Daiwa Expected to Ask President to Step Down : Banking: Akira Fujita is also wanted for FBI questioning in connection with an inquiry at the firm’s New York office.

Japan braced for the resignation today of the president of scandal-plagued Daiwa Bank, whose board of directors was expected to call for the ouster of Akira Fujita in the wake of Daiwa’s $1.1-billion loss in bond trading and subsequent efforts to cover it up.

Fujita is also wanted for questioning by the U.S. Federal Bureau of Investigation in connection with its investigation of the unauthorized bond trading incident at Daiwa’s New York office, according to Nikkei Shimbun, Japan’s leading financial daily.

Though rumors of Fujita’s resigning were roundly denied just last week, the bank’s disclosure Friday that it had hidden records from regulators in a bid to pass inspections by the U.S. Federal Reserve Board appeared to make a shake-up at the world’s 19th-largest bank all but inevitable.

According to Japanese media reports, Daiwa Vice President Takashi Kaiho will be promoted to succeed Fujita. Hiroyuki Yamaji, a vice president, is also expected to resign, the newspaper said.

A bank spokesman would only say that Daiwa would hold a news conference today; he declined to elaborate.

Daiwa is also expected to announce that it has about $5 billion in non-performing loans, which represent about 7% of its total outstanding loans, Nikkei Shimbun reported. Among Japan’s major commercial banks, a 7% bad-loan ratio is considered relatively high. However, Daiwa’s general financial condition is said to be good.

Daiwa admitted Friday that U.S. and Japanese regulators knew as early as 1993 about deceptive dealings by Daiwa Bank’s New York operations--two years before the bond trader’s $1.1-billion loss surfaced.

A Daiwa official in Japan said that the bank told the Fed in 1993 that it had hidden some of its records and temporarily removed the bond trader and others from the New York branch in order to pass a 1992 inspection by the regulators.

Kaiho, 58, was named last week to head a panel of senior Daiwa managers commissioned to strengthen its in-house supervision over traders and transactions at its overseas branches.

The bank said last month that the New York trader, Toshihide Iguchi, 44, racked up the huge losses from 1984 to 1995 and hid the losses from his superiors by falsifying transaction books and records. Iguchi was then charged by U.S. prosecutors with forgery and falsification of bank records.

But Friday’s disclosure revealed how officials above Iguchi at the Osaka-based bank played a role in deliberately manipulating its books.

Iguchi allegedly concealed 30,000 unauthorized trades from regulators over the 11 years.

Fujita is a likely target for FBI questioning because he received a confession letter from Iguchi, Nikkei Shimbun reported.

But even if the FBI wants to speak with Fujita in its investigation, the bureau does not have authority to summon non-residents of the United States, so he could turn down the request, the paper said.

Japanese media have also reported that Daiwa Chairman Sumio Abekawa will leave within a year in a management shake-up linked to the losses.

“I perceive my responsibility as a manager as serious,” the Kyodo News Agency quoted him as saying last week.