Nomura Securities Co. and Dai-Ichi Kangyo Bank each submitted plans Sept. 19 to the Finance Ministry for steps to strengthen their internal control systems.
The plans, which were handed to ministry officials by presidents of the two financial institutions, included measures to increase transparency in decision-making and improve the system of checking business transactions. The firms are suspected of illegally offering financial paybacks to “sokaiya” racketeer Ryuichi Koike, and were handed administrative penalties by the ministry July 30.
The Finance Ministry ordered DKB and Nomura to suspend part of their operations from Aug. 6 to Dec. 31 at the latest over their illegal dealings with the racketeer. The administrative penalties are the most severe ever handed down. The submission of an implementation plan to correct management and break ties with sokaiya was included as part of the penalty, and the two firms are required to report progress to the ministry every six months.
Dai-Ichi Kangyo’s program aims to clarify where business authority and responsibilities lie within the bank and radically strengthen its internal auditing system. The process will involve some organizational renovation. For example, an “office of social responsibility” has been set up to check dubious loans.
In addition, the loan screening system has been strengthened with stronger penalties provided for violation of internal loan rules. DKB has also designated one employee responsible for legal compliance in every section and branch. To ensure legal compliance, two outside advisers will oversee the new measures and ensure that internal monitoring is being implemented among the managerial levels.
The bank has already reviewed its “antisocial” loans to people such as sokaiya and is trying to terminate such dealings, the bank said in its plans. DKB extended about 11.8 billion yen in loans to Koike through a nonbank affiliate from 1994 to 1996, without appropriate screening, to buy his silence at the bank’s shareholders’ meeting.
Nomura, in a bid to improve its in-house management supervision system has established a new committee consisting of both company executives and outsiders, such as lawyers, it reported. “We turned a blind eye to illegal dealings with antisocial groups, which were implemented on the instruction of top company officials,” Nomura said in its report.