Government officials Wednesday raided the offices of Shoko Chukin Bank, a state-linked lender for small and medium-sized firms, over improper loans issued under a state-backed program to help crisis-hit companies.
The Financial Services Agency, the Ministry of Economy, Trade and Industry and the Finance Ministry plan to look into the causes of the inappropriate loans and possible problems with the organizational management of the bank.
The FSA is taking the lead in identifying the responsible parties amid concerns that an investigation by the bank on its own practices may pose a conflict of interest and may be less effective.
Since the bank's top post has been occupied by retired METI officials, the FSA took the initiative.
The agency aims to conduct a thorough investigation into the bank's business practices and management, and the bank could face additional administrative punishment if new revelations of fraud are found, according to sources.
"We will strictly question executives and others about the root cause of the problem," an FSA official said.
A bank spokesperson pledged full cooperation with the investigation.
The agency and the two ministries issued a business improvement order to the bank on May 9 after it was found to have extended emergency loans to companies that did not fulfill criteria under the state-backed program.
The bank was instructed to submit an improvement plan including measures to prevent similar acts by June 9.
An investigation by a third-party committee found that the bank was involved in the inappropriate loans to achieve lending targets. The bank fabricated documents at its branches to clear the criteria and tried to conceal these activities, the committee said in a report.
Under the state-backed program, low-interest loans are offered to smaller scale companies on the verge of financial collapse or struck by natural disaster.