Mizuho Bank President Yasuhiro Sato apologized in parliament Wednesday over a scandal involving loans to organized crime groups, admitting that the Japanese megabank failed to take basic actions and left the issue unattended for more than two years.
Aside from the tie-up loans it extended through group consumer credit company Orient Corp., the bank itself also has transactions with gangsters, Sato also revealed without elaborating, while stating that his bank has reported all such cases to the Financial Services Agency.
Summoned as an unsworn witness to the House of Representatives' Committee on Financial Affairs, Sato said, "I want to offer my heartfelt apology for causing confusion in society," adding he will do his utmost to improve the bank's business operations "with unwavering resolve."
He said the main problems were that the bank did not take drastic measures over the loans for over two years and that it submitted a false report to the financial watchdog.
The bank failed to take quick action as it responded to system troubles that occurred after the 2011 earthquake and tsunami disaster in northeastern Japan and also it lacked appropriate internal rules for reporting the issue, he said.
Although some lawmakers have said Sato should step down, he indicated that he will stay in his post, saying he will work to prevent such scandals occurring again.
Takeshi Kunibe, chairman of the Japanese Bankers Association who was also summoned by the lower house among other chiefs of financial industry bodies, said the association will consider sharing information with the police so as to prevent any transactions involving organized crime groups.
Kunibe, also president of Sumitomo Mitsui Banking Corp., added his bank has had dealings with people and companies suspected of having ties with crime syndicates.
The scandal came to light in late September when the FSA ordered Mizuho to improve its operations for not taking proper measures, even though its senior officials in charge of legal compliance knew about the loans to gangsters.
The bank and its parent, Mizuho Financial Group Inc., have admitted to more than 200 million yen ($2.04 million) in such loans through Orient mostly in the form of auto loans.
Mizuho originally claimed its top management had not been aware of the issue but later admitted the management had received materials mentioning the issue at board meetings and compliance meetings between 2011 and 2012.
It submitted a business improvement report to the FSA on Oct. 28 while announcing internal disciplinary measures against 54 current and former executives including Sato who will forgo his pay for six months.
The FSA started investigating Mizuho Financial and two other major Japanese banking groups Nov. 5, focusing on measures to prevent ties to criminal groups, and will decide whether it will take additional measures against Mizuho Bank.