(Provisional Translation)

March 31, 2004
Financial Services Agency
The Government of Japan

Administrative Actions on the JPMorgan Chase Bank, Tokyo Branch

1. According to the incident report from the JPMorgan Chase Bank, Tokyo Branch [hereinafter referred to as the ''Branch''] to the Financial Services Agency [hereinafter referred to as the ''FSA''] and the Branch's subsequent report to the FSA in response to the FSA's Reporting Order based on the Article 24 (1) and the Article 48 of the Banking Law, it is confirmed that there exist serious problems and weakness on the management's commitment and the internal control with regard to the compliance with the Banking Law and regulations related thereto. These problems and weakness include the points as follows;

1)	Since May 2001, the Branch has allowed the J.P.Morgan Securities Asia Private, Limited, Tokyo Branch [hereinafter referred to as the ''Securities Company''] to practically represent the Branch for operating and executing the financial derivatives transactions with the Branch's clients. The FSA pointed out last May that such operations controlled by the Securities Company were the violation of the Article 47-2 [the Article 8 before the amendment] of the Banking Law since May 2003. Although the Branch, recognizing the illegality of the operations, took the corrective measures since then, they were not sufficient to correct the violation.
2)	When carrying out the transactions under such illegal conditions above represented by the Securities Company on behalf of the Branch during the period from December 2002 to July 2003, an interest rate option trader in the Securities Company [hereinafter referred to as the ''Trader''. This person was employed by the Branch and seconded to the Securities Company.] colluded with the broker[s] in another firm and repeated to offer manipulated valuation for the purpose of hiding the mark to the market and loss of Yen interest rate option trading which was managed by the Trader. As a result of this manipulation of valuation, false market prices information were repeatedly provided to the Branch's clients during the period above and it was possible that some of the clients' closing accounts at the end of months and fiscal years were distorted if such closing accounts were made on the basis of such information. Moreover the manipulation of valuation by the Trader distorted the related valuation of derivative positions in the trading department of the Branch, the Head Office in New York and the London Branch, which caused the serious problems on the risk management control of the JPMorgan Chase Bank.
3)	The Branch was not forthcoming enough to provide the information and explanation to the related clients about the occurrence of this misconduct and influence on the clients' transactions, even after finishing the internal investigation directed by the FSA to the Branch into the influence by this misconduct on the transactions with the Branch's clients.
4)	The information on the side of the Branch on the client's credit exposure management and the conditions of client's trade execution and the transaction history on trading in the Branch have been used and produced in the Securities Company which acted as agent of the Branch, thus, impacting proper control of client's information by the Branch.
5)	Although the question about the parameter of the Trader was pointed out by another trader in the proprietary trading department in the Branch and by the middle section responsible for checking the daily evaluation of trading positions, it took long time for the Branch to find Trader's misconduct due to the fact that the internal checking did not work properly. Moreover, internal audit function did not properly performed, either, and they failed to give necessary instructions to the related departments and the management in the Branch on a timely basis.
6)	The management's response with a view to strengthening compliance function was not prompt enough although the internal investigation and reporting to the FSA were done by the Branch. The Branch did not take proper actions timely and did not reply to the FSA until receiving an instruction from the FSA. As a result, it took over six months for the Branch to submit a final report to the FSA in response to the reporting order by the FSA since the Branch first identified the occurrence of the Trader's misconduct in July 2003.

2. With the findings above, the FSA today took the following administrative actions [Business Improvement Order] to the Branch based on the Article 47 (2) - (3) and the Article 26 (1) of the Banking Law.

1)	To enhance compliance functions, the Branch should establish and strengthen the internal control system regarding legal and compliance issues with due emphasis on the following points:
	[1] to clarify the commitment of the management on compliance with laws and other related regulations [2] to develop internal system which enables the Branch to take prompt action in response to the occurrence of legal and compliance issues [3] to reinforce the function of the legal and compliance department in the Branch [including the enhancement of human resources and organizational aspects] [4] to take measures to make sure that relevant laws and regulations are properly understood and followed by the management and employees
2)	To review and strengthen the compliance functions for the operational control and the execution and control of trading the financial derivative transactions under the Article 10 (2-14) of the Banking Law and to prevent a recurrence of misconduct, the FSA ordered the Branch to establish and strengthen the operational and internal control system [including the enhancement of human resources and organizational aspects] for the above mentioned derivative transactions with due emphasis on the following points:
	[1] Proper management and control of operation [2] Proper provision of information and explanation to clients [3] Proper management and control on the information on client's credit exposure management and condition of client's trade execution and the track record on trading in the Branch [4] To strengthen function on internal checking and auditing, and to upgrade the framework of follow-up of function [5] To clarify who, among the management and employees, should be held responsible with respect to this incident
3)	The Branch must submit the Business Improvement Plan to the FSA by April 30, 2004 and implement it promptly.
4)	The Branch must report the progress in the implementation of the plan to the FSA on a quarterly basis until its completion.