Founding Daiwa Next Bank: a securities group enters banking (2009)

What it means for a broker to build its own bank

What this decision stepped into was an idea that crosses the boundary between industries: a securities firm owning its own bank. Fujimoto Bill Broker, Daiwa’s source, originally ran banking and securities side by side, and has a history of being forced by the 1933 revision of the Banking Act to choose one and turning to securities alone. A company that set out by giving up its banking licence had, seventy-odd years later, gone and taken a banking licence back. It was not borrowing a bank’s capital through a joint venture, nor allying with another bank, but a choice to place the entrance for customers’ money inside the group.

A design that catches idle funds sitting in securities accounts as deposits can be read as anticipating the limits of a securities model built on trading single products, because it takes hold of the everyday point of contact — money moving in and out of investments. With commissions deregulated and online brokers spreading, the earnings from intermediating trades were thinning; to move toward the wealth-management form that holds customers’ assets for the long term, you need the foundations of settlement and deposits. Daiwa Next Bank was the move that laid those foundations ahead of the turn in the securities business itself. How close can a securities firm come to a bank and still remain a securities firm — now that it holds ¥5 trillion in deposits, that question weighs more, not less.