Panel says no cover-up in Japan's Mizuho mob loans scandal

Mon Oct 28, 2013 8:18am EDT
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By Taiga Uranaka

TOKYO (Reuters) - Mizuho Financial Group (8411.T: Quote) did not intentionally cover-up loans to "yakuza" mobsters, an outside panel said on Monday, a verdict that increases the likelihood Japan's second-biggest bank by assets will escape serious penalty over the scandal.

Mizuho said its president and CEO, Yasuhiro Sato, would keep his job but have his pay suspended for six months. While that should allow him to resume his efforts to unify the fractious "megabank" and improve its governance, Mizuho faces an uphill battle in catching up with its expanding peers.

"It's extremely regrettable that we failed to do enough to eliminate transactions with anti-social forces," Sato told a news conference, using a common euphemism for organized crime. "I would like to apologize from the bottom of my heart for causing confusion."

The external panel of lawyers hired by Mizuho said in a report that Mizuho's management was lax in its handling of the loans to gangsters, but did not intentionally mislead regulators with an initial false report on the extent of the problem.

"We can say there is no possibility" of a cover-up by the bank, said panel leader Hideki Nakagome, announcing the results of the three-week investigation.

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 panel did not find intentional evasion.

But Mizuho is not off the hook yet.

While the bank wants to move beyond the scandal, some members of parliament have called for Sato to testify on the affair and, people familiar with the matter say the FSA is under pressure to appear tough, as questions arise over why it did not uncover the shady loans earlier.   Continued...

Mizuho Financial Group President Yasuhiro Sato (2nd R) attends a news conference at the Bank of Japan headquarters in Tokyo October 28, 2013. REUTERS/Issei Kato