Japanese Trust Banks Lent to Gangs Via Credit Units, Asahi Says

Trust affiliates of Japan’s three biggest banks lent money to organized crime groups, the Asahi newspaper reported today as regulators widen a probe into illicit lending and Parliament plans to question financial executives.

Mizuho Trust & Banking, Mitsubishi UFJ Trust and Banking, and Sumitomo Mitsui Trust made loans to crime groups through their consumer credit units, Asahi said, citing unidentified people. The banks began reviewing their loans earlier this year on instructions from the Financial Services Agency, according to the report.

Calls by Bloomberg News to the three banks outside office hours today weren’t immediately answered.

Regulators are intensifying an investigation begun after revelations that a credit arm of Mizuho Financial Group Inc. made 230 loans, mostly for car purchases, to yakuza gangsters. Shinsei Bank Ltd. yesterday became the second institution to disclose lending to crime syndicates.

Shinsei President Shigeki Toma said its trust unit conducted more than 10 transactions with so-called antisocial groups through a consumer credit company. Tokyo-based Shinsei discovered the loans following an internal probe after Mizuho was penalized by the FSA, Toma said at a briefing.

Regulators plan to inspect all lending by Mizuho, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., the nation’s three largest financial groups, the FSA said this week.

Japanese lawmakers are scheduled to question Mizuho officials this month on its loans to crime groups, ramping up political pressure on executives at the country’s third-biggest bank by market value. President Yasuhiro Sato is under pressure to explain how Mizuho 200 million yen ($2 million) in loans made to members of criminal organizations.

Tokyo-based Mizuho this week submitted plans to improve internal controls and cut pay for executives including Sato, who has said he was in a position to know about the transactions from documents circulated in executive meetings. He said this week he doesn’t recall seeing the issue highlighted in the reports.

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