The Yomiuri Shimbun The Financial Services Agency has ordered Mizuho Bank to rectify its business practices, saying the bank did not take appropriate measures for two years after a bank executive found out Mizuho had extended a total of ¥200 million in loans to members of crime syndicates.
The FSA issued a business improvement order to Mizuho Bank on Friday based on the Banking Law, instructing the bank to clarify where responsibility lies and develop preventive measures.
There were 230 transactions with crime-syndicate members, the FSA said.
Mizuho Bank lent money to crime-syndicate members to purchase items such as cars through the bank's affiliated credit loan firms such as Orient Corporation.
In an affiliated loan program, credit loan companies screen customers' ability to repay before banks provide loans. When the firms confirm the customers are suitable for banks to extend a loan, they guarantee repayment of the loans.
The FSA calls on banks not to make transactions with crime-affiliated forces in its guidelines for supervision.
If banks find problems with their loan customers, they are required to void the transactions by demanding credit loan firms repay the loans, among other steps.
The agency uncovered that the bank extended loans to crime-affiliated organizations in a routine FSA's bank inspection held in December, the FSA said.
Although a Mizuho executive in charge of compliance knew the bank had made transactions with criminal groups' members for more than two years, the executive did not take any concrete measures and did not report them to its president and other top-level executives.
According to the FSA, Mizuho Bank lent money in such transactions mainly to individuals in criminal organizations. No evidence has been found that the money was used for the organizations.
"Loan applicant screenings are conducted by credit loan companies. I thought that a bank can't deal with the matter even if there are transactions with antisocial groups," the FSA quoted a Mizuho Bank official as saying.
After FSA pointed out the transactions to Mizuho Bank, the bank fixed the problems involving all transactions in question. However, the FSA concluded that the bank still has a serious flaw in its internal management system.
The FSA demanded the bank implement a fundamental review of compliance and business administration, and ordered it to submit a business improvement plan by Oct. 28 and carry it out immediately.
"We take this order very seriously and deeply regret these occurrences," the bank said. "We will grapple with these issues to strengthen and improve our internal management system."
