Japan’s financial regulator has sanctioned Mitsubishi’s main banking unit UFJ Financial Group and two joint ventures for breaching customer confidentiality rules, potentially dealing a further blow to their businesses.
The Financial Services Agency ordered MUFG Bank, Morgan Stanley MUFG Securities and Mitsubishi UFJ Morgan Stanley Securities to improve their operations. The FSA also requested reports on the cause of the breach by July 24 and planned measures to prevent a recurrence.
The scandal has damaged confidence in the country’s largest banking group, prompting some clients to take their bond underwriting operations elsewhere. Japan bans commercial and investment banking units of the same financial group from sharing customer data without their consent, in part to prevent lenders from abusing their negotiating positions.
The FSA’s investigative arm, the Securities and Exchange Surveillance Commission, said earlier this month that MUFG Bank, Morgan Stanley MUFG Securities and Mitsubishi UFJ Morgan Stanley Securities had inappropriately exchanged customer information to win business at least 26 times. The market watchdog also noted other inappropriate behavior, including cases where MUFG Bank tried to win insurance contracts for the brokerage unit.
The banking industry has long lobbied officials to ease restrictions, arguing that it would better serve customers’ interests if lenders and their group brokers could jointly offer products and services.
Officials found firewall breaches at the brokerage subsidiary of rival Sumitomo Mitsui Financial Group a few years ago.
