Japan’s FSA Probes Three Banks over Compliance

Japan’s Financial Services Agency (FSA) has told the country’s three major banking groups it will conduct inspections in November focusing on compliance issues, an agency official said.

One of the three is Mizuho Financial Group, which has been under investigation over
loans made to organised crime

The financial regulator will conduct on-site inspections on 5 November at the financial groups that operate major lenders Mizuho Bank, the Bank of Tokyo-Mitsubishi and Sumitomo Mitsui Banking to check their legal compliance and overall business management, the official said.

The planned probes of the leading banks will be the first since the FSA’s new policy of inspection and supervision was announced early last month. In its annual revision of the policy, the agency said the scope of inspections will be focused on select key points in each industry and issues particular to individual financial institutions (FIs)among other changes, instead of uniform checks.

At Mizuho, the FSA will examine whether the bank is implementing measures included in its business improvement plan submitted to the agency earlier this week following the loan scandal, the official said.

An FSA inspection from December 2012 to March 2013 found that Mizuho had engaged in 230 transactions involving more than 200 million yen (JPY) with people tied to organised crime. It was revealed that Mizuho left the transactions unaddressed for more than two years.

The FSA ordered Mizuho to improve its business based on the bank’s initial claim that top management had not been aware of the illegal loans, but it later admitted top management had known, raising questions about effectiveness of the FSA probe.


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