Fri, Dec 27, 2013 - Page 15 News List

Mizuho draws more fines for ‘criminal loans’

COMPLIANCE:The bank was penalized a second time for its incorrect report on the transactions during an earlier probe, as well as a lack of awareness and governance

Bloomberg

Takashi Tsukamoto has resigned as chairman of Mizuho Financial Group Inc after Japan’s third-largest lender was penalized over loans to criminal groups for the second time in three months.

Japan’s Financial Services Agency (FSA) ordered the Mizuho Bank Ltd lending unit to suspend new transactions through its consumer credit affiliates for a month, the regulator said in a statement yesterday that also announced other measures.

Tsukamoto will step down at the end of March, the bank said in a separate statement.

The new measures add to the regulator’s September order directing Mizuho to strengthen compliance after it failed to stop ¥200 million (US$2 million) in credit extended to members of anti-social groups through an affiliate. Mizuho cut pay for executives, including president Yasuhiro Sato, and submitted a plan on Oct. 28 to the agency outlining measures to improve internal controls.

“The additional penalties for Mizuho are unlikely to have much impact on the bank’s earnings,” Yoshinobu Yamada, a Tokyo-based analyst at Deutsche Bank AG, said by phone. “More important is that the FSA is sending a message that the whole financial industry should strengthen measures against transactions with anti-social groups, using Mizuho’s case as a trigger.”

Sato apologized at a news conference in Tokyo for the bank receiving the extra penalties. The lender is taking the regulator’s orders seriously, it said in a statement, adding that it may make changes to its corporate structure in response.

The watchdog also issued business improvement orders to the parent company and the lending unit after the bank wrongly reported to the FSA during an investigation that only lower-level officials were aware of the loans.

The FSA is calling on financial institutions for more efforts to break off relationships with criminal groups, it said in a separate statement yesterday.

Mizuho shares closed 2.4 percent higher at ¥216 in Tokyo yesterday before the penalties were announced. Since the first punishments were announced on Sept. 27, they have slipped 2.7 percent, compared with a 5.1 percent gain in the benchmark TOPIX.

The additional measures result from Mizuho’s incorrect report on the transactions during the previous probe, as well as a lack of awareness and governance regarding the issue, the FSA said in the statement. The parent company and the lending arm must submit improvement plans to the FSA by Jan. 17, according to the statement.

Mizuho has been penalized for lapses ranging from computer failures to trading errors since its creation in 2000 through the merger of Dai-Ichi Kangyo Bank Ltd, Fuji Bank Ltd and Industrial Bank of Japan Ltd. In May 2011, the FSA ordered Mizuho to improve operations and fix its “corporate culture” following system malfunctions that delayed transactions after the earthquake and tsunami two months earlier.

Sato, 61, who has driven measures designed to improve management at Mizuho since taking the post in June 2011, said on Oct. 28 he would give up six months of pay, as did Tsukamoto. Sato’s unpaid period will be extended to one year, the bank said.

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