Financial Services Agency
The Government of Japan
Administrative Actions on Bank of Tokyo-Mitsubishi
- A report of misconduct and other matters was submitted by Bank of Tokyo-Mitsubishi pursuant to the provisions of Article 53-1 of the Banking Law and Article 35 of the Enforcement Regulations of the said law. The report stated that an inquiry from a customer at a branch led to the discovery that temporary staff in charge of customer liaison dispatched from the bank's subsidiary serving as a personnel placement agency had embezzled customers' deposits. Findings from an internal investigation conducted by the bank revealed that the staff had embezzled more than ¥900 million over an extended period, spanning more than ten years.
- Following the submission of the report, the Financial Services Agency (FSA) ordered the bank pursuant to Article 24 of the Banking Law to submit a report describing the factors that led to the misconduct and the reasons why the misconduct was not discovered for such a long period of time, and conducted an examination. The examination revealed the presence of serious problems in the bank's management stance towards compliance and its internal control system as follows:
|(1)||The management team makes efforts to prevent misconduct from recurring in consideration of the employees' frequent misconduct in the past, but its management stance towards compliance remains inadequate, as exemplified by its poor awareness of the risks of wrongful acts associated with the increase in temporary staff and changes in the nature of duties.|
|(2)||As a result, the bank has failed to build personnel/labor control systems adapted to the attributes of temporary staff, as reflected in insufficient personnel information compared to employees, including the improper application of rules on the management of staff who are engaged in the same line of work over an extended period of time. The bank has also failed to establish a compliance system on a bank-wide scale, including failing to review the way in which irregular affairs are handled according to external and internal variable factors.
In addition, its branches do not properly control the movements of temporary staff and their daily check-and-balance mechanism is inadequate, as reflected by their failure to verify the number of irregular affairs with respect to each staff member and the causes of such affairs, as well as making efforts to reduce the number of such affairs.
Moreover, its subsidiary serving as a personnel placement agency does not adequately control the movements of its employees, and is deemed to have problems in its compliance system, including the lack of frameworks to manage the compliance with rules between the subsidiary and the bank.
|(3)||Further, the audit program for internal audits conducted by the Audit Office does not address the management status of temporary staff belonging to the same department over an extended period of time. Even though the internal audit of branches had pointed out the weaknesses in the internal control system of branches, the bank failed to detect the misconduct by itself; it was revealed only when a customer made an inquiry. This failure illustrates the ineffectiveness of the internal control system that prevented the self-correcting mechanism from functioning.|
- For the reasons stated above, the FSA issued a Business Improvement Order to the bank today as follows, pursuant to Article 26-1 of the Banking Law.
|(1)||The bank shall expand and strengthen its internal control system in consideration of the following, in order to establish a compliance system and ensure sound operations:|
|(2)||The bank shall submit a Business Improvement Plan addressing the points described in (1) above by September 26, 2005, and implement the Plan immediately.|
|(3)||Subsequent to the implementation of (2) above and until the aforementioned Business Improvement Plan is carried out, the bank shall prepare a quarterly report of the progress, implementation status, etc., starting with the period ending September 2005, and submit the said report by the 15th day of the following month.|
Financial Services Agency TEL: 03-3506-6000 (Main)
Banks Division I, Supervisory Bureau (Extension: 3321, 3325)
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