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{{10-31-00 p.C-4104}}

   [11,231A] In the Matter of The Daiwa Bank, Limited and Daiwa Bank Trust Company, New York, New York, Docket No. 95-135c&b (10-2-95).

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices.

   [.1] Bank Expansion—Restrictions On

   [.2] Bank Operations—New Types of Lending Restricted

   [.3] Audit—Required

   [.4] Bank Operations—Internal Controls—Reviewed {{10-31-00 p.C-4104.1}}

In the Matter of

THE DAIWA BANK, LIMITED and
DAIWA BANK TRUST COMPANY
New York, New York
(Insured State Nonmember Bank)
ORDER
Issued Pursuant to the New York State Banking Law, Section 39 and Federal Deposit Insurance Act Section 8(b)

FDIC-95-135c&b

   WHEREAS, The Daiwa Bank, Limited, Osaka, Japan ("Daiwa") and its branch located in New York, New York (the "New York Branch") have acknowledged that the New York Branch has suffered a loss of approximately $1.1 billion as a result of unauthorized trading of U.S. Treasury securities;

   WHEREAS, such loss purportedly remained undetected by Daiwa and the New York Branch for a number of years;

   WHEREAS, such failure to detect the loss is evidence of unsafe and unsound practices;

   WHEREAS, the Superintendent of Banks of the State of New York ("Superintendent") and the Board of Governors of the Federal Reserve System ("Board of Governors") have issued an order to cease and desist, requiring among other things, a reduction in the New York Branch's trading activities;

   WHEREAS, as set forth in the Notice of Charges and of Hearing ("NOTICE") and the Findings of Fact and Conclusions of Law ("FINDINGS") issued by the Federal Deposit Insurance Corporation ("FDIC"), which are attached hereto and made a part hereof, the Superintendent and the Federal Deposit Insurance Corporation ("FDIC") have reasonable cause to believe that similar unsafe or unsound conditions may exist at the Daiwa Bank Trust Company ("Bank"), a New York State-chartered trust company, wholly owned by Daiwa;

   WHEREAS, because Daiwa and the New York Branch knowingly may have submitted to the Superintendent and the Reserve Bank a misleading and inaccurate report of the branch's condition as of June 30, 1995, and because of their failure to make timely disclosure of the losses caused by the trading activities to their regulators or the banking public, the Superintendent and the FDIC further have reasonable cause to believe that unless the Bank is restrained by the issuance of an order to cease and desist, such trading activities if engaged in at the Bank may result in a significant dissipation of the Bank's assets or earnings, and/or weaken the condition of the Bank, and/or otherwise prejudice the interests of the Bank's depositors prior to the completion of any administrative proceedings;

   WHEREAS, the Superintendent possesses the authority under section 39 of the New York Banking Law to order the discontinuance of unsafe or unsound practices;

   Whereas, the FDIC may, pursuant to sections 8(b) and (c) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §§ 1818(b) and (c), issue an order to cease and desist against the Bank in response to unsafe or unsound practices and violations of law that will likely result in a significant dissipation of the assets or earnings of the Bank, and/or weaken the condition of the Bank, and/or otherwise prejudice the interests of the Bank's depositors;

   WHEREAS, the Superintendent and the FDIC believe that prompt interim action is necessary to address their supervisory concerns with regard to the Bank and duly note that additional formal enforcement actions may be necessary to address the unsafe or unsound practices and violations described in the Notice;

   NOW, THEREFORE, the Superintendent and the FDIC hereby jointly issue this Order (the "Order") pursuant to section 39 of the New York Banking Law and sections 8(b) and (c) of the Act, respectively, and order that:

   [.1] Unless otherwise agreed to in writing by the Superintendent and the FDIC, as of the date of this Order, the Bank shall not increase, and Daiwa shall not allow the Bank to increase, the amount and market risk exposure of its trading activities above the daily average for the two week period prior to the date of this Order.

   2. The Bank shall submit to the Superintendent and the FDIC, on a daily basis, a written report detailing the New York Branch's trading activity.

   3. Unless otherwise agreed to in writing by the Superintendent and the FDIC, the Bank shall not, directly or indirectly, assume
{{10-31-00 p.C-4104.2}}any trading or custody operations of the New York Branch.

   [.2] 4. Unless otherwise agreed to in writing by the Superintendent and the FDIC, the Bank shall not, directly or indirectly, in any manner engage in or initiate any new line of business.

   [.3] 5. (a) Within five days of the date of this Order, the Superintendent will engage the services of an independent certified public accounting firm (the "CPA"), acceptable to the Superintendent and the FDIC, to:

       (i) conduct a comprehensive audit of the internal controls, custody business, risk management, and management information systems of the Bank, and the accuracy of records relating to the Bank's trading operations, paying special attention to where any losses may have occurred; and

       (ii) submit to Daiwa, the Bank, the Superintendent, and the FDIC a written report of its findings pursuant to that audit;

   (b) Daiwa and the Bank shall pay for the services of the CPA within five days of the presentation of an invoice by the Superintendent, and shall cooperate fully with the CPA in its efforts.

   (c) Within 30 days of receipt of the CPA's report pursuant to this paragraph, Daiwa and the Bank jointly shall submit to the superintendent and the FDIC an acceptable written plan to address any deficiencies or criticisms contained in such report.

   [.4] 6. (a) Within five days of this Order, Daiwa and the Bank shall initiate a joint internal review of:

       (i) the internal controls, custody business, risk management, and management information systems of the Bank, and the accuracy of records relating to the Bank's trading operations, paying special attention to where any losses may have occurred, and

       (ii) the actions, if any, of Daiwa and the Bank from the time when they learned in July 1995, of the approximately $1.1 billion loss from U.S. Treasury securities trading at the New York Branch until Daiwa notified banking authorities in September 1995.

   (b) Daiwa and the Bank shall complete the review required by this paragraph within 30 days of this ORDER and shall submit to the Superintendent and the FDIC a joint written report of their findings, along with a written description of any management or operational changes, including any disciplinary actions, that will be instituted as a result of the findings of this review.

   7. All communications regarding this Order shall be sent to:

       (a) Mr. Robert H. McCormick
    Deputy Superintendent of Banks
    New York State Banking Department
    Two Rector Street
    New York, New York 10006

       (b) Mr. Michael J. Zamorski
    Acting Regional Director
    Federal Deposit Insurance Corporation
    452 Fifth Avenue
    21st Floor
    New York, New York 10018

       (c) Mr. Jerry L. Langley
    Executive Secretary
    Federal Deposit Insurance Corporation
    550 17th Street, N.W.
    Washington, D.C. 20429

       (d) Mr. Akira Fujita
    President
    The Daiwa Bank, Limited
    2-1, Bingomachi 2-chome
    Chuo-ku, Osaka 541, Japan

       (e) Mr. Fumito Kltora
    President
    The Daiwa Bank Trust Company
    666 Fifth Avenue, 3rd Floor
    New York, New York 10103

   8. The provisions of this Order shall be binding on Daiwa and the Bank and each of their institution-affiliated parties, including their officers, directors, employees and agents, in their capacities as such, and their successors and assigns.

   9. This Order shall become effective immediately upon service on Daiwa and the Bank, and shall remain in full force and effect pending the completion or termination of the administrative proceedings initiated pursuant to the foregoing Notice, except to the extent that, and until such time as, any provision of this Order shall have been stayed, modified, suspended, or set aside by the Superintendent and the FDIC, or, with respect to the FDIC, by a court in proceedings authorized by section 8(c)(2) of the Act, 12 U.S.C. § 1818(c)(2).

   10. Notwithstanding any provision of this Order to the contrary, the Superintendent and the FDIC may, at their sole discretion, grant written extensions of time to Daiwa and the
{{10-31-00 p.C-4104.3}} Bank to comply with any provision of this Order.

   11. The provisions of this Order shall not bar, estop or otherwise prevent the Superintendent or the FDIC, or any federal or state agency or department, from taking any other action affecting Daiwa, the Bank, or the New York Branch, or any of their current or former institution-affiliated parties, or their successors or assigns, including, but not limited to, the actions and penalties authorized for violations or noncompliance with this Order under sections 40, 44 and 606 of the New York Banking Law or applicable federal law.

   By order of the Superintendent and the Federal Deposit Insurance Corporation, effective this 2nd day of October, 1995.

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