Japan Ruling LDP to Ask Mizuho’s Sato to Explain Crime Loans

Japan’s ruling party plans to ask Mizuho Financial Group Inc. (8411) President Yasuhiro Sato to appear before its finance committee to explain the bank’s lending to crime groups.

Isshu Sugawara, chairman of the Liberal Democratic Party’s finance committee, said he wants Sato to speak to the panel after Mizuho submits a business improvement plan to the Financial Services Agency due Oct. 28. The lawmakers have begun to examine whether the FSA’s supervision of Mizuho was adequate, Sugawara told reporters in Tokyo today.

The financial regulator ordered Mizuho to improve compliance on Sept. 27 for neglecting to break off loans made to members of crime groups through its Orient Corp. (8585) consumer credit affiliate. The Tokyo-based bank initially told the FSA that compliance officials knew of the loans, only to say last week that top managers were also aware of the transactions.

Sato, 61, said on Oct. 8 that he was in a position to have found out about the loans in executive meetings as early as July 2011, when reports mentioning the transactions were distributed.

It was “outrageous” that Mizuho failed to address the loans and the bank’s top executives bear a great responsibility, Sugawara said. While the committee has no power to summon Sato, it can propose law changes.

Masako Shiono, spokeswoman for Mizuho in Tokyo, declined to comment on the LDP committee’s plans.

Orient’s Pledge

Mizuho’s banking unit made 230 transactions through Orient, mostly loans for automobiles, valued at about 200 million yen ($2 million), according to the FSA. Orient submitted a report to the trade ministry this week pledging to promptly recall or terminate outstanding loans to gangsters.

As well as propose measures to improve internal controls, Mizuho has to explain to the FSA by Oct. 28 how and when top management became aware of the transactions.

The case has prompted the Japanese Bankers Association to explore ways to ensure its members avoid business with the yakuza. The industry group, which has a database on criminal organizations, is considering sharing information with consumer credit companies, Chairman Takeshi Kunibe said yesterday. It has also been in talks with the National Police Agency since 2010 on sharing information from the agency’s database.

To contact the reporter on this story: Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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