Mizuho Financial Group chairman to resign over loan scandal

Mizuho Financial Group Inc. said Thursday that Chairman Takashi Tsukamoto will step down from his post on March 31 to take responsibility for its core banking unit's loans to members of organized crime groups.

Mizuho Bank President Yasuhiro Sato will also take a self-imposed salary cut for one year as Japan's Financial Services Agency ordered the megabank to suspend some of its affiliated loans between Jan. 20 and Feb. 19 over the lender's involvement in transactions with "antisocial forces," it said.

The financial watchdog also ordered Mizuho Financial Group and Mizuho Bank to improve their businesses, urging the parent company to strengthen management over the bank and asking the bank to tighten internal controls.

The FSA ordered the two to jointly upgrade a business improvement plan and submit the revised version by Jan. 17. The bank compiled and submitted the business improvement plan in late October following the FSA's earlier business improvement order against the bank.

Sato told a press conference in Tokyo, "I will take the FSA's punitive action seriously and hope to regain trust as soon as possible."

He denied he intends to step down over the scandal and pledged to bolster the company's corporate governance.

The agency said that although executives of the bank were aware of the issue, they "left the matter up to the compliance department without taking specific and clear measures" to sever ties with gangsters.

It also pointed out that the bank's top management failed to "properly instruct and manage Orient Corp." through which it offered loans and that "it failed to develop a sense of compliance."

The latest orders follow one issued to Mizuho Bank in September to improve operations after it failed to take substantial steps to prevent or break off transactions with gangsters for over two years despite its knowledge of the matter.

The FSA decided to take additional punitive action after determining that the holding company did not act "as a group" to take measures and left responsibility to each section of its affiliate companies.

Mizuho Bank originally claimed its top management had not been aware of the issue, but it later admitted that Sato and former President Satoru Nishibori were in a position to know.

A third-party panel set up by the bank concluded after a probe that the bank had no intention of concealing the loan problem when it submitted a false report to the FSA.

The agency launched additional inspections on Nov. 5 of Mizuho Bank and Mizuho Financial Group to verify the panel's findings.

An agency official said at a press conference in Tokyo that its inspection found no evidence that the lender systematically covered up the matter, but added "it only relied on the memory of an official in charge of the matter and did not look at materials in the past."

As part of its efforts to improve governance, Mizuho Financial Group plans to have independent committees oversee its management and invite more external experts as board members.

In October, the lender took internal disciplinary action against 54 current and former executives including Tsukamoto, who resigned as chairman of Mizuho Bank but remained in his post at the parent company. This time, the parent and the bank implemented additional measures as they took the second order by the FSA seriously, Sato said.

The bank and the holding company have admitted to lending more than 200 million yen ($2.04 million) through group consumer credit company Orient, mostly in the form of auto loans. Sato also revealed last month the bank itself had transactions with gangsters.