Angry US authorities clamp down on Daiwa
Tuesday 03 October 1995
The enforcement order issued by the Federal Reserve Board of Governors and the New York State Banking Department reflected anger that Japan's 10th biggest bank had deliberately ignored US regulations by delaying to report the circumstances surrounding the $1.1bn losses run up by Toshihide Iguchi in unauthorised bond trading.
Mr Iguchi confessed to Daiwa headquarters in Osaka in July about the massive unauthorised trading, apparently conducted over an 11-year period. The bank then moved discreetly to conduct its own internal investigation and apparently sell off assets to cover the loss. The regulatory authorities in New York were only informed in mid-September. In addition to the failure to inform the authorities of a severe breakdown in controls and supervision, Daiwa Bank "may have knowingly submitted a misleading and incorrect report of the branch's condition" as of 30 June, the New York authorities declared.
Daiwa Bank was ordered to conduct a "detailed, forensic review" of the transactions that led to the $1.1bn of bond trading losses, and to provide an in-depth internal review of its actions from the time it learned of the loss in July until it notified the banking authorities.
Daiwa must also submit, within five days, an acceptable written plan to reduce all of its New York trading activities "to the minimum levels necessary to service customers, conduct asset-liability management and manage the risk in the existing trading position of the New York branch".
The US authorities were scathing about the unsound practices that allowed Mr Iguchi to deceive his superiors for such a long time. The regulators said "prompt interim action" was needed to control Daiwa's local activities, and permanent enforcement action may be necessary. This will be decided at a hearing on 27 December.
The Fed said that in November 1992 and November 1993 regulators criticised controls at the New York branch. Regulators said they were led to believe by Daiwa officials that lines of authority were changed in November 1993 so that Mr Iguchi was no longer responsible for the branch's trading and custodial operations. The Fed now believes reporting lines were not changed.
In his written confession to Daiwa, Mr Iguchi said that because he was responsible for the branch's custodial department, he was able to sell securities from Daiwa's own accounts, as well as securities of customers to cover his trading losses. He was also in a position to falsify accounting and other branch records to hide the losses.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...
£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...