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Japan to revoke Credit Suisse unit license

(Reuters) -- Japanese financial regulators said on Thursday they will revoke the banking licence of Credit Suisse Group's derivatives unit for obstructing official investigations and offering inappropriate products to clients.

This content was published on July 29, 1999 - 13:28

(Reuters) -- Japanese financial regulators said on Thursday they will revoke the banking licence of Credit Suisse Group's derivatives unit for obstructing official investigations and offering inappropriate products to clients.

Financial regulators also ordered a partial suspension of Tokyo operations at four other CS Group units and Kokusai Asset Management Co Ltd, a unit of second-tier Japanese brokerage Kokusai Securities Co.

The revocation of Credit Suisse Financial Products' (CSFP) banking licence was among the harshest penalties ever imposed on a financial firm operating in Tokyo, analysts said.

The penalties, which were in line with expectations, signalled the regulators' resolve to tighten control on foreign firms at a time when Tokyo's markets are opening up to competition under Japan's "Big Bang" deregulation, they said.

The Financial Revitalisation Commission (FRC) said in a statement that CSFP's operations would be suspended from August 5 and its Japan license would be revoked on November 30.

"CSFP's Tokyo branch as an organisation evaded and obstructed investigations and offered extremely inappropriate products to clients, in view of their disclosed financial position, in large volumes and on a repeated basis," the statement said.

Credit Suisse Group said the revocation of CSFP's license was without precedent in Japan.

"Although the group believes that the sanction is disproportionate to the criticised conduct, it will comply with the sanction," Credit Suisse said in a statement.

The banking group commissioned an independent study of problems at the Japan unit, asking for help from an outside law firm, and dismissed some executives in connection with the matter.

The other four CS units penalised by the authorities were Credit Suisse First Boston, investment bank Credit Suisse Trust & Banking Co, Credit Suisse First Boston Securities (Japan) and Credit Suisse Asset Management.

Japan's regulators had been looking into whether CS Group firms in Tokyo engaged in any inappropriate transactions to help clients conceal losses by bouncing them from one account to another, possibly using derivatives transactions.

"The move was good in terms of firing a warning shot," said Hideki Naito, managing analyst at Standard & Poor's MMS International. "Japan's regulators had been sweet to outsiders while taking a hard-line stance against domestic players. The view that Japan is an easy market for foreigners will change."

Regulators have also launched inspections of the Tokyo operations of two U.S. brokerages, Lehman Brothers and Cresvale Group. Findings could be announced as early as next month.

Japan's Financial Supervisory Agency (FSA), born last year out of a series of scandals that entangled the powerful Ministry of Finance, has become known for tough and transparent supervision of financial firms on the basis of clear and fair rules -- a break from the murky discretionary system of the past.

The regulators' move also sounded a warning against any attempts by recession-hit Japanese firms to hide losses or bad loans with derivatives or other financial tools, analysts said.

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