OSAKA -- The arrest of former top executives of the failed Kofuku Bank is expected to unveil the dubious nature of the bank's "family-run" business, which is believed common among many second-tier regional banks.
Osaka-based Kofuku was one of Japan's 60 second-tier regional banks, which originally started as private lending associations. Kokumin Bank and Tokyo Sowa Bank, which also collapsed earlier this year, belong in the same category.
Many continue to be run by their founding families. In the case of Kofuku, the family of former President Tokusuke Egawa effectively controlled about 30 related businesses. Under the nontransparent management of the unlisted bank, it was easy for Egawa and his underlings to channel funds to the family companies without proper screening.