Daiwa Bank is considering a sharp cut in its overseas operations, especially in the US, following last week's disclosure of a $1.1bn bond trading fraud in its New York branch, according to bank sources.
Masayoshi Takemura, the finance minister, yesterday made it clear he expects the resignation of Akira Fujita, Daiwa's president, as a gesture of atonement for the humiliation to Japan's tenth biggest bank
"The management must take proper responsibility," Mr Takemura announced, using the traditional formula used to imply resignation. Mr Fujita, who last week said he would be cutting his own pay by 30 per cent, had insisted he would remain in charge "for the time being, until the issue is resolved". Analysts predicted he may hold on until after the publication of reports on the case, in order to take with him as much of the burden of responsibility as possible for the failure to spot the unauthorised bond trading carried out by the chief bond trader in New York, Toshihide Iguchi, over 11 years.
Mr Takemura's statement came as the ministry of finance prepared its own inspection of the bank. Ministry inspectors will today visit Daiwa's head office in Osaka, three days after a similar investigation was announced by the US regulators in New York. The Bank of Japan will also carry out an investigation, and ministry officials are expected to fly out to New York in the next few days. Asahi Shimbun reported that a second, unnamed Japanese in New York was being investigated for a possible part in the fraud. The Bank has been accused by the US regulatory authorities of possible violation of US law because of the two month delay between the bank being alerted to the fraud and the authorities being notified.
The latest moves suggest the scale of the embarrassment caused to the Japanese establishment. The Daiwa affair comes at a particularly bad time for the finance ministry, which is struggling with the bad debt crisis in the Japanese banks. The ministry suffered a scandal of its own last month after a former senior official was found to have made a fortune through questionable investments. Mr Iguchi's activities escaped the notice of two ministry inspections, as well as reviews by the US Federal Reserve. "I regret that the ministry was not capable of spotting the affair," Mr Takemura said.Reuse content