Mitsubishi UFJ Financial Group (MUFG), Japan’s largest banking group, has announced pay cuts for its CEO and five other executives following breaches of “firewall” regulations at its banking and securities arms. These measures are part of MUFG’s efforts to restore client confidence following the breaches.
CEO Hironori Kamezawa’s salary will be reduced by 30% for three months. Chairman Kanetsugu Mike’s pay will also be cut by 30% for five months.
Other executives affected include Junichi Hanzawa, CEO of MUFG’s main banking unit, and Makoto Kobayashi, head of its brokerage arm. Both will see their salaries reduced by 30% for three months. Additionally, MUFG Bank Chairman Naoki Hori and Mitsubishi UFJ Morgan Stanley Securities Chairman Saburo Araki will have their pay cut by 30% for two months.
In total, 21 officials, including some retired executives, will give up part of their pay.
| Executive | Position | Pay Cut Percentage | Duration |
|---|---|---|---|
| Hironori Kamezawa | Group CEO | 30% | 3 months |
| Kanetsugu Mike | Chairman | 30% | 5 months |
| Junichi Hanzawa | CEO of Banking Unit | 30% | 3 months |
| Makoto Kobayashi | Head of Brokerage Arm | 30% | 3 months |
| Naoki Hori | Chairman, MUFG Bank | 30% | 2 months |
| Saburo Araki | Chairman, Mitsubishi UFJ Securities | 30% | 2 months |
FSA’s Regulatory Findings and Actions
The Financial Services Agency (FSA) penalized MUFG after finding that the bank violated laws prohibiting the unauthorized sharing of client information between its lending and securities units. The FSA’s investigation revealed at least 26 instances of confidential information being shared improperly between 2020 and 2023. As a result, the FSA issued a “business improvement order” to MUFG Bank and its joint ventures with Morgan Stanley.
The breaches led some corporate customers to move their bond underwriting business to other firms. MUFG admitted that its executives and employees did not fully understand the compliance requirements for collaboration between its banking and brokerage units.
The bank plans to review its procedures, increase training and monitoring, and change staff performance evaluations. MUFG has submitted a list of improvement measures to the FSA.
Chairman Mike received the harshest punishment because he failed to act properly when he sensed a potential breach of the rules. Previously, Mike served as the CEO of MUFG Bank before becoming the group’s chairman in 2021.
MUFG CEO Kamezawa, who earned 339 million yen ($2.16 million) in the year ending March 2024, expressed regret at a briefing, stating, “As CEO, I take this matter very gravely,” and apologized deeply on behalf of the top executives.
What Is the Firewall Rule?
In Japan, banks and securities companies within the same group are prohibited from sharing customer data without consent. This firewall rule aims to prevent lenders from abusing their financial positions. However, MUFG and other banks have lobbied for easing these regulations, arguing that integrated services benefit clients. Despite this, MUFG admitted shortcomings in compliance and is taking steps to prevent future breaches.
This regulatory action is one of the most significant in Japan since 2022 when the securities arm of Sumitomo Mitsui Financial Group faced market manipulation charges. In response, SMBC Nikko Securities, the main brokerage of Japan’s second-largest banking group, imposed a six-month pay cut on its CEO.
MUFG’s steps to address the breaches include comprehensive reviews and enhanced training to ensure compliance with regulations, aiming to prevent future violations and restore client trust.
Featured Image courtesy of Robert Way/Getty Images
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