Citigroup Inc. said Monday it will close its trust banking unit in Japan within a year, after Japanese authorities ordered the U.S. financial services giant to suspend its private banking business there.
Charles Prince, Citigroup's chief executive, apologized to Japanese authorities for the problems and said the company would appoint a new CEO for Citibank Japan.
Japan's Financial Services Agency last month suspended the private banking division of Citibank, a unit of New York-based Citigroup, and announced it would revoke its license after a year, effectively expelling it from the Japanese market.
The FSA accused the private bank, which manages the investments of wealthy individuals, of failing to implement safeguards against money laundering, misleading customers about financial risks, and other violations.
On Monday, Citigroup acknowledged that management at its private bank had "failed to establish a culture that ensured ongoing compliance with laws and regulations."
The trust banking unit, which handled product development for Citibank's private banking operations, would be closed within a year, Citigroup said.
Citigroup has dismissed 12 executives at Citibank in Japan over the scandal. Eleven other employees had their salaries reduced, and others were reprimanded, the company said.
Last week, Citigroup removed three senior New York-based executives in the wake of a banking scandal in Japan. They included Sir Deryck Maughan, a Citigroup vice chairman and head of Citigroup International; Thomas W. Jones, chairman and chief executive of the global investment management division, and Peter K. Scaturro, head of Citi's private bank.
Maughan, 56, had been with Citigroup or its predecessor companies since 1983. Jones and Scaturro were both members of the Citigroup management committee.
Prince told a news conference Monday he didn't believe global financial giant suffered similar problems to those found in Japan in other countries.
He earlier met FSA Commissioner Hirofumi Gomi to apologize for the bank's inadequate governance and internal controls.
Prince also said Citigroup remains committed to the Japanese market and its business relationship with Japan's Nikko Cordial Corp. will stay intact.
Citigroup and Nikko Cordial, Japan's third-largest securities firm, have a wholesale securities joint venture, Nikko Citigroup Ltd. Citigroup is also a major shareholder in Nikko Cordial, though it recently said it would lower its stake in the Japanese brokerage house.