Period I
Prior to FSA First Inspection/Measures

Relevant excerpts taken from the interview material of that period

23 April 98
Foreign Private Banker
.....Typically Citibank has blown hot and cold about Private Banking all the time with a negative impact on clients.....

08 May 98
.....There should be opportunities for foreign Private Bankers in Japan, once the trust problem can be overcome. Would have thought that Diners Club would be the way to contact people: it has a better spread of owner/managers and the wealthy out in the provinces where people are relatively conservative and less flighty than in Tokyo etc. Of course there is the traditional attitude of honesty and paying taxes on the nail among the more reliable segments of the population. A steady retail operation on-shore and a rather select operation off-shore would be the business solution most probably.....

11 May 98
Bank Planner
.....It is known that there is a number of foreign banks active in aggressive Private Banking and certain foreign lawyers/accountants work on such off-shore schemes. The real question is at what stage the authorities move to deal with this. If the authorities do nothing, then there is reverse discrimination and a somewhat unsatisfactory situation. If the authorities move on their usual arbitrary basis and use the scandal pages of the newspapers then there may be the making of diplomatic friction - this would be the more serious for the authorities as regards the US rather than the European banks. The provisions of the Inheritance Tax Act as regards limited taxpayers and off-shore location of assets are well known and it is quite possible to drive a coach and horses through the tax avoidance opportunities presented.....

18 May 98
Foreign Private Banker
.....At.....Citibank.....the emphasis has switched away/remained away from off-shore and the client base is serviced out of Singapore and Hong Kong and there are increased efforts to keep off-shore strictly off-shore. On-shore solicitation of off-shore products will see increasing restriction and difficulty. The off-shore business presences in Japan are likely to slower wither away. The overly large representative offices will disappear: there is already increasing use of the trust bank office by those banks having the licence. Instead everyone is looking at the on-shore market in simple asset management products with a degree of financial planning/financial advisory thrown in for good measure. Citibank.....are all cases in point where something is happening.....

21 May 98
Bank Planner
.....Certainly the general attitude to tax and to the high level of discretionary judgement preserved by the bureaucracy is surprisingly passive.....The foreign banks tend to ignore the nods and winks and rely on their interpretation of the law. There is something of a double standard operating which is not entirely satisfactory. Citibank is supposed to have around 5,000 customers but that is mostly near-retail and is on-shore.....

27 May 98
Private Banker
.....Was originally with Citibank which has been the training ground for so many Japanese Private Bankers. People with get-up-and-go got up and went to more attractive slots.....At Citibank the mainstream product was the affluent market and the gifting of US Treasury Bills by parents to children as limited taxpayers in the US: it was therefore possible to escape both Japanese and US gift and inheritance tax. The typical lot size was USD1m. It was a kind of volume plain vanilla business.....

29 May 98
Foreign Tax Lawyer
.....Citibank has blown hot and cold on Private Banking and switched between personalised and retail also. A number of competent Japanese have been trained by Citibank only to be put on the street. Around half-a-dozen first rate ex-Citibank professionals now form a mafia and are working in a variety of foreign institutions but still keeping in touch.....

19 April 99
Financial Planner
.....Finally there is the on-shore retail market as exemplified by Citibank. However, that is going to be hit by the universalising Japanese banks that will compete powerfully in the one-size-fits-all tradition of Japanese domestic banking.....

20 April 99
Private Banker
.....Like so many Japanese private bankers am ex-Citibank and benefit from the information network: the NTA went into ....., not because of, but because of a Citibank deal! The deal was done some five years ago and was the responsibility of a.....staff member when at Citibank at that time. There were some very dynamic income tax and inheritance tax avoidance structures thought up at Citibank and there was a team of two that did the work. It was the one that moved to.....that got fingered. Curiously, the client reportedly stayed with Citibank.....Citibank.....180 staff and the foreign market leader and heavily into retail.....

23 April 99
Bank Planner
.....Currently the major banks are moving to universal banking structures and will eventually be able to offer a full range of services. At present they have been allowed into asset management via SIT sales. Teams of private banking marketing officers are being formed and with elementary financial planning SIT products are being sold. The next product will be in-house trust banking products and then insurance products and all the rest.....It all means that the Japanese banks are going to become a substantial force in the on-shore retail market and foreign entrants such as Citicorp and.....could meet stiff competition in the near future. There will be near-supermarket financial institutions for the moderately affluent.....

