Nomura Holdings Inc. has faced significant challenges in the corporate bond market. A market manipulation scandal has hit its reputation at a time when corporate governance breaches in Japan are under greater scrutiny. As a result, its ranking and market share have come under pressure.
Unraveling the Consequences of Nomura's Market Scandal on Bond Market
Section 1: The Fall in Nomura's Ranking
Bloomberg data shows that Nomura's position in the league table of corporate bond underwriters fell to sixth place as of Dec. 2, 2023. Its market share shrank to 1.9%, while online brokerage SBI Holdings Inc. leapfrogged over it. This decline is notable as issuers like KDDI Corp. did not appoint Nomura as an arranger for their debt offerings. In 2023, Nomura was previously ranked third with a 19% market share.The experience of Nomura contrasts with that of Mitsubishi UFJ Morgan Stanley Securities Co., which committed a similar violation in 2018. While its market share dropped relatively small compared to Nomura, falling to about 11% in August from around 27% in May.Section 2: Sensitivity of Issuers and Investors
Professor Yumiko Miwa from Meiji University, who studies corporate governance, points out that issuers and market investors have become more sensitive to working with financial institutions that have breached rules. They are demanding greater accountability. For example, KDDI raised ¥210 billion by selling bonds in November but did not appoint Nomura to manage the deal. SoftBank Group Corp. sold ¥350 billion of bonds, and Nomura was not a lead manager in the offering.This shows the changing dynamics in the market where trust and compliance are crucial.Section 3: Nomura's Response and Resumption of Business
Last month, Nomura added "criminal acts by officers and employees against customers" as a new risk to its business after a former employee was indicted for attempted robbery and murder of a customer and arson of a current building.However, mega-banks and life insurers have gradually resumed business with Nomura for market trading operations. This indicates that Nomura has taken steps to address the issues and regain the trust of its partners. It completed paying the fine and tightened its internal control system in October.These developments highlight the complex situation that Nomura is facing and its efforts to move forward in the wake of the market scandal.READ MORE