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Regulators order Asahi Bank to pay $5 million

February 13, 1997

WASHINGTON (AP) _ The New York branch of Asahi Bank Ltd., one of Japan’s largest banks, was ordered by the Federal Reserve Board to pay $5 million for allegedly obstructing bank regulators.

The order did not reveal details of Asahi’s conduct. But it said it was issued ``for misconduct by certain officers ... relating to the alleged misuse of confidential supervisory information, to the making of allegedly false statements ... and to the alleged obstruction of a formal investigation.″

Asahi did not admit to the allegations as part of the consent order it signed with the Federal Reserve. But, in a separate statement, it said six New York branch employees were involved and that the allegations related to a 1995 examination by the Federal Reserve Bank of New York and the New York State Banking Department.

Asahi said an independent investigation conducted by its legal advisers and the accounting firm Price Waterhouse found several employees obtained access to confidential examination materials left by regulators at the bank and that the employees initially denied their involvement when questioned.

Regulators frequently store documents at banks, in sealed boxes. Reading them is a federal violation.

Asahi said its employees also failed to produce a document in response to a subpoena issued by the Federal Reserve. It concerned the opening of the boxes, said a person familiar with the matter.

Asahi said its probe found no financial improprieties or losses. It said the branch’s managers were replaced by officials from its headquarters in Japan. Though relieved of their responsibilities, the employees involved were not fired and continue to work for the bank in the United States, said the person familiar with the matter, who spoke on condition of anonymity.

Katsumi Sakai succeeded Kasuhiro Shibatsuchi as general manager of the branch, which offers lending, foreign exchange and brokerage services to corporate clients.

The Federal Reserve also ordered Asahi to train its personnel in ethics and the U.S. bank supervisory process, highlighting ``the necessity for candor in all communications with bank supervisors.″

Asahi said it was strengthening the branch’s internal controls with the assistance of Price Waterhouse. And it agreed that the consent order it signed would not prevent criminal prosecution.

The Asahi matter is the latest in a number of run-ins between Japanese banks and U.S. regulators. In the most serious, Daiwa Bank Ltd. was fined $340 million and barred from operating in the United States after it pleaded guilty last year to hiding $1.1 billion in bond trading losses.