The Yomiuri Shimbun October 6, 2013
Mizuho Bank’s loans to gangsters show corporate governance lacking
Mizuho Bank’s handling of its latest scandal was done in an impromptu manner that shows the megabank lacks a sense of responsibility. Mizuho must swiftly regain its organizational discipline.
The Financial Services Agency issued a business improvement administrative order to the bank because it determined it had been extending loans to many members of gang organizations through affiliated firms, including the consumer credit company Orient Corp.
These loans were extended in the form of 230 so-called tie-up loans between the bank and consumer credit firms, the total value of which exceeded ¥200 million.
The business world has been working to rid itself of the influence of criminal organizations. In spite of this, Mizuho extended a huge sum of loans to gangsters. There is simply no justification for the bank’s actions.
Mizuho Bank held a press conference on Friday, and Vice President Toshitsugu Okabe apologized for the scandal. We cannot understand why it took one week to hold the press conference after the FSA issued the business improvement order. Bank President Yasuhiro Sato himself should have appeared at the press conference to explain the reasons for the scandal, among other things.
To restore the trust in the bank, Mizuho must clarify where management responsibility lies through stern internal punishments. Also, it needs to take thorough steps to determine the cause of the scandal and devise measures to prevent a recurrence.
Under the tie-up loan system, consumer credit firms receive and screen applications from customers. If they approve a loan to buy a car, for example, a bank extends the loan.
Left untouched for 2 years
Mizuho learned that it had lent money to gangsters during a confirmation process after the loans were extended.
However, the bank did not make an appropriate response such as canceling the transactions based on the terms of loan contracts and left the problem unsolved for two years until it was pointed out by the FSA in its inspection in December last year.
Furthermore, information on the questionable transactions went no further than executives in charge of legal compliance, including the then vice president, and did not reach top management executives. We must say that the bank’s corporate governance is defective.
Other banks also deal with tie-up loans. With the latest scandal as a good lesson, banks and consumer credit companies should make utmost efforts to prevent the extension of problematic loans by, for example, sharing credit records such as lists of gangsters and gangster-related people.
The Mizuho Financial Group was launched in 2000 through a management integration of three banks: Dai-Ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan. In July this year, the group was transformed into a one-bank system under the One Mizuho New Frontier Plan after the merger of Mizuho Bank and Mizuho Corporate Bank. The scandal has spoiled the fresh start of the banking group.
A sense of rivalry still deeply rooted among Mizuho bankers from the three former banks must be behind the poor response to the scandal. It is an urgent task for the bank to reform its corporate climate into one with a smooth flow of information.
Before the merger of the three banks, Dai-Ichi Kangyo Bank received strong criticism from society over a payoff scandal involving a sokaiya corporate racketeer. And after the launch of the group, Mizuho was roundly criticized for successive large-scale system failures.
As far as we can see from its response to the latest scandal, the financial group has not made use of its bitter experiences. This time, it must listen sincerely to the harsh criticisms of society for the sake of management reform.
(From The Yomiuri Shimbun, Oct. 5, 2013)