Private financial institutions can be divided into several categories, based on such factors as their business function or historical background. The distinction between city, regional banks and member banks of the Second Association of Regional Banks (regional banks II) is not a legal one, but is a customary classification for the purposes of administration and statistics. City banks are large in size, with headquarters in major cities and branches in Tokyo, Osaka, other major cities, and their immediate suburbs. Regional banks are usually based in the principal city of a prefecture and they conduct the majority of their operations within that prefecture and have strong ties with local enterprises and local governments. Like regional banks, regional banks II serve smaller companies and individuals within their immediate geographical regions. Most of the regional banks II used to be mutual savings banks.
From 1999, non-financial institutions began to enter the banking business by establishing new types of banks such as banks specializing in settlements or internet banks, categorized under other banks in the above chart.
The entry of non-financial institutions into the banking business led to an amendment to the Banking Act concerning regulation of bank shareholders from April 2002: Shareholders of more than 5% of a bank’s total shares must file with the Financial Services Agency (FSA), and those seeking to hold 20% or more require FSA permission to acquire the shares and are subject to FSA inspection.