The Financial Services Agency issued a business improvement order against Fukushima Bank on Friday after the regional lender erroneously paid dividends despite lacking the earnings to do so.
The FSA, the country’s financial watchdog, fell short of ordering the bank to halt business as the lender has admitted to the error and said it was due simply to its staff lacking proper knowledge, sources close to the matter said. The bank’s outside investigative panel has concluded that the misdeed does not amount to any criminal wrongdoing.
The Fukushima Prefecture-based bank paid ¥344 million in dividends to its shareholders for the year that ended in March 2008.
In January this year, however, an accounting firm that checked the bank’s balance sheet found it did not have sufficient retained earnings at the time of the payment.
The staff in charge of dividends failed to deduct unrealized losses on securities investments from retained earnings, according to the sources. Without the error, the bank would have had no resources for dividends and in fact found a deficit of ¥695 million in such resources.
The case is quite rare, even among nonfinancial firms, the sources said, adding that the FSA was in no position to overlook the mistake.
This is not the first business improvement order for Fukushima Bank. In January 2007, it received a business improvement order over embezzlement involving a temporary employee.
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