While the biggest problem facing US bands is lack of demand (and supply, since it is far more profitable for banks to "invest" reserves in risk assets using excess deposits as initial margin) for loans, Japan doesn't have such a problem. At least not, when the loans are made to "gangsters" such as the Yakuza. AFP reports that [6]executives at Mizuho Financial Group, one of Japan's largest banks, knew the firm was doing business with gangsters but failed to stop it, a panel said Monday, as Japan's finance minister slammed the banking giant over the affair.
The bank has been in the public spotlight since it emerged last month that it processed hundreds of loans worth about $2 million for the country's notorious Yakuza crime syndicates. And while in the US the punishment for banks caught in criminal behavior is a simple slap on the wrist and a settlement paid using TARP money, in Japan bank CEO still have some semblance of honor. Bloomberg adds [7]that in the aftermath of the revelations, Mizuho's president Yasuhiro Sato will give up six months of pay ahead of more penalties, and will resign his Chairmanship at Mizuho Bank while keeping the post at the parent company. Some 52 other current executives will also be penalized.
More:
Sato bowed in apology at a news briefing in Tokyo, hours after submitting a report to the Financial Services Agency outlining measures such as database sharing and the addition of an outside director to prevent further transactions with yakuza crime syndicates. Lawyers commissioned by Mizuho to investigate the loans earlier said the bank’s shortcomings stemmed from lax internal controls rather than attempts to mislead regulators.
“Mizuho’s internal punishment won’t be negative for the share price as Sato remains president,” said Takehito Yamanaka, an analyst at Credit Suisse Group AG in Tokyo. “We still need to pay careful attention to whether the FSA will hand down any additional severe punishment.”
Sato, 61, who has driven measures designed to improve management at Mizuho since taking the post in June 2011, said he didn’t consider stepping down even while acknowledging the incident dented his authority.
“Mizuho’s top management including myself deeply regret this issue,” he said. “My leadership was severely hurt, but I don’t think it’s impossible to recover.”
...
The lender failed to act on 200 million yen ($2 million) in about 230 transactions with members of crime groups through its Orient Corp. (8585) affiliate, the agency said on Sept. 27. There may have been about 460 transactions initially, Sato said yesterday, without giving a yen amount.
And so on.
While it is a given that banks will continue to engage inwhatever activities provide them with marginal revenue, criminal or otherwise, perhaps the most jarring news in the above story is that the once proud Japanese Yakuza was forced to seek a paltry $2 million in 230 transactions, or about $10k per loan. If there is any better indication of just how bad the Japanese economy is, than