MITSUBISHI UFJ Financial Group top executives will take pay cuts as Japan’s largest banking group seeks to restore client confidence after breaching information firewalls.
Chief executive officer Hironori Kamezawa will see his salary reduced by 30 per cent for three months while chairman Kanetsugu Mike’s compensation will be cut by a similar amount for five months, MUFG said in an statement on Friday (Jul 19).
Junichi Hanzawa, CEO of the group’s flagship banking unit, and Makoto Kobayashi, head of its main brokerage arm, will also receive the same pay cuts for three months to take responsibility for the lender’s violation of client confidentiality rules.
The same salary punishment will also hit MUFG Bank chairman Naoki Hori and Mitsubishi UFJ Morgan Stanley Securities chairman Saburo Araki for two months. In total, 21 current and retired executives will face discipline, including giving up part of their pay.
The move comes after Japan’s financial regulator penalised the bank for breaking a law that prohibits unauthorised sharing of client information between lending and securities units within a financial conglomerate. The revelations prompted some of the group’s corporate customers to take bond underwriting business elsewhere.
“As CEO, I take this matter very gravely,” Kamezawa said at a briefing, as he and other top executives bowed deeply. “We sincerely apologise for causing anxiety and trouble for customers and all stakeholders.” He said there has been an impact from clients moving their underwriting and other businesses elsewhere.
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“If we cannot restore confidence, corporate clients and investors could stop doing business with us,” Kamezawa said. “We have to avoid that situation.”
The Financial Services Agency last month issued a so-called business improvement order to MUFG Bank and joint ventures Morgan Stanley MUFG Securities and Mitsubishi UFJ Morgan Stanley Securities after its investigative arm found that they had inappropriately exchanged client information at least 26 times to win business.
The Securities and Exchange Surveillance Commission also found cases in which MUFG Bank tried to win underwriting business for the brokerage unit.
Morgan Stanley MUFG Securities said it views this situation very seriously and will take strict action against those involved and the management, according to a statement on the firm’s website.
The firewall rule, which is intended to keep lenders from abusing their financial position, is somewhat controversial.
MUFG and other banks have been lobbying for easing of the regulation, saying clients are better served if they can offer various services and products across units.
MUFG said executives and employees did not sufficiently understand they needed to comply with rules governing collaboration between commercial banking and brokerage units. It will review its procedures, instill more training and monitoring as well as change how staff performance is evaluated, the company said, adding a list of improvement steps was submitted earlier in the day to the regulator.
Chairman Mike got the most severe punishment because he did not take proper action when he sensed a potential breach of the rules, Kamezawa said at the briefing. Mike was CEO of MUFG Bank before he became the group’s chairman in 2021.
Japanese financial firms tend to announce pay reductions for senior executives following regulatory punishment. SMBC Nikko Securities, the main brokerage of the country’s second biggest banking group, took away six months worth of compensation from its then-CEO after a market manipulation scandal surfaced in 2022.
The firm had also suffered record losses as clients took their business elsewhere, before subsequently bouncing back. BLOOMBERG
