• Bloomberg


Citigroup Inc. has been ordered to suspend some derivative transactions by the Financial Services Agency, the regulator said Friday.

Citigroup’s Japan banking unit also had some of its retail operations suspended, while UBS AG’s Japan unit was likewise hit with sanctions.

Part of the New York-based Citigroup’s retail business will be suspended for 30 days, the FSA said in a statement. Citigroup’s trading unit will be suspended from selling products tied to interest rates for 14 days and its head, Brian McCappin, may resign.

Citigroup Chief Executive Officer Vikram Pandit is trying to restore the bank’s reputation in Japan. Regulators punished the company twice in seven years after finding fault with its private-banking operation and a lack of internal controls.

The trading unit will be banned from selling certain products in Japan tied to the London and Tokyo interbank offered rates, or Libor and Tibor. These are rates at which banks are willing to lend money to each other.

Citigroup employees tried to improperly influence Tibor to the firm’s advantage, the FSA said.

Shannon Bell, a spokeswoman for Citigroup in New York, declined comment. The suspensions will take effect in January.

McCappin may resign within the next six weeks as a result of the probe, sources familiar with the matter said.

He didn’t respond to phone calls and emails seeking comment.

Citigroup’s retail operation will be suspended from marketing some of its products, including those tied to mutual funds. The FSA had been preparing to penalize the bank for failing to fully explain product risks to retail customers, two of the sources said earlier this month.

Darren Buckley, CEO of the retail unit, may step down as soon as this month to take responsibility for the breach, the pair said on condition of anonymity.

Citigroup has had a presence in Japan since opening a branch in Yokohama in 1902, according to its website. The bank has 32 branches and offices here with 1,790 employees. The Citicorp division, which includes retail banking, had $2.9 billion in consumer loans in Japan as of Sept. 30, Pandit said in a presentation earlier this month.

In 2009, the FSA ordered Citigroup to suspend marketing of banking services to individuals for a month after failing to install adequate internal controls to detect and monitor suspicious transactions. In 2004, the regulator told the company to close its private-banking operations in the country.

UBS AG will be suspended from trading derivatives tied to Libor and Tibor for seven days from Jan. 10.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.