26 April 99
Private Banker
.....Citibank.....Continues to expand numbers: recently hired the LTCB team of 10 with their links to HNWIs via the old bearer debenture market.....

26 April 99
Foreign Private Banker
.....Outlook for private banking is remarkably poor: the Forex Act "liberalisation" and the advent of the Big Bang round of deregulation is meaning that:
  1. money that was mobile to go off-shore has had its chance to go pre-April 1998 and that window of opportunity has now closed, and
  2. the Japanese banks are going to present serious competition in around five years' time.
The foreign players most exposed are Citibank.....: there could be a nasty squeeze. The niche foreign players did very well from say 1985 to 1998 and the implementation of the liberalised Forex Act.....

28 April 99
Private Banker
....For the major Japanese banks, there is a slow but very sure shift to universal banking and five to ten years out Japanese banking is going to look very different. As a result of the current liberalisation the bank can sell SITs.....The name that always comes up is Citibank and often find oneself in a competitive situation with Citibank.....Citibank is reported to have 180 staff.....

30 April 99
Private Banker
.....The foreign banks are often in private banking on a small team/experimental basis and the only ones of note.....Citibank with 180 and a retail + personalised approach.....Citibank appears to be semi-Japanese.....As usual there appears to be a double standard in place.....The foreigners are accustomed to driving a coach and horses through MoF regulation etc and have in the past been involved in shipping money out of Japan as cash, bearer bonds and even diamonds. The visit that the regulatory authorities are paying tobashi derivatives products and the visit paid by the NTA private banking are both shots across the bows that the foreigners too must toe the line.....The common foreign complaint that the line is not clearly defined and bordering on the invisible/moves at the whim of the authorities does not hold water. The intention of the authorities is clear and should be understood by everyone in the business. We are all over 21.....The foreign banks are currently making all the running with their advertising campaigns: Citibank with a variety of high yield derivatives based products that are somewhat doubtful.....The authorities seem to be adopting a double standard again as these advertisements are sailing quite close to the wind as a general observation.....

11 May 99
Private Banker
.....Worked for thirty years for one of the major banks in Japan and also overseas in a variety of responsible positions particularly with exposure to asset management and trust product related. Was heavily involved in private client work for Japanese resident in the US and, having developed a wide range of contacts, decided to take a favourable early retirement package and go independent at the beginning of this year.....Specialise in off-shore corporate vehicles: either Direct Outbound Investment (DOI) related asset management or off- shore/off-shore entrepreneurial activities to generate off-shore assets. Some HNWIs are quite sophisticated, the owner/manager type, but most are not.....A lot of the old money got out of Japan in the easy days. A lot of the new money and much of the undisclosed money has not: for some reason many people did not understand the full implications of the liberalisation of the Forex Act that came into force from April 1998. The liberalisation effectively ring fenced Japan for the physical transport of funds. These funds will eventually seep out in some fashion.....It is true, and as so readily noticed by Analytica, that the location of the office has, too, a slightly underground air to it in the centre of Toranomon Itchome. The area from Itchome all the way down to Sanchome as far as Kamiyacho is rife with underworld front organisations, bureaucrat amakudari slot shadanhojin organisations and "flexible" lawyers. It is the physical intersection of the world of the bureaucracy and the world of the politicians with the gangsters as go-betweens and all lubricated with hard cash. For off-shore private banking, it is not an inappropriate location.....It is difficult to see what the foreign banks can bring to Japanese private banking. In the declared economy they bring little in the way of edge at the end of the day as it is now all on-shore. They are merely making the running in the interim, while the Japanese banks universalise and eventually get their acts together. In the undeclared economy, the reputational risk is so great that they can never be a force.....

19 May 99
Foreign Banker
.....Made an extensive study last year of Japanese private banking prospects and got board approval to go ahead recently.....The important thing is to have the integrated approach of banking + investment + patrimonial services. The competition is the US style which is very product/profit driven.....: Citibank.....One thing coming out was the undesirability of being involved in off-shore work: the NTA wants to see a firm on-shore orientation to Japanese private banking and then the market in the long term will also be on- shore - Japan is a mature economy with a stable political framework and therefore there is no real need for capital flight per se.....

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