Scandal forces out Watanabe as Nomura CEO

Nomura Holdings CEO Kenichi Watanabe resigned yesterday in an insider trading scandal that has again smeared the reputation of Japan's biggest investment bank.

COO Takumi Shibata, Watanabe's top lieutenant, also resigned. Watanabe, who headed Nomura for four years and led the company’s controversial and expensive worldwide expansion, will be replaced by Koji Nagai, President of Nomura Securities.

Nagai, a three-decade company veteran, took over that unit in April as part of a management reshuffle.

The departure of both Watanabe and Shibata, the architects of Nomura's takeover of the Asian and European assets of Lehman Brothers, places in doubt the continuity of the global expansion strategy they engineered.

"When you look at their history, the number of scandals, this was the last straw," said Jim Sinegal, an analyst with Morningstar research house.

This latest scandal, which began in 2010, is the third insider trading scandal since Watanabe took over leadership four years ago.

Government investigations forced Nomura to confirm it was the source of leaks on planned share offerings by the energy firm Inpex, Mizuho Financial Group and Tokyo Electric Power. In all three cases, employees at Nomura’s institutional sales department provided the inside information.

Shares of Nomura have fallen in value by more than a third since the first insider trading case emerged last March.

Moody's Investors Service cut its debt rating on Nomura to one notch above speculative or junk grade in March, citing concerns about the long-term profitability of its overseas operations.