MUFG Bank, the largest bank in Japan, will pay the state Department of Financial Services $33 million to settle claims related to its conduct while it was regulated by the state, the agency said Monday evening.

The agreement settles a lawsuit brought against DFS by MUFG two years ago when the agency sought to enforce the state's regulations against the bank, which had swiftly converted its New York branch to a federal charter months earlier.

DFS had argued that, even though MUFG had switched its branch over to federal oversight, it was still responsible for any violations of New York's laws and regulations while chartered by the state. The agency has less regulatory power over financial institutions that are licensed by the federal government, rather than the state.

The New York Attorney General's Office, arguing on behalf of DFS, had countered the lawsuit from MUFG with that point and also claimed the bank's quick switch from state oversight to a federal charter was unlawful and arbitrary. Negotiations ensued, ending in the settlement announced Monday.

DFS Superintendent Linda Lacewell said in a statement that the agreement is a nod to the country's dual banking system.

“DFS is pleased to have reached an appropriate agreement with the bank to end this litigation,” Lacewell said. “Today's settlement reinforces the strength of our nation's dual banking system and significantly reaffirms New York's authority to vigorously protect our financial markets and consumers.”

A spokesman for MUFG said the company was similarly pleased to put the litigation to bed.

“MUFG Bank is pleased to have resolved its legal disputes with the New York DFS,” the spokesman said. “The settlement allows us to move forward with our simplified regulatory structure in the U.S.”

The settlement isn't the first time the bank has had to pay New York state in recent years. It was fined a combined $565 million by the state between 2013 and 2014 for violating state and federal sanctions statutes.

Despite those penalties, MUFG continued to skirt the state's laws, DFS alleged early last year in response to the bank's lawsuit. The agency alleged that the bank had failed to comply with the consent orders it agreed to as part of the earlier penalties and was still violating the state's sanctions laws.

Months earlier, the U.S. Office of the Comptroller of the Currency had approved the bank to transfer its oversight to the federal government, away from the state. The application was approved eight days after it was filed with the federal agency, according to DFS.

But regardless of whether that approval was lawful, DFS had argued that any violations committed by the bank prior to the switch should still be eligible for enforcement by the New York agency.

“No bank or financial institution (or anyone else) is permitted to avoid responsibility for its prior illegal conduct by moving jurisdiction from a state-licensed entity to a federally-licensed entity (or between states),” the agency wrote in its response last year. “[MUFG] willfully and repeatedly violated New York law and two DFS consent orders while it was operating under a license issued by the State of New York and under DFS's jurisdiction.”

The settlement is not an admission by MUFG of any wrongdoing and won't settle the question of whether the bank's transfer from state to federal oversight was lawful. But it ends the bank's litigation against the state and in turn dismisses the state's counterclaims.

MUFG was represented in the litigation by attorneys with firms Sullivan & Cromwell and Covington & Burling, according to the settlement.

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