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The Financial Services Agency slapped Saikyo Bank with a business-improvement order Friday for failing to report that employees had been embezzling from depositors’ accounts, FSA officials said.

Japan’s top financial regulator demanded that the second-tier regional bank enhance compliance, clarify management’s responsibility and report a business improvement plan within a month.

Bank President Mitsuhiro Ohashi will step down June 28 to take the blame for covering up the in-house scandal, the bank said in a statement.

According to the FSA, eight employees are suspected of embezzling a total of about 150 million yen from depositors’ bank accounts in eight cases between 2000 and 2005.

Of the eight cases, the bank reported four cases to the regulator but failed to do so regarding the remaining four, in which the appropriated money amounted to about 82 million yen, the agency said.

The bank’s top executives, including Ohashi, failed to report to the agency about the embezzlement even though they were aware of it.

The bank’s management also failed to take sufficient steps to prevent such illegal acts, the agency said.

A police complaint has reportedly yet to be filed.

Saikyo Bank is based in Shunan, Yamaguchi Prefecture, with 70 outlets mainly in the prefecture.

The regional bank raised its profile when it agreed with Livedoor Co. to jointly launch an online bank in January. But the two companies announced the annulment of the tieup plan in March, following allegations that top executives of the Internet firm were involved in accounting fraud and other misconduct.