Suruga Bank’s improper lending practices simply outrageous

The Yomiuri ShimbunAn excessive fixation on performance targets opened the door to misconduct throughout Suruga Bank. The bank’s corporate culture must quickly be overhauled from top to bottom.

A third-party panel established by Shizuoka Prefecture-based Suruga Bank has compiled a report that investigated the scandal swirling around the bank’s inappropriate extension of loans for share houses.

The report acknowledged many bank employees, including branch managers, were involved in a range of improper conduct, such as altering documents used in the loan application screening process. This misconduct occurred throughout the entire organization.

Borrowers’ deposit balances were falsified to make it appear they had more capital so they cleared the conditions required to receive loans. Unscrupulous methods such as this stand out in the report.

When Suruga Bank employees voiced misgivings about what was going on, an executive in charge of sales vociferously argued back against them and pushed the loans through. The bank must be said to have displayed a remarkable paucity of good governance.

The report stingingly pointed out that Chairman Mitsuyoshi Okano, a top executive at Suruga Bank for more than 30 years and a member of the bank’s founding family, had not performed his duty as an executive to sufficiently monitor the bank’s operations.

Five Suruga Bank executives, including Okano, have resigned to take responsibility for the scandal. This was a natural step to take. An overhaul of the management lineup should be a chance to rethink the bank’s business approach from scratch.

Reveal entire picture

Wrongdoing involving loans was not limited to money for share houses, but was conducted widely and included loans for apartments bought as investments.

The bank used a variety of methods to jack up loan amounts, such as inflating the actual price of the properties in question and estimates of rental income that would be used as funds to repay the loans.

The bank’s excessive emphasis on achieving business performance goals set the stage for this widespread misconduct.

Employees handling sales were given high targets that were out of touch with reality.

Extraordinary pressure was applied to these employees to reach the quotas. One employee was even rebuked with the words, “If you can’t achieve your target, jump off a building.” The report acknowledged the bank’s treatment of staff became a major factor in employees resorting to improper practices.

The bank’s loan screening section, which should have acted as a brake on this wrongdoing, was turned into a mere shell and approved almost every loan application.

This slack screening invited misfortune, and many share houses did not attract tenants as had been expected. The owners were hard pressed to repay their loans. The interests of the bank’s main customers, which should have been given priority, took a back seat.

About half of Japan’s regional banks are running a loss in their main operations as ultra-low interest rates shrink their profit margins. Even in this severe business environment, Suruga Bank chalked up good business results. It is simply appalling that trickery such as systematic wrongdoing was going on behind the scenes.

The Financial Services Agency has conducted on-site inspections of the bank.

These inspections reportedly discovered Suruga Bank had extended loans totaling tens of billions of yen to companies linked to its founding family. Were there any dubious flows of capital, such as money being diverted for private use by the founding family? The entire truth of this matter must quickly be revealed.

(From The Yomiuri Shimbun, Sept. 9, 2018)Speech


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