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Japan to probe mega-banks after mob loan scandal

AFP-JIJI, JIJI

The Financial Services Agency said it will probe Japan’s three biggest banks following the loans-to-mobsters scandal that has raised questions about corporate links with organized crime.

The watchdog will look at Mizuho Bank’s business dealings as well as Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp., an FSA spokesman said Tuesday without disclosing further details.

Mizuho has been under fire since it emerged last month that it processed hundreds of loans worth about ¥200 million for notorious yakuza crime syndicates, which are involved in activities ranging from prostitution and drugs to extortion and white-collar crime.

The widening regulatory investigation will probe a range of issues, including the banks’ risk management systems, while Finance Minister Taro Aso said the watchdog must do a better job of weeding out corporate misdeeds.

The scandal has made headlines for weeks and reportedly sparked a police investigation into Japan Inc.’s ties with organized crime.

Authorities have long battled to keep gangsters from infiltrating the corporate sector amid fears about mob involvement in stock trading and the real estate sector, among other legitimate activities.

In 2007, regulators penalized a unit of Mitsubishi UFJ, the country’s biggest lender, for doing business with organized crime figures.

News of the FSA’s latest probe came a day after a panel of lawyers hired by Mizuho said bank executives knew it was doing business with gangsters but failed to stop the practice.

“Many officials and board members were aware of, or were in a position to be aware of, the issue,” said the panel’s 100-page report.

“However they failed to recognize it as a problem, believing that the compliance division . . . was taking care of it.”

Aso on Monday slammed the Mizuho transactions as a “huge problem” and said the bank’s initial — and incorrect — claims that executives knew nothing about the shady loans was “the worst thing a bank can do.”

On Tuesday, Aso took aim at the FSA, saying that “we have to improve what we are supposed to be doing.” His comments were in response to questions about the watchdog’s handling of the high-profile case.