The corporate governance role of banks in "bank-centered" countries like Japan has been well studied. This article studies the corporate governance in Japanese banks. It shows that large shareholders restrained bank managers from real estate lending in the 1980s. However, this effect was absent for the shareholders who belonged to the same keiretsu (corporate grouping) as the bank. Relationship banking and cross shareholding prevented these shareholders from disciplining the bank managers. In financial systems where banks play a large role in corporate governance, the more effective the banks are in monitoring other companies, the more difficult it may become to monitor bank managers.