Japan’s FSA has ordered the suspension of Société Générale's Japanese private banking business, after discovering “serious violations of laws and regulations".

Japan’s Financial Services Agency has ordered the suspension of Société Générale's Japanese private banking business, after discovering “serious violations of laws and regulations”, during an inspection.

The FSA said in a statement published on its website that it had taken administrative action against the French lender, after “serious problems that may impede sound and appropriate business operations were recognised, regarding the governance system, the compliance system, and the customer protection management system”.

SocGen should suspend most of its private banking division, which will mean not accepting new money and soliciting for new money, between 23 October 2012 to 22 November 2012. SocGen must also suspend most of its trust business in the corporate division between 23 October 2012 to 22 January 2013, which the bank says is a non-core asset.

The FSA said the bank must also clarify the responsibility of the management, review the governance system and strengthen the functions of the audit committee and the internal audit division.

The FSA also ordered SocGen to drastically restructure its compliance system and the customer protection management system, including the review of the management systems regarding the pension trust business and the private banking business. It must ensure that all executives and employees fully understand and comply with laws, regulations and rules, and train, retain and appropriately allocate personnel necessary for the company's business operations.

SocGen is obliged to formulate a business improvement plan to implement the measures and to submit this plan by 16 November 2012, and then immediately implement it, said the FSA.

A spokesperson for SocGen said: "All Japan private banking clients will be contacted by their relationship manager to explain how the consequences of the FSA ruling will be taken into account. The bank will endeavour to ensure the FSA ruling has no adverse impact on clients."

Société Générale Private Banking had assets under management of €85.6 billion (US$111 billion) as at end of June 2012, but did not break down AuM on a regional basis. 

The FSA said the move came about after SocGen was found to be failing the method of screening the acceptance of money, and allocated the responsibility for conducting due diligence examination regarding the scope of partnerships' investment targets and GPs' asset investment experience and capabilities entirely to sales personnel, instead of fund managers, who are responsible for asset investment. In addition, the company did not have internal control divisions, such as the legal affairs division and the compliance division, conduct verification.