South Korea to scrutinise Citigroup

South Korea’s markets watchdog has said it is to inspect Citigroup’s local operations, days after regulators censured the bank’s Japanese business.

The Financial Supervisory Service (FSS) said the probe would focus mainly on Citigroup’s private banking division. Last week, Japan’s market regulators ordered Citigroup to close its private banking operations there. They said the unit had violated the country’s banking laws.

South Korea’s FSS said its probe was part of a regular schedule of inspections drawn up earlier this year, and was not directly linked to Citigroup’s difficulties in Japan, news agencies reported.

Citigroup, which has had two run-ins with regulators in recent weeks, will be hoping the South Korean investigation does not uncover any irregularities.

Its clash with the Japanese regulator came barely a month after the UK’s market watchdog launched an inquiry into a controversial bond trade carried out by Citigroup traders in August.

France and Germany’s market watchdogs have also begun informal inquiries into the affair.

It centres on a large-scale sale of government bonds which, while not in breach of market rules, is alleged to have broken a ‘gentleman’s agreement’ to keep markets stable.