The scandal over Mizuho Bank’s loans to yakuza has prompted customer defections, raising stock market concerns over a possible downturn in the lender’s earnings.
In September, the Financial Services Agency issued a business improvement order to the unit of Mizuho Financial Group Inc. for engaging in transactions with the underworld for years and not resorting to any preventive action.
Some of Mizuho’s corporate clients said they had no choice but to shun the bank as a supplier of large-lot loans.
In addition, some companies have canceled new account openings at Mizuho, while the lender’s call center has received a flurry of complaints from retail customers.
The loan scandal also has upset prefectural and municipal governments that used Mizuho as a financial institution for collections and payments of public money, including the Tokyo Metropolitan Government and the cities of Osaka and Kitakyushu.
The Tokyo Metropolitan Government sent a letter Thursday to Mizuho Bank President Yasuhiro Sato, urging the institution to get to the bottom of its shady practices and to restore confidence.
An official at the metropolitan government’s accounting bureau urged Mizuho to end the turmoil quickly. Mizuho could lose the confidence of the public as a designated financial institution, the official said.
The metro government also engages in transactions with Mizuho for bond issuance and lottery sales.
The metropolitan government intends to consider a response after looking at possible additional punishments by the FSA and a business improvement plan to be compiled by the bank.
Mizuho Financial Group closed at ¥207 in Tokyo stock trading Friday, down 6.8 percent from Sept. 27, the day the scandal broke. The price briefly fell below ¥200 on Wednesday.
An analyst said, “I am keeping a close watch on how far customer defections accelerate.”
Yakuza syndicates engage in wide-ranging criminal activities, including drug-dealing, prostitution, loan-sharking and money-laundering. They also use front companies to conduct business activities.
The FSA in February 2007 ordered Mitsubishi UFJ Financial Group Inc. to suspend some of its operations for a week after it was revealed that the bank had long engaged in “inappropriate deals” with a yakuza group.