The general longer term chronology of Citibank in Japan is of some interest: pre-First World War the emphasis was very much on trade finance with the branches being in Yokohama and Kobe: the leading ports of the day. During the War the Japanese economy expanded by approximately 400 percent, the first, largely unremarked and most important high growth period, on import substitution eg fine chemicals, pharmaceuticals etc as German supplies were entirely cut off and new export markets eg spun cotton yarn, woven cotton fabric etc as the UK was no longer able to supply the world market. Therefore, after the First World War, Citibank opened offices in the much expanded industrial centres of Tokyo and Osaka. After the Second World War that process resumed, without missing a beat as it were, with the Nagoya Branch opening of 1951.

The specific shorter term chronology, starts from the mid-1980s when a concerted attack was made on the Japanese retail market: Japanese GDP per capita was rising to the highest level among the G5 on the strength of the economy and the post-Plaza Accord Yen appreciation. Also, there was the famous "wall" of Yen funds moving out of Japan looking for higher returns. There was some natural friction between a foreign new entrant and the local players. Also Private Banking Phase I, which had been launched in 1986, became problematic post-Bubble and was wound down by the mid-1990s, only to be relaunched in the late 1990s as Private Banking Phase II with the significant added boost of the Diners Club acquisition. The nine selected newspaper articles summarised below in translation sketch these various happenings anecdotally.

1.   22 June 90 Nikkei Kinyu
US banks and Private Banking

Switzerland is the traditional centre of private banking, but the US banks are putting greater emphasis on the area and building a specialised network to cater for US and non-US clients. There has been US interest in Japan and using the trust bank subsidiaries to offer private banking services. Citicorp reports the number of clients rising from 40 in 1985 to 1,200 currently. However, the legal compartmentalisation of financial services is a problem and there is much US dissatisfaction with MoF regulation.

2.   25 August 90 Nikkei Chokan
Inheritance tax avoidance and land prices

Private banking is attracting client interest, but is mainly limited to tax avoidance schemes typically involving borrowing against tax undervalued land and then often re-investing in letting property. The authorities have seemed undecided on the appropriate level of the valuation of land for tax purposes and how close it should be to the actual market price level. The US has put pressure on Japan to narrow the gap, while the NTA has generally taken the attitude that excessive pressure on individuals to sell land could destabilise the land market [and lead to greater payment in kind (butsuno) and consequent valuation losses for MoF].There is no consensus on the appropriate valuation policy. The current guideline is to raise the tax valuation to 70 percent of the reference valuation (kojikakaku) level in order to close off the worst of the existing borrowing and reinvesting tax-valuation loophole.

3.   20 January 92 Nikkei Kinyu
Citibank: 'My Way' retail banking

"There would be no meaning in becoming a city bank [a then-major commercial bank designation 'togin'], and we have no intention of becoming one/wareware ga togin ni natte mo muimi da shi, naru tsumori mo nai," said Yashiro, Citibank Representative in Japan. Citibank started a retail operation in Japan in 1985 and the completely flexible "Multimoney" product is a typical example of the individualistic retail products on offer: term deposit, variable interest rate deposit, multi-currency, etc all in the one master account. There are monthly statements posted and transactions can be made over the telephone. Once opened there is no need to go to the branch at all. Overseas the domestic cash card provides local currency. At the same time Citibank is connected to the city bank network, BANCS, and the city banks' ATMs can be used, while the Citibank ATMs work until 21:00 and at the weekend. This year payroll direct credits will be made and Citibank is moving into the area of the Japanese settlements system. While it is a good thing that the city banks are being shaken up and the customer is being given a better deal, it is only fair to say that the city banks are under a stricter regulatory regime and that Citibank is allowed much leeway. "MoF is keen to prevent any gaiatsu and leaves Citibank pretty much to do what it wants to do/okurasho wa shiti ni jiyu ni yaraseru koto de gaiatsu o fusego to shite iru," said one well placed observer.

4.   02 March 92 Nikkei Chokan
Changes in Private Banking emphasis post-Bubble

The Citibank Otemachi Branch "Private Bank Office" was very active in property secured lending during the Bubble for overseas art and land purchases. The client list ran to 2,000 mainly business owners/managers and land owners. Now the emphasis is on restructuring and according to the manager, Kubota, one in three clients has substantial loan exposure. Much time is spent on art and land disposals. The Japanese banks saw private banking as a means of lending to the individual sector during the Bubble period, but now everything is in reverse. Fuji Bank's Tsuda said that, in common with the other city banks there had been a rush to lend to individuals for residential property investment, but the letting market was now depressed with many projects in extreme difficulty. IBJ has run down its private banking operation. [This was done in connection with the Onoue Nui Event and the ill-fated IBJ Private Banking Department lending made, without any credit control procedures in place, of eventually some JPY100bn plus to an elderly Osaka restaurant manageress, who unwisely took her securities investment advice from the pottery likeness of a toad in spiritualist seances, but who also imaginatively manipulated her lenders in an involved teeming and lading of bank debenture collateral by saying that as a simple woman she wanted to sleep with the certificates and who at the end had total bank borrowing outstanding of reportedly in excess of JPY400bn, but had her portfolio of assets severely depleted by the post-Bubble collapse of the securities markets.] LTCB has reined in its private banking lending activities sharply with strict controls in force, now that the term "private banking" has gathered some negative connotations.

5.   15 March 98 Nikkei Chokan
Sumitomo Bank hires Citibank's Kubota

Sumitomo Bank is to hire the Head of Private Banking Planning at Citibank, Kubota, and give him the title of SMD as Head of Private Banking. This type of personnel move is most unusual.

6.   30 August 98 Nikkei Chokan
Private Banking to the fore

Sumitomo Bank held a successful seminar on asset management in Hachioji at the end of July. Interest is gravitating towards the less high profile suburbs where there are often substantial numbers of the affluent. It has been estimated by a city bank that there are: 1. 0.6m households with financial assets in excess of JPY100m totalling JPY140tr, 2. 0.8m households owning land other than their housing land in excess of JPY100m and totalling JPY300tr. Currently Citibank has some 160 staff and is aiming at 10,000 accounts by the year 2000. UBS has 60 staff and is aiming for 200 staff by the year 2000. These are the leaders: the Japanese banks have got stuck in the volume market.

7.   02 November 99 Nikkei Yukan
Citibank acquires Nippon Diners Club

Agreement has been reached by the shareholders of Nippon Diners Club, fuyo keiretsu-related (60 percent) + JTB (40 percent), and Citibank for the transaction to proceed for around JPY40bn. Citibank will acquire the total issued share capital and revert to pre-1990 when Citibank under financial pressure had sold the operation to realise cash. Now Citibank is flush and wishing to invest in Japanese retail, while Fuji Bank as a future member of the Mizuho Bank will concentrate on UC Card with DKB. Diners has around 840,000 members concentrated on HNWIs and this is attractive for Citibank private banking etc. The card will be reconstructed as a cash + credit card. Banks are currently reconsidering credit cards as they re-emphasise retail and the data base mining etc opportunities of credit cards are better appreciated. Sanwa, which manages JCB, is set to reconstruct the JCB card as an e-money + credit card. As Japan's first credit card company, Nippon Diners Club was set up in December 1960 as part of Diners Club International and its franchise approach. The usage per card for the year to March 99 was JPY490,000 pa and more than three times that of the other bank-relateds and volume was JPY412.5bn and pre-tax profit JP2.1bn. There are 529 employees.

8.   18 May 99 Nikkei Kinyu
Citibank opens Private Banking outlet in Nagoya

Yesterday Citibank opened a private banking outlet in Nagoya: the third after Tokyo and Osaka. Citibank believes that there are 0.4m to 0.5m affluent target clients with financial assets of minimum JPY100m and total net assets minimum JPY300m and that 70 percent of these targets live in the three major urban conglomerations.

9.   28 October 99 Nikkei Chiho
Private Banking seminars in Fukuoka

Citibank has offered private banking seminars in Tokyo and Osaka, but never before in Fukuoka. Kitade, Head of Private Banking, said, "It is not just a question of selling financial products, but also of providing advice on the management of assets and liabilities and so appealing to the affluent class of customer." Affluent means net assets of JPY300m and financial assets of JPY100m minimum. In Japan there are some 0.4m to 0.5m affluent individuals and their assets are around JPY250tr. In Kyushu there are 30,000 to 40,000 affluent individuals holding JPY15tr to JPY20tr.

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