Japan’s Financial Services Agency plans inspections of the country’s biggest banks after finding loans linked to organised crime at No. 2 lender Mizuho. The regulator said in a notice that it will inspect Bank of Tokyo-Mitsubishi UFJ, the country’s No. 1 bank by assets, Mizuho Financial Group and No. 3 bank Sumitomo Mitsui Bank.
The FSA inspections, to be carried out next week, will focus on compliance and risk management. The move comes after Mizuho’s announcement that the chairman of its banking business resigned and top executives will have pay docked over more than 200 million yen ($2 million) in loans to organised crime.
The loans, reported to Mizuho’s board in early 2011, were issued by consumer finance affiliate Orient Corp. A probe by an outside panel faulted Mizuho for failing to crack down sooner, but said the bank had not deliberately sought to cover up the loans.
It is unclear if the FSA plans any further action against Mizuho, following an order in late September for the bank to clean up its lending business.
Asked if the Mizuho case reflected a need for tighter oversight, finance minister Taro Aso said improvements might be made in the future despite the regulator working with limited resources. “If the probe shows there are areas needing improvement, then we will do so,” Aso said.
Japanese gangs, known as “yakuza”, are entrenched in many areas of the economy despite efforts to freeze them out of the financial system.