Bad news for the banking industry

March 27, 2007
By Ken Worsley

Shinsei Bank has found out the hard way that Japan’s Fair Trade Commission may be enfeebled, but it’s not fully asleep. The FTC is apparently about to take the unprecedented step of ordering Shinsei to stop printing misleading advertisements, and require Shinsei to submit a report on what happened and what steps have been taken to ensure that it does not happen again.

The Japan Times also tells us that the “Financial Services Agency will strengthen its supervision of financial institutions on advertisements for derivative products.”

Shinsei has 30 days to appeal the decision.

Back in April of 2006, the Financial Services Agency handed Shinsei a one-year ban on undertaking any new real estate trusts as a punishment for the bank’s alleged use of manipulated building surveys, as part of a raid into several financial institutions operating in Japan.

Shinsei Bank is managed by Ripplewood Holdings, a US-based private equity firm. It was formerly known as Long-Term Credit Bank, but had its name changed to Shinsei in March 2000 after being purchased by Ripplewood for $1.13 billion. Ripplewood’s turnaround of Shinsei has been one of the strongest success stories of the post-bubble banking era. If you don’t believe me, just ask William Pesek.

Filed Under Banking