Suruga Bank Exec Led Lending Irregularities

August 8, 2018

Tokyo- A then executive officer of Japanese regional lender Suruga Bank <8358> led falsifications of loan application documents related to share-house investments, informed sources have said.

The then executive, who was in charge of sales, intimidated the bank's loan screenings department into passing applicants of loans to finance such investments, according to the sources.

In May, the bank denied its organizational involvement in the wrongdoing in a report on its internal probe into its lending irregularities.

The Financial Services Agency plans to impose tough administrative penalty on the bank, based in Numazu, Shizuoka Prefecture, central Japan, for a serious lack of governance.

A third-party panel of the bank comprising mainly lawyers is expected to draw up a report on its probe into the irregularities by the end of this month.

The panel believes Chairman Mitsuyoshi Okano and other officials failed to prevent the wrongdoing because they did not know in detail the situation of the bank's sales operations.

Under the share-house investment scheme, Smart Days Inc. subleased shared-housing units it leased back from the owners, many of whom had taken out loans from Suruga Bank.

Tokyo-based Smart Days guaranteed payments of prefixed amounts to these owners as rents. But it went bust in April after stopping the payments, putting many investors in dire straits.

Documents submitted to obtain loans, including passbook copies and papers to prove annual income, were found manipulated.

In many cases, share-house sales agents made loan applications on behalf of investors. Suruga Bank officials urged the agents to falsify related documents and gave instructions on how to do that, the sources said.

The balance of the bank's loans related to share-house investments stood at some 200 billion yen as of the end of March, including loans tied to investment schemes run by other companies. The loans were extended to some 1,200 investors in total. Jiji Press