Citigroup suffered a serious blow to its business and reputation when it was ordered by Japan's financial regulator yesterday to shut down its private banking operations in Japan for breaking banking laws.
The unexpectedly severe punishment followed what the Financial Services Agency said was a series of "serious violations" including misleading customers and failing to prevent suspected money laundering.
The move is the latest setback for the world's largest financial services group, which earlier this week apologised for executing a huge trade in European government bonds in August. The €11 billion trade disrupted the electronic trading system and angered European government officials.
Citigroup is also facing several billion-dollar investor legal actions in the US and Mr Chuck Prince, chief executive officer, has made restoring the company's reputation one of his top priorities.
Its Japanese private banking business, which has been ordered to suspend all new transactions from September 29 and close completely by September 30 2005, generated net income of less than $89 million (€73 million) last year out of a group total of $17.9 billion.
Citibank Japan was the industry leader in private banking services in Japan with about 10,000 clients. Citibank Japan conducts its private banking operations - targeted at wealthy customers who have more than Y100 million (€747,000) of financial assets - from its Tokyo Marunouchi branch and its satellite offices in Osaka, Nagoya and Fukuoka.
All four offices will be forced to discontinue private banking operations.
