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Top Japanese bank rapped over gangster loans scandal

Top Japanese bank rapped over gangster loans scandal
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A scandal involving loans made to gangsters by Mizuho Financial Group, Japan’s second-biggest bank, is costing some of its top bosses.

The chief executive of Yasuhiro Sato will have his salary suspended for six months.

A total of 42 executives will suffer pay cuts and 12 former employees will have to return some of their compensation.

But an outside investigation found the bank did not intentionally cover-up the loans in reporting to regulators, though it was slow to respond when it found out about them.

Finance Minister Taro Aso withheld judgment on the report and Mizuho’s response, but people familiar with the matter have said the Financial Services Agency, which Aso heads, was unlikely to impose further penalties on the bank as the external panel of lawyers hired by Mizuho did not find intentional evasion.

However some members of parliament have called for Sato to testify on the affair and, reportedly the FSA is under pressure to appear tough, as questions arise over why it did not uncover the shady loans earlier.

Regulators disclosed in late September that Mizuho had learned in late 2010 of the $2 million (1.45 million euros) in loans made to “yakuza” mobsters. The 230 small transactions, mostly car loans, were made by Mizuho consumer-finance affiliate Orient Corp. and were among bulk loans the bank later bought from Orient.

The FSA last month ordered Mizuho to improve business practices after the bank did almost nothing about the mob lending for more than two years.

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