Mitsubishi UFJ Financial Group Executives Face Pay Cuts Amid Confidentiality Breach Scandal

Mitsubishi UFJ Financial Group Inc. (MUFG), Japan’s largest banking group, announced that its top executives would take pay cuts in an effort to regain client trust after breaching information firewalls. The move comes as part of the bank’s response to regulatory penalties and lost business resulting from the violations.

Hironori Kamezawa, the Chief Executive Officer, will have his salary reduced by 30% for three months. Chairman Kanetsugu Mike will see a similar reduction for five months. Junichi Hanzawa, CEO of the group’s flagship banking unit, and Makoto Kobayashi, head of its main brokerage arm, will also face three-month pay cuts. These measures reflect their responsibility for the breach of client confidentiality rules.

The penalties extend to other senior officials as well. Naoki Hori, Chairman of MUFG Bank Ltd., and Saburo Araki, Chairman of Mitsubishi UFJ Morgan Stanley Securities Co., will receive two-month pay cuts. In total, 21 officials, including some retired executives, will have part of their pay withheld.

This decision follows penalties from Japan’s financial regulator, which found that MUFG had unlawfully shared client information between its lending and securities units. This violation led some corporate customers to move their bond underwriting business elsewhere. Kamezawa expressed deep regret for the incident, acknowledging the serious impact on customer trust and stakeholder confidence.

The Financial Services Agency issued a business improvement order to MUFG Bank and its joint ventures, Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities, after discovering at least 26 instances of inappropriate information exchange intended to secure business. The Securities and Exchange Surveillance Commission also identified cases where MUFG Bank attempted to win underwriting business for its brokerage unit.

The firewall rule, designed to prevent lenders from misusing their financial influence, has been contentious. MUFG and other banks have argued for easing these regulations to better serve clients with a comprehensive range of services and products across their units.

MUFG admitted that its executives and employees failed to fully understand the necessity of complying with rules governing the collaboration between commercial banking and brokerage units. The company plans to review its procedures, enhance training and monitoring, and adjust staff performance evaluations. A detailed list of improvement steps was submitted to the regulator.

Chairman Mike received the most severe punishment due to his inaction upon sensing a potential rule breach. Mike had previously served as CEO of MUFG Bank before becoming the group’s chairman in 2021.

In Japan, it is common for financial firms to announce pay reductions for senior executives following regulatory punishments. For example, SMBC Nikko Securities Inc. took away six months’ worth of compensation from its then-CEO after a market manipulation scandal in 2022, which led to significant client losses before the firm eventually recovered.

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