MIZUHO BANK SANCTIONED BY JAPANESE FSA FOR LOANS TO "ANTI-SOCIAL FORCES", FURTHER SANCTIONS NOW POSSIBLE FOLLOWING INCORRECT REPORT TO THE FSA
Following an investigation earlier this year, on 27 September 2013 the Japanese Financial Services Agency (FSA) issued a Business Improvement Order (the Order, link) to Mizuho Bank, Ltd. (Mizuho), one of the three largest banks in Japan. The Order found "serious problems with the Bank's postures towards administrative control, internal control and legal/regulatory compliance".
These problems related to loans made by Mizuho through its consumer credit affiliate Orient Corp. (Orico) to "anti-social forces", a common euphemism for organised crime in Japan. The FSA found that Mizuho, through Orico (who were responsible for the screening of applicants), had extended 230 consumer-credit loans in a total of over JPY200 million (USD2.1 million) to anti-social forces.
The Order requires Mizuho to draft and submit a business improvement plan dealing with the points raised by the FSA by 28 October 2013. Mizuho has also set up a Special Investigation Committee on Improvement of Joint Loan Business, made up of three lawyers external to Mizuho, to identify the causes of this issue, evaluate the appropriateness of improvement measures and make further recommendations.
The FSA were particularly critical of the fact that no steps were taken in Mizuho to stop or break off loans to anti-social forces, even after it was ascertained these had been made, and that communication of the fact these loans had been made stopped at the executive officer in charge.
However, following the FSA sanctions, on 8 October 2013, Mizuho's President Yasuhiro Sato made an announcement clarifying that Vice Presidents of Mizuho had, in fact, been made aware of concerns relating to Orico loans through Compliance Committee and Board of Directors Reports between June 2011 and January 2012. No action had been taken by the Vice Presidents further to these reports. This announcement was contrary to the position taken by Mizuho at the time of the FSA's investigation that matters had only been reported to the executive officer in charge, as reflected in the Order. Mizuho have now been asked to conduct a further investigation into why this incorrect information was given to the FSA, and how far Mizuho's parent Mizuho Financial Group was involved.
It has been reported that the FSA are considering whether to make any further investigations into or impose sanctions against Mizuho, including potential criminal sanctions for false reporting to the FSA.