Japanese Banking Scandals Put Public Trust at Risk

Public trust in Japan's financial sector is reportedly at risk following a spate of scandals, according to The Japan News.

In June, the Financial Services Agency (FSA) issued business improvement orders to MUFG Bank and its securities affiliates for sharing non-public client information without consent. By July, an MUFG employee was under investigation for insider trading. And in November, Sumitomo Mitsui Trust Bank dismissed a manager for similar misconduct. The bank's president publicly apologized for the incident.

In December, Nomura Securities faced scrutiny after a former employee was indicted for arson and the attempted murder and robbery of a client. As a result, Nomura Securities President Kentaro Okuda and other executives voluntarily returned part of their monthly salaries. "We must take the situation seriously as trust in the financial industry is at risk," a bank official admitted.

Governance expert Shinji Hatta highlighted that these scandals exposed poorly managed organizational checks and called for banks to do more to protect their customers. "They are an issue that greatly overturns the common sense that banks' operations are based on the trust of the customers," Hatta said. "They should thoroughly review even the most basic measures, such as multilevel checks to prevent operational misconduct, from the perspective of protecting customers' assets."