Japan parliament grills banking officials over mob loans

TOKYO - Japanese lawmakers on Wednesday questioned the head of one of the country's biggest banks over a mob loans scandal, as another major lender admitted it may have been involved in dealings with gangsters.

Mizuho Financial Group president Yasuhiro Sato apologised for his firm's role in the widening scandal as lawmakers questioned him about Mizuho's surveillance and his future at the bank, after he earlier refused to step down.

"We deeply regret that the Japanese financial sector's credibility was hurt because of our relations with anti-social forces," Sato said, using a common euphemism for organised crime.

The scandal has gripped Japan's banking sector since Mizuho came under fire in September after revelations that it had processed hundreds of loans worth about $2 million for the country's notorious yakuza crime syndicates.

The gangs are involved in activities ranging from prostitution and drugs to extortion and white-collar crime.

Authorities have long battled to keep the gangsters from infiltrating Japan's corporate sector amid fears of mob involvement in stock trading and the real estate sector, among other legitimate activities.

"The amounts involved may be small compared to the past, but it still means that funds are going to the mafia," organised crime expert Atsushi Mizoguchi told public broadcaster NHK.

A panel of lawyers hired by Mizuho to probe the transactions found that "many officials and board members were aware of, or were in a position to be aware of, the issue".

That contradicted Mizuho's initial claims that top management were in the dark about the mob links.

In the wake of the Mizuho report, Japan's financial watchdog said it would probe the country's top three banks - Mizuho, Mitsubishi UFJ and Sumitomo Mitsui Banking Corp - in an effort to eradicate the practice.

Mizuho has said more than 50 former and current executives would be punished, including Mizuho Bank chairman Takashi Tsukamoto, who would step down from his post but stay on as head of the parent company.

Sato said he would forgo his salary for six months, but refused to quit.

That decision came under scrutiny Wednesday as lawmakers questioned whether the punishments were strong enough, while Sato insisted some loans were made in good faith.

"There are some trades with people that might be discovered to be anti-social only after the transactions have been done," he said.

Also Wednesday the head of Sumitomo Mitsui acknowledged the "possibility" that the bank did business with gangsters, after another bank official said Tuesday that an affiliated firm had been making mob loans.

Other financial firms, including Shinsei Bank and a major Japanese credit card company, have admitted in recent weeks to similar business dealings.