Bloomberg News

Citigroup Said to Consider Replacing Japan Banking CEO on Probe

December 13, 2011

Dec. 2 (Bloomberg) -- The head of Citibank Japan Ltd., Darren Buckley, may step down from the post as soon as this month as regulators prepare to punish the bank for the third time since 2004, said two people with knowledge of the situation.

Citigroup Inc. is searching for a Japanese national to become the chief executive officer at its local banking unit for the first time to ensure the person is familiar with local rules and the nation’s retail market, the people said on condition of anonymity because no decision has been made.

Buckley, 45, is likely to step aside after the Financial Services Agency penalizes the bank for failing to fully explain product risk to retail customers, the people said. He will stay at Citigroup after stepping down, according to one of the people. An interim replacement would then guide the firm while Citigroup talks with FSA officials to form a shortlist of candidates for the permanent role as soon as January, the people said.

Japanese officials have criticized foreigners in management posts at banks in the past. Last year, Shinsei Bank Ltd., the lender part-owned by U.S. investor J. Christopher Flowers, replaced four foreign executives after two years of losses, a failed merger and criticism by former Financial Services Minister Shizuka Kamei that their pay was “exorbitant.”

Buckley wasn’t available to comment. Mika Nemoto, a spokeswoman for Citigroup in Tokyo, declined to comment on whether Buckley will resign or the nationality of any future appointments.

Global Experience

Buckley, who has more than 20 years experience in London, New York, Singapore and Tokyo, has been chief executive of the Japanese banking unit since October 2008. He became the country head of Citigroup in January 2010.

The FSA ended an onsite inspection of the New York-based bank’s Tokyo offices in July to investigate whether the lender was inadequate in explaining investment risks to retail customers. Citigroup possibly had insufficient information, such as the age and occupation of customers, needed to measure the degree of risk they should take, the regulator pointed out, two people with knowledge of the matter said in October.

The penalties may include suspension of operations at some outlets, according to the people who spoke at that time.

Citigroup stopped soliciting clients for some retail banking products in Japan, the people said. The FSA told employees in late June not to market products such as investment trusts and foreign currencies. The bank is reviewing its compliance processes and offering trading to staff to improve internal controls, according to the people.

Lower Profit

It posted profit of 2.2 billion yen ($28 million) for the six months ended Sept. 30, down from 9.8 billion yen a year earlier, the bank said in a statement on Nov. 14.

Citigroup, which has 32 branches and offices in Japan with 1,790 employees, hasn’t had a Japanese CEO since the position was created in 2004. The bank has been punished by Japanese regulators twice in the past seven years.

In 2009, the FSA ordered Citigroup to suspend marketing of banking services to individuals for a month after failing to install adequate internal controls to detect and monitor suspicious transactions. In 2004, the regulator told the company to close its private banking operations in the country.

--Editors: Russell Ward, Brian Fowler

To contact the reporters on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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