The relationship between banks and firms varies significantly in degree of breadth and intensity depending on the status of both the firm and the bank. Further, it is dynamic and flexible, as both banks and firms seek more benefits. This chapter looks at specific aspects of these general observations using empirical research collected and analysed by the author since the early 1980s. The status of a firm is determined by a number of factors; here we are concerned primarily with aspects of size.
The existence of segmented loan markets—Japan created a number of financial institutions to deal with smaller firms, while historically the large (city) banks serviced large firms—is well known. Going beyond this, the first part of this paper analyses how and why smaller firms have banking relationships different from larger ones. The second part looks at an activity reserved for large firms—loan syndication—and traces its evolution from before World War II to the present.
The banks a firm does business with can be divided into four groups like concentric circles or, from a Japanese perspective, a hierarchy: main, core, clearance, and other banks. Core banks (shuryoku ginko gun) include the main bank and those banks the firm has 'almost as important a relationship with as with the main bank'. As the name implies, clearing banks handle daily cash transactions, and usually include core banks. In general, the larger the firm, the larger the number of banks in each group that a firm does business with, but the ranges are quite wide for each category of firm. Data are in Table 8.1 . 1