Japanese financial authorities crack down on Citibank
TOKYO (AP) â Japanese financial authorities announced Friday they would shut down Citibank's (C)
private banking business in the country after finding "severe legal violations" in its
operations.
The Financial Services Agency ordered that private banking operations be suspended
starting September 29, putting an end to all new transactions. The government said it
plans to revoke Citibanks' private banking licenses in September of next year to
discontinue that business entirely.
Citibank in Japan, part of New York-based Citigroup, said Friday that it accepts the
orders and will comply with them.
The FSA's action was in response to a request from the Securities and Exchange
Surveillance Commission of Japan, the nation's stock market watchdog, which recently
inspected Citibank Japan's private banking operations and identified violations by the
bank and its employees.
Citibank Japan issued an apology and said it will work to prevent a recurrence of the
violations.
"These sanctions demonstrate the serious consequences of failing to comply with regulatory
requirements and violating our business standards," Citigroup CEO Charles Prince and Robert
Willumstad, the company's president and chief operating officer, said in a statement to employees.
"We deeply regret the problems that led to the FSA's actions in Japan."
Citibank Japan said it will strengthen internal control systems to abide by local
laws. Six officers have left Citibank to accept responsibility for the problems in
Japan, and eight employees have had their compensation reduced and other employees
have received formal reprimands, it said.
Citibank said it had also agreed to create a new CEO position to manage its Japanese
business, and had named executive Douglas L. Peterson to the job.
The FSA said it also ordered Citibank to refrain from accepting foreign currency
deposits from new customers for one month starting Sept. 29.
All banking services provided to existing retail customers will be unaffected by the
sanctions, Citibank said.
Japanese regulators said they decided on the sanctions after finding a large number of "severe legal
violations" and "extremely inappropriate transactions" at the four offices where Citibank
conducts its private banking business. Those offices are located in Tokyo's Marunouchi district, and in
the cities of Nagoya, Osaka and Fukuoka.
Article 27 of Japan's Banking Law allows the government to revoke banking licenses
when a financial institution acts in a manner that is detrimental to public interest.
Shares of Citigroup fell 23 cents to close at $46.95 Friday on the New York Stock Exchange.
