Japanese financial authorities announced yesterday that they are punishing Citibank by suspending private banking operations for a year at four of its branches after finding problems with their operations.
The Financial Services Agency ordered that private banking operations be suspended at Citibank's Marunouchi, Nagoya, Osaka and Fukuoka branches for one year from Sept. 29. The private banking licenses of those branches will then be revoked on Sept. 30 next year, so that operations will be discontinued, it said.
Citibank in Japan, part of Citigroup Inc., said yesterday 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 apologized and said it will prevent a recurrence. All banking services provided to existing retail customers will be unaffected by the sanctions, Citibank said.
Citibank Japan will strengthen internal control systems to abide by local laws, it said. 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.
Private banking consists of lending, investment management, and other banking services for wealthy customers. Retail banking consists of services regular people use, such as savings accounts.
The FSA said it also ordered Citibank to refrain from accepting foreign currency deposits from new customers for one month starting Sept. 29.
Japanese regulators said they decided on the sanctions after finding a large number of "severe legal violations" being conducted by Citibank's Marunouchi Branch and the offices in Nagoya, Osaka and Fukuoka. Authorities judged that "it would be inappropriate for operations to continue" at the branches, they said.
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.
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