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Shinsei Bank Falls on Loans to Crime Organizations: Tokyo Mover

Shinsei Bank President Shigeki Toma
Shigeki Toma, president and chief executive officer of Shinsei Bank Ltd. Photographer: Akio Kon/Bloomberg

Shinsei Bank Ltd. fell in Tokyo trading after saying it had transactions with criminal organizations, the latest revelation of ties between Japanese banks and gangsters.

The shares closed 0.9 percent lower at 227 yen after declining as much as 4.8 percent. President Shigeki Toma said yesterday that his company’s Shinsei Trust & Banking Co. unit had more than 10 transactions with so-called antisocial groups.

Japanese authorities and politicians are scrutinizing banks’ relations with yakuza crime syndicates after regulators ordered Mizuho Financial Group Inc. to improve compliance for failing to break off loans to gangs. Shinsei discovered its transactions in an internal investigation following the Financial Services Agency’s action against Mizuho, Toma said.

“The market is reacting over the short term on concern about Shinsei’s reputation risk,” Yoshinobu Yamada, a Tokyo-based analyst at Deutsche Bank AG, said by phone today. “The impact on the company will probably be limited.”

Shinsei Trust lent the cash through Aplus Financial Co., a consumer credit company owned by another unit, Shinsei Financial Co., Toma said. Eiji Ootaka, a Tokyo-based spokesman for Shinsei, confirmed by telephone today that Toma made the remarks at a news briefing yesterday in Tokyo.

Aplus tumbled 6.8 percent, the most in three months, to 150 yen at the close. The benchmark Topix Index slid 0.9 percent.

Loan Structure

The structure of the loans is similar to those involving Mizuho, Japan’s third-biggest bank by market value, which made 230 transactions valued at about 200 million yen ($2 million) through its Orient Corp. consumer credit affiliate. Mizuho this week outlined plans to improve internal controls and cut pay for executives including President Yasuhiro Sato.

In a business improvement report to the FSA on Oct. 28, Mizuho said it will bolster sharing of its database on crime groups with Orient to prevent further transactions. Japan’s banking association said last month that it’s considering exchanging information with consumer credit firms.

The lower house financial affairs committee plans to question Mizuho officials in the week starting Nov. 11 as part of discussions on the crime-loan issue in parliament, ruling Liberal Democratic Party lawmaker Isshu Sugawara told Bloomberg News today.

The FSA said this week that it will inspect the nation’s three largest lenders, including Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. to determine whether their banking units are complying with rules to curb transactions with crime groups. The reviews are scheduled to start on Nov. 5.

Financial Services Minister Taro Aso said this week that his agency will examine Mizuho’s improvement plan before determining any further action against the bank. He said he would also take into account the findings of a panel of lawyers commissioned by Mizuho, who said this week that the bank didn’t intend to mislead FSA investigators.

Mizuho, which initially told the FSA that only compliance officials knew of the loans, last month said that top managers at the time were also aware of the transactions.

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