Financial Supervisory Agency
Statement by the Commissioner
Administrative actions against financial institutions involved in recent bribery cases
1. Concerning the alleged bribery cases between financial institutions and financial authorities, public prosecutors have alleged in the indictment of officials of financial authorities on charges of accepting bribes, that the senior managers and staff of ten banks (the Dai-Ichi Kangyo Bank, Limited, the Sakura Bank, Limited, the Fuji Bank, Limited, the Bank of Tokyo-Mitsubishi, Limited, the Asahi Bank, Ltd., the Sanwa Bank, Limited, the Sumitomo Bank, Limited, the Hokkaido Takusyoku Bank, Limited, the Industrial Bank of Japan, Limited, and the Long-Term Credit Bank of Japan, Ltd. ) and of five securities firms ( the Nomura Securities Co., Ltd., the Nikko Securities Co. Ltd., the Daiwa Securities Co., Ltd., the Yamaichi Securities Company, Limited and the Sakura Securities Co., Ltd.) engaged in bribe-givings.
The financial authorities ordered, pursuant to Article 24 of the Banking Law and other relevant legislation, these institutions──excluding failed institutions ( the Hokkaido Takushyoku Bank and the Yamaichi Securities) ──to submit reports on the role of institutional decision-making in their possible illegal and/or inappropriate activities and on possible problems in their internal control systems. The Ministry of Finance and later on the Financial Supervisory Agency (“the Agency") received reports from all of the institutions concerned.
2. The Agency has reviewed the reports and concluded as follows:
(1) All of these institutions have admitted that Settai (“wining and dining" of officials) was a traditional and frequent practiced custom, and that in this regard, they paid little attention to legal compliance and their internal control systems did not function well.
(2) The Agency has found that six of these institutions (the Dai-Ichi Kangyo Bank, the Bank of Tokyo-Mitsubishi, the Asahi Bank, the Sanwa Bank, the Sumitomo Bank and the Industrial Bank of Japan) obtained confidential information, including information on on-site inspections which was utilized internally to prepare for inspections. These institutions, however, denied having taken illegal actions such as circumventing inspections by fabricating and/or concealing data.
(3) The Sanwa Bank, however, has taken extremely inappropriate actions. It received results of on-site inspection of other banks and obtained inside information from the Bank of Japan concerning the target range for short-term interest rate, and used this information in its market operations.
3. Having considered their reports and followed the due legal process, described in the Administrative Procedure Law, of granting the institutions concerned the opportunities to defend themselves, the Agency has today taken the following administrative actions.
(1) Administrative actions against the Sakura Bank, the Fuji Bank, the Long-Term Credit Bank of Japan, the Nomura Securities, the Nikko Securities, the Daiwa Securities, and the Sakura Securities
Pursuant to Article 26 of the Banking Law and relevant legislation, the Agency has issued orders to the banks and operational directives against the securities firms directing them to formulate and implement a management improvement plans , to take measures to strengthen their internal control systems ( e.g. by formulating and implementing measures to prevent inappropriate activities, strengthening controls to ensure compliance with the law, and strictly checking expenses ), and to report on the implementation of their plans.
(2) Administrative actions against the Dai-Ichi Kangyo Bank, the Bank of Tokyo-Mitsubishi, the Asahi Bank, the Sumitomo Bank, and the Industrial Bank of Japan
Pursuant to Article 26 of the Banking Law and relevant legislation, the Agency has issued orders to the above institutions to formulate and implement management improvement plans , to take measures to strengthen their internal control systems ( e.g. by formulating and implementing measures to prevent inappropriate activities, strengthening controls to ensure compliance with the law, and strictly checking expenses ), and to report on the implementation of their plans every six months as long as the Agency deems it necessary.
In addition, the Agency has ordered that operations auditing committees comprising external experts such as lawyers be established within each of the above institutions, the role of the said committee being to advise on and audit the management improvement plans to be reported to the Agency.
(3) Administrative actions against the Sanwa Bank
In addition to the order mentioned in 3.(2) above, the Agency prohibits, pursuant to Article 26 of the Banking Law, the Sanwa Bank from over-the-counter sales of securities investment trust beneficiary securities and from establishing bank holding companies ( two activities in which banks are now permitted to engage following the recent reform of the financial system) during the period from August 3, 1998 to August 2, 1999, in order to make the bank concentrate its efforts on strengthening its internal control system.
4. The Agency strongly hopes that the institutions use their best endeavors to strengthen their internal control systems and regain their credibility. Realizing the importance of maintaining official discipline, the Agency also intends to make every possible effort to carry out its rule-based supervisory activities in a transparent manner.
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Financial Supervisory Agency
Statement by the Commissioner
Administrative actions against financial institutions involved in recent bribery cases
1. Concerning the alleged bribery cases between financial institutions and financial authorities, public prosecutors have alleged in the indictment of officials of financial authorities on charges of accepting bribes, that the senior managers and staff of ten banks (the Dai-Ichi Kangyo Bank, Limited, the Sakura Bank, Limited, the Fuji Bank, Limited, the Bank of Tokyo-Mitsubishi, Limited, the Asahi Bank, Ltd., the Sanwa Bank, Limited, the Sumitomo Bank, Limited, the Hokkaido Takusyoku Bank, Limited, the Industrial Bank of Japan, Limited, and the Long-Term Credit Bank of Japan, Ltd. ) and of five securities firms ( the Nomura Securities Co., Ltd., the Nikko Securities Co. Ltd., the Daiwa Securities Co., Ltd., the Yamaichi Securities Company, Limited and the Sakura Securities Co., Ltd.) engaged in bribe-givings.
The financial authorities ordered, pursuant to Article 24 of the Banking Law and other relevant legislation, these institutions──excluding failed institutions ( the Hokkaido Takushyoku Bank and the Yamaichi Securities) ──to submit reports on the role of institutional decision-making in their possible illegal and/or inappropriate activities and on possible problems in their internal control systems. The Ministry of Finance and later on the Financial Supervisory Agency (“the Agency") received reports from all of the institutions concerned.
2. The Agency has reviewed the reports and concluded as follows:
(1) All of these institutions have admitted that Settai (“wining and dining" of officials) was a traditional and frequent practiced custom, and that in this regard, they paid little attention to legal compliance and their internal control systems did not function well.
(2) The Agency has found that six of these institutions (the Dai-Ichi Kangyo Bank, the Bank of Tokyo-Mitsubishi, the Asahi Bank, the Sanwa Bank, the Sumitomo Bank and the Industrial Bank of Japan) obtained confidential information, including information on on-site inspections which was utilized internally to prepare for inspections. These institutions, however, denied having taken illegal actions such as circumventing inspections by fabricating and/or concealing data.
(3) The Sanwa Bank, however, has taken extremely inappropriate actions. It received results of on-site inspection of other banks and obtained inside information from the Bank of Japan concerning the target range for short-term interest rate, and used this information in its market operations.
3. Having considered their reports and followed the due legal process, described in the Administrative Procedure Law, of granting the institutions concerned the opportunities to defend themselves, the Agency has today taken the following administrative actions.
(1) Administrative actions against the Sakura Bank, the Fuji Bank, the Long-Term Credit Bank of Japan, the Nomura Securities, the Nikko Securities, the Daiwa Securities, and the Sakura Securities
Pursuant to Article 26 of the Banking Law and relevant legislation, the Agency has issued orders to the banks and operational directives against the securities firms directing them to formulate and implement a management improvement plans , to take measures to strengthen their internal control systems ( e.g. by formulating and implementing measures to prevent inappropriate activities, strengthening controls to ensure compliance with the law, and strictly checking expenses ), and to report on the implementation of their plans.
(2) Administrative actions against the Dai-Ichi Kangyo Bank, the Bank of Tokyo-Mitsubishi, the Asahi Bank, the Sumitomo Bank, and the Industrial Bank of Japan
Pursuant to Article 26 of the Banking Law and relevant legislation, the Agency has issued orders to the above institutions to formulate and implement management improvement plans , to take measures to strengthen their internal control systems ( e.g. by formulating and implementing measures to prevent inappropriate activities, strengthening controls to ensure compliance with the law, and strictly checking expenses ), and to report on the implementation of their plans every six months as long as the Agency deems it necessary.
In addition, the Agency has ordered that operations auditing committees comprising external experts such as lawyers be established within each of the above institutions, the role of the said committee being to advise on and audit the management improvement plans to be reported to the Agency.
(3) Administrative actions against the Sanwa Bank
In addition to the order mentioned in 3.(2) above, the Agency prohibits, pursuant to Article 26 of the Banking Law, the Sanwa Bank from over-the-counter sales of securities investment trust beneficiary securities and from establishing bank holding companies ( two activities in which banks are now permitted to engage following the recent reform of the financial system) during the period from August 3, 1998 to August 2, 1999, in order to make the bank concentrate its efforts on strengthening its internal control system.
4. The Agency strongly hopes that the institutions use their best endeavors to strengthen their internal control systems and regain their credibility. Realizing the importance of maintaining official discipline, the Agency also intends to make every possible effort to carry out its rule-based supervisory activities in a transparent manner.
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