The Financial Services Agency filed a criminal complaint against UFJ Bank and three former executives Thursday over their attempts to block inspections by concealing documents and refusing to answer questions, the bank regulator said.

The FSA also ordered the bank’s Tokyo and Osaka corporate business sections to cease new lending operations to corporate clients for six months, beginning Oct. 18.

The criminal complaint, filed at the Tokyo District Public Prosecutor’s Office, is the latest blow to beleaguered UFJ Holdings Inc., the object of a merger battle between the Mitsubishi Tokyo Financial Group Inc. and the Sumitomo Mitsui Financial Group Inc.

The FSA’s action comes four months after it ordered UFJ Bank, the core commercial unit of UFJ Holdings, to improve its operations after it discovered bank employees destroying, hiding or forging documents showing that its borrowers were in worse shape than the bank had reported to the government.

The probe was conducted from last fall through the beginning of this year. UFJ has already acknowledged the charges and has taken punitive measures targeting those involved.

“We decided to take action after considering the extremely malicious nature of the practice,” said Financial Services Minister Tatsuya Ito.

Individuals convicted of obstructing FSA inspections can face maximum penalties of one year in prison or a 3 million yen fine. A corporation can be fined up to 200 million yen.

The FSA’s widely anticipated complaint is not only an embarrassment for UFJ; if it causes the UFJ share price to fall, it could weaken its bargaining position with MTFG. It might also open the door for a takeover by SMFG, according to analysts.

MTFG has signed a basic merger agreement with UFJ, injecting 700 billion yen into the bank to keep it afloat. But while MTFG has yet to propose a share-swap ratio, SMFG has said it is willing to merge with UFJ on an equal footing, with a one-for-one share swap.

Both MTFG and SMFG have said their offers to merge will stand, even in the face of criminal charges. But the MTFG-UFJ merger could run into trouble at UFJ’s shareholders’ meeting in June if UFJ is unable to persuade shareholders of the merits of merging with MTFG over SMFG.

“What is important is that we convince shareholders of the benefits of a merger with MTFG and show them a share swap that is satisfactory,” said Ryosuke Tamakoshi, chairman of UFJ Bank.

UFJ will work to regain the trust of its customers, added UFJ President Takamune Okihara. He said the bank’s culture of not taking governance seriously is “about to change.”

The FSA order that UFJ suspend new business loans will have little effect on earnings, bank officials and analysts said.

“It’s symbolically important that Japan’s fourth-largest bank is being forbidden from operations, but it’s not a very harsh punishment,” said Brett Hemsley, director at Fitch Ratings Ltd.

UFJ can still increase loans to existing businesses and issue loans to small businesses and individuals, he said.

“Bank lending is declining everywhere, there are no new customers,” he said.

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