Equity ownership of banks

Abstract

The participation of hanks in the equity capital of a firm is one of the most controversial issues in banking regIdation. The maximum amount of capital that a bank is allowed to hold in a non-financial firm riders widely between countries. Usually two types of restrictions can he found: limitations of the absolute level of equity investment in relation to a book’s capital and absolute limits on the participation in a single company. Whereas the first kind d restrictions normally only relevant for very big firms, direct limitations of link ownership aa, a severe limitation of the banks scope of action. For example in Denmark and Norway banks may own up to 50% of a firm’s voting stock, n Portugal 25%, Finland or Ireland 10%, and in Belgium, Japan and Sweden op to 5%. Since Italy has recently abandoned ownership Australia is now the only OECD which does not allow any investment in equity of non-financial firms. Similar to Germany, Austria, Greece, Spain and Turkey have no general restrictions on the percentage of a firm that a bank may own (OECD 1992).