Angry US authorities clamp down on Daiwa

The US authorities yesterday ordered Daiwa Bank of Japan to reduce to a minimum its New York branch activities following alleged violation of banking regulations.

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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat