Financial regulators said Thursday they will slap Sumitomo Mitsui Banking Corp. with a six-month ban from May 15 on selling financial derivatives.
The Financial Services Agency will take the punitive action due to the discovery that SMBC was forcing corporate borrowers to buy interest swaps to get loans.
The FSA also will ban SMBC from opening new outlets catering to corporate clients for one year from the same date.
Last December, the Fair Trade Commission ordered SMBC to stop forcing its borrowers to buy the interest rate swaps, which allow clients to change their variable interest rates to fixed rates. They are designed to reduce the risks that come with interest rate fluctuations.
SMBC extended loans to corporate clients, particularly small and midsize companies, on condition they bought the interest swaps between fiscal 2001 and 2004, the FSA said.
Specifically, SMBC took advantage of its dominant position as a lender to get interest-swap sales in nearly 20 cases and it is suspected of abusing its position in 50 others, the FSA said. That behavior violates the Antimonopoly Law.
In about 180 cases, there is a question of whether SMBC neglected its civil responsibility, by failing to offer thorough explanations on the interest swaps to clients.
The FSA ordered SMBC to take steps to improve management, including clarification of who among the executives were responsible. This virtually lays the blame with former SMBC President Yoshifumi Nishikawa, now president of Japan Post Corp., and the other executives working for the bank at the time of the purchasing pressure.