JAPANESE authorities have raided the offices of Royal Bank of Scotland (RBS) in Tokyo as part of an unprecedented crackdown on the banking industry.

RBS is one of three foreign banks under investigation by Japan’s Financial Services Authority (FSA), which yesterday confirmed that it was looking into “breaches of banking law”.

More than 15 Japanese banks are under inspection as part of an industry-wide clean-up operation by the Government. ING Bank and the Australia and New Zealand Bank are also named in the FSA’s crackdown.

The regulator has recently entered super-aggressive mode with banks, and has, in the past five days, imposed some of the harshest punishments suffered by the finance industry in Japan. RBS, like other British banks, has only limited operations in Japan — including corporate and aviation finance — but it is understood that the FSA inspections relate to its derivatives trading operations.

The search of RBS’s offices, which took place on Tuesday, comes as two of Japan’s biggest banking names have received heavy penalties from the FSA. Two days ago, the regulator told Sumitomo Mitsui Banking, Japan’s third-biggest financial group, to halt marketing of interest rate swaps for six months.

The order marks the first use on a bank of a new antimonopoly law introduced in January. Sumitomo Mitsui is accused of abusing its position by forcing its small and medium-sized corporate customers to buy derivatives. The FSA said the punishment, which hits Sumitomo Mitsui hard in a core business, was “necessary to shift the fundamental mentality of company executives”.

A day earlier, the FSA hit Shinsei Trust & Banking with a one-year ban on undertaking any new real estate trusts — a punishment for the bank’s alleged use of manipulated building surveys. On Monday, Mizuho suffered the humiliation of a government business improvement order, again on the instructions of the FSA.

The FSA’s clean-up drive is seen by analysts as part of a government clampdown on banking as Japan’s economy continues into recovery. Hiromichi Shirakawa, Credit Suisse’s chief Japan economist, the Government fears that Japanese banks and corporations will revive the old bubble-era spirit and repeat mistakes that crippled the economy for a decade.

Increased activity by the FSA and the Fair Trade Commission of Japan represents an attempt to “eliminate disorder” in the financial sector as the overall economy improves. Other banks are expected to come under increased regulatory scrutiny in coming months.

A spokesman for RBS in Japan would not comment on the FSA investigation.

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