The banking regulator for Japan has order Mizuho Financial Group Inc. to submit a current report on its failure to end loans to members of organized crime just a day after the bank admitted to that its top level management had been aware of the illicit transactions.
Earlier, the bank told authorities that only its compliance officials were aware of the loans and top management was not aware of the situation. Since then, they have recanted, saying those in charge were indeed aware of what was happening. The admission is likely to impact the group’s relationship with the regulator. The bank’s admission of guilt, acknowledging that the top management was aware of the loans now puts the bank’s responsibility up for even more scrutiny.
The bank is already scheduled to give a business improvement report to the Financial Services Agency no later than October 28. That new report requires the bank to specify the details of which person at the bank knew what about the loans and at what point they gained that information. Yasuhiro Sato, president of the second-largest lender in Japan by assets, said on Tuesday that the head of the bank’s core unit, Mizuho Bank, was provided information about the loan situation as far back as in 2010.
Sato explained that he was in “a position to know” about the issue back in 2011, since he attended the meetings that involved handing out papers that made reference to the loans. He said, however, he did not recognize the seriousness of the matter at that point in time.
In the time being, the bank is waiting for an outside panel of attorneys to determine if the false report initially given to the regulator was a misunderstanding by those in charge of the bank, or an intentional diversion. The panel was formed this week to investigate the ongoing scandal.
In September, the FSA order Mizuho to improve its business practices by more than the $20.6 million in loans that it extended indirectly to organized crime members through a bank-owned financial firm known as Orient Corp. The FSA has indicated there are major concerns that Mizuho did not work to correct the problem after learning about the situation way back in 2010.
According to the bank regulator, Orient Corp. made 230 auto loans and other credit offers that total more than 200 million yen to clients who in turn are “yakuza” criminal members.