer applied for a license last November.

While deregulation has opened the door for non-financial firms to enter the banking sector since last year, financial regulators still have extensive screening powers.

To date, only one specialized online bank has been established since deregulation -- Japan Net Bank, set up last October by a corporate group led by Sakura Bank.

Reuters contributed to this report.

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