Press Conference by FSA Commissioner Takafumi Sato
May 12, 2008
[Opening Remarks by Commissioner Sato]
I have nothing specific to report to you.
[Questions and Answers]
I will ask you about a glitch that disrupted part of the Bank of Tokyo-Mitsubishi UFJ's new online system, which started operating today. The Financial Services Agency (FSA) has been strengthening surveillance of this bank's process of system integration by conducting targeted inspections. What do you think of the fact that the system glitch occurred on the first day of operation, and what action will the FSA take? Also, as the process of integration continues step by step, how will the FSA deal with it?
The Bank of Tokyo-Mitsubishi UFJ shifted the system of the former Bank of Tokyo-Mitsubishi's branches to a new system, and the online operation started this morning. I have received a report that a system glitch made it impossible to use cards issued by the former Bank of Tokyo-Mitsubishi with Seven Bank's ATMs. I hear that the Bank of Tokyo-Mitsubishi UFJ will deal with the situation by leading customers to use the cards in question with ATMs of financial institutions other than Seven Bank while proceeding with restoration work, and that the system was restored to normal operation around 11:55 a.m. However, it is regrettable that a system glitch affecting customers has occurred.
I understand that the bank will continue integration work with a view to completing the full-fledged system integration, dubbed "Day 2," by the end of 2008. I hope that the bank will take every possible precaution in its future integration work. The FSA will seek explanations about the cause of this system glitch and keep a close watch on the status of the future work.
Regarding the case of insider trading involving a former Nomura Securities employee, the re-arrest of the suspect was announced earlier today. Could you tell me again about how you view this case and what kind of criteria the FSA intends to use in evaluating the internal control system of companies- an issue that is expected to become a major focus of attention? Also, may I understand that the FSA intends to make its judgment regarding this case after the series of criminal proceedings, such as indictment, have been completed?
I will stress again that, from the financial authorities' point of view, it is quite regrettable that a securities company employee has been arrested for suspected insider trading.
I would like to refrain from making a specific comment on Nomura Securities' internal control system at this time, as the Securities and Exchange Surveillance Commission and the law enforcement authorities are currently investigating this case.
Also, I think we need to carefully consider what administrative action to take in light of the facts that are revealed by the investigation. As you know, generally speaking, when a problem has been detected in the internal control system of a securities company, the FSA will consider whether or not to take disciplinary action giving due consideration to its seriousness and maliciousness and the underlying factors, such as the appropriateness of the control environment.
Generally speaking, securities companies are supposed to put rigorous systems for legal compliance and internal control in place, in light of the role they play in the financial and capital markets. Also, their officers and employees need to recognize the public nature of their companies' role and engage in business operations with an enhanced sense of legal compliance, professional ethics and self-discipline. From this viewpoint, it is important for securities companies to establish a proper internal control system, including an information control system, in order to prevent insider trading by ensuring legal compliance.
On April 28, the FSA asked all securities companies to grasp the status of securities trading by their officers and employees, review their information control system and provide necessary training. We will continue efforts to achieve a transparent and fair market by enhancing the compliance system of the securities industry as a whole through these measures.
Regarding the Bank of Mitsubishi-Tokyo UFJ, the FSA has already conducted an inspection targeted at its system. While it is not clear how extensive this system glitch and the damage caused by it are, what do you think of the fact that this system glitch has occurred despite the targeted inspection?
We believe that the FSA has provided as much support as possible to ensure that sufficient preparations are made, by conducting an inspection targeted at the system and holding supervisory hearings regarding the progress of the preparations. Unfortunately, however, an incident like this has nevertheless occurred on the first day of operation. Since this is such a large-scale system, we hope that the bank will promptly identify the cause of the glitch and prevent its recurrence by promptly resolving the problems detected, and swiftly implement necessary measures in light of the lessons learned from this incident.
Another thing I would like to mention is that, regarding the requirement of a report in the case of a computer system glitch, Article 24 of the Banking Act has a provision for the order of a comprehensive report, as you know. Generally speaking, the submission of a report will be required under Article 24 of the Banking Act in a case like this.
Are you considering requiring Seven Bank to submit a report?
We will judge whether it is necessary to do so after confirming the facts through hearings. As for the latest incident, I have not heard of a problem occurring at Seven Banks' ATMs when other banks' cards are used or transactions related to other banks' accounts are made.
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