Japan FSA to Issue Biz Improvement Order to Higashi-Nippon Bank

July 13, 2018

Tokyo- Japan's Financial Services Agency plans to issue a business improvement order shortly to Higashi-Nippon Bank, a second-tier regional lender based in Tokyo, over improper loans, informed sources have said.

The FSA also found a flaw in Higashi-Nippon Bank's loan screening system, the sources said.

With the order, the FSA will urge the bank, a unit of Concordia Financial Group Ltd., to take preventive measures and review its internal control system, the sources said.

Higashi-Nippon Bank is believed to have received fees for loans that did not look reasonable on top of interest from corporate clients.

The bank also extended excessive amounts of loans to clients on condition they deposit part of the loans in the bank, so that it can earn additional interest income, according to the sources.

Its loan screening division failed to stop the improper loans.

The FSA has been scrutinizing loans extended by the bank and its internal control system since its launch of an on-site inspection late last year.

Higashi-Nippon Bank is reviewing its management system. In June, former Finance Ministry official Michito Ishii stepped aside as the bank's president to become chairman. He was replaced by Tomoo Okanda, who was promoted from senior managing director.

Concordia Financial Group was created in April 2016 through the business integration of Bank of Yokohama and Higashi-Nippon Bank. Jiji Press