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.
Guide dog mauled while helping owner deliver Christmas cards
Nelson Mandela’s complex bond with Britain
The poorest pay the price for austerity: Workers face biggest fall in living standards since Victorian era
Deadly ice storm pushes up US east coast as temperatures drop to -29C
10 stone five-year-old taken into care
- 1 Gurdwaras-turned-food banks: Sikh temples are catering for rise in Britain’s hungry
- 2 Council bans use of word ‘Commie’ – but ‘fascist’ and ‘Nazi’ are fine
- 3 The man who made Femen: New film outs Victor Svyatski as the mastermind behind the protest group and its breast-baring stunts
- 4 The poorest pay the price for austerity: Workers face biggest fall in living standards since Victorian era
- 5 Mass murder in the Middle East is funded by our friends the Saudis
- < Previous
- Next >
iJobs Money & Business
£2000 - £25500 per annum + Benefits: Flight Centre Limited: We are seeking an ...
£55000 - £70000 per annum + Benefits + Bonus: Harrington Starr: Senior Java De...
£25000 - £35000 per annum: Harrington Starr: PHP Developer (Web Developer, MyS...
£55000 - £75000 per annum + 28 Days Holiday: Harrington Starr: Flex Developer ...