The CEO of U.S. banking giant Citigroup Inc. apologized Monday for the bank’s misconduct in Japan and said it will terminate its private banking business here for wealthy customers by Sept. 30, 2005.
Charles Prince also said the bank will wind down Cititrust and Banking Corp., a Japanese trust-bank subsidiary, by mid-October 2005, due to its organizational problems.
“I’d like to fully apologize to our customers and the public for the problem that has occurred in our business in Japan and for any concern and inconvenience this has caused,” Prince told a news conference in Tokyo.
The bank’s plan to end its private banking operations is in line with an order issued last month by the Financial Services Agency because of problems with compliance and its management structure.
At Monday’s news conference, Douglas Peterson, the newly appointed CEO of Citibank Japan, admitted that the group has taken a hit to its reputation in Japan, causing confusion among retail banking customers.
Retail banking, which targets a wide range of customers, is the bank’s core business here.
Peterson added that the company has no plans to restart private banking in Japan.
Prince said he met with FSA Commissioner Hirofumi Gomi before the news conference and apologized for the firm’s inadequate governance and management structure in Japan.
Citigroup submitted a business improvement plan Friday to the FSA.
According to the plan, Citibank has created a chief executive officer post to oversee all businesses in Japan, has seen 12 officers leave “to accept responsibility,” has cut the pay of 11 employees and has issued formal reprimands to others.
It will also form an independent oversight committee comprised of external members. The committee will monitor Citibank Japan’s progress in implementing the business improvement plan and in meeting its other commitments.
Citibank Japan was ordered last month by the FSA to close four key offices in Tokyo’s Marunouchi business district, Nagoya, Osaka and Fukuoka. These deal exclusively in banking for wealthy customers who have more than 300 million yen in net assets.
The FSA will revoke the four branches’ licenses next Sept. 30.
An FSA investigation, conducted between November and April, found that bank employees on several occasions violated laws and regulations.
These acts included providing money to clients who were subsequently prosecuted for stock-price manipulation; defrauding customers of more than 1.8 billion yen in foreign currency deposits; lending money to beef up documents used to borrow public funds from a municipality; and taking customers’ passwords out of the office.
Citibank, which opened its first Japanese branch in Yokohama in 1902, shifted its focus to retail banking in the 1980s.
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