Japan's Mizuho Sanctions Executives Over Yakuza Loan Scandal

Japan's Mizuho Bank will punish more than 30 executives at the bank with demotions and pay suspension over loans made to Yakuza mobsters, according to media reports.

The bank's chairman Takashi Tsukamoto will step down from his post, but will remain as head of the parent company, according to Japan's Jiji Press news agency.

CEO Yasuhiro Sato who admitted wrongdoing on the part of the company will have his salary cut for six months.

Sato will not be sacked and is likely to survive the scandal, sources familiar with the matter told Reuters.

In addition, a compliance executive will be ousted from the bank's board, according to reports.

Mob Loan Scandal

Mizuho, the second-largest bank in Japan by assets, had earlier admitted its top management knew of certain illegal transactions at the bank dating back to 2010.

The bank was accused of extending more than 200m yen ($2.06m, £1.3m, €1.5m) in loans via a partially bank-owned finance firm called Orient Corp, to organised crime members.

The crime groups generally known as Yakuza engage in wide-ranging anti-social activities, including drug-dealing, prostitution, loan-sharking and money-laundering. They also conduct business activities using front companies.

Following the revelations, Japan's Financial Services Agency (FSA) ordered the bank to improve its business practices. The banking regulator said it was a grave mistake that Mizuho did not take action even after it came to know about illegal loans in 2010 and asked the bank to submit an updated report on its failure.

Mizuho is required to submit a report to the FSA by 28 October detailing how it plans to improve operations. The bank had earlier set up committees including third parties to investigate the scandal.

Following the scandal, the bank has lost a number of corporate and government customers.

Cracking Down on Yakuza

The Japanese Bankers Association is reportedly taking serious steps to curb banks' illegal transactions with organised crime groups. The industry body said it will use the police database of mob members to stop bank funding to them, according to a Reuters report.

It will also work with the police to tackle Yakuza members who default on car and small-business loans.

US regulators have joined the crack down on the Yakuza by attacking them financially. The US Treasury Department so far has frozen about $55,000 of yakuza holdings including two Japan-issued American Express cards, according to a Bloomberg report.