Mizuho Draws Further Penalties for Loans to Criminal Groups (1)
Bloomberg News
Mizuho Financial Group Inc. (8411), Japan's third-largest lender, was penalized by the nation's banking regulator for the second time in three months for failing to address loans to criminal groups.
The Financial Services Agency 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 in Tokyo today. 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 new measures add to the regulator's September order directing Mizuho to strengthen compliance after it failed to stop 200 million yen ($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.'
Mizuho apologizes and is taking the regulator's orders seriously, it said in a statement, adding that it may make changes to its corporate structure in response. Sato will hold a press briefing at 5:30 p.m. in Tokyo, according to an announcement at the Bank of Japan.
The FSA is calling on financial institutions for more efforts to break off relationships with criminal groups, it said in a separate statement today.
Mizuho shares rose 2.4 percent to 216 yen in Tokyo today before the penalties were announced. Since the first punishments were announced Sept. 27 they've slipped 2.7 percent, compared with a 5.1 percent gain in the benchmark Topix index.
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 will give up six months of pay, as will Chairman Takashi Tsukamoto. Tsukamoto gave up his role as chairman of Mizuho's lending unit.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Shingo Kawamoto in 東京 at skawamoto2@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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