FSA hits UFJ with improvement orders

Bank censured over its systematic efforts to evade agency inspection

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The Financial Services Agency on Friday hit the UFJ banking group with four business improvement orders, partly over its attempts to evade an agency inspection by systematically scrapping, hiding or tampering with crucial documents relating to borrowers.

The FSA ordered the nation’s fourth-largest lender by assets to submit a business improvement plan in a month that identifies the senior bank managers responsible for the coverup and features a new system for legal compliance.

“We want the UFJ group to realize its tasks and social responsibility,” a senior FSA official told a media briefing. “We think it needs to improve the internal control function and management stance.”

As an example of data concealment, UFJ Bank — a core unit under UFJ Holdings Inc. — moved important documents to secret rooms and lied that it had not done so, the financial regulator said.

The FSA also accused UFJ bank of three problems:

Failing to achieve profit targets by more than 30 percent for two consecutive years, despite the bank’s acceptance of public funds.

Issuing false reports on the amount of loans to small and midsize firms.

Revising its earnings forecast in a way that did not reflect the actual results, which were much worse.

The agency declined to comment on whether it will file a criminal complaint with police against the bank.

UFJ Holdings said last month that it had posted a net loss of 402.8 billion yen for the year through March 31, its third consecutive year in the red.

UFJ had planned to report a net profit, only to be instructed last month by the FSA to put up larger loan-loss reserves than it had planned for bad loans.

UFJ still holds bad loans amounting to 3.9 trillion yen, accounting for 8.5 percent of its total outstanding loans.

UFJ Bank President Takamune Okihara said he does not believe the alleged inspection evasion was intentional or systematic.

But in response to the management improvement orders, the bank will halve executive salaries for the time being.

Information from Kyodo added