Japan’s Financial Services Agency (the “FSA”) has decided that in connection with Suruga Bank’s illicit share house financing scandal, it will issue an order to cease part of the business operations of the bank by the end of this week. The FSA has found that many employees of the bank, including at least one executive director, were involved in forging real estate financing documents for transactions to proceed. Furthermore, the FSA has concluded that in its present form, the bank’s corporate governance structure is ineffective in enabling management to prevent widespread corporate fraud.
It is expected that the main focus of the FSA’s order will be on the bank division that executes and approves new financing deals for real estate investment projects such as for shared houses. The FSA order to cease partial operations will probably extend for many months, although it is likely that the bank’s normal account services such as accepting deposits and withdrawals will not be affected.
An investigative committee consisting of outside attorneys and other professionals issued a public report concerning the bank scandal on Sept. 7th. Pursuant to the report, Suruga employees were forced to meet unreasonable internal sales quotas, which caused them to forge documents and inflate income data and amounts on deposit at the bank for investors (borrowers) to qualify for real estate loans.
Source: Mainichi Shinbun Digital (Japanese), October 2, 2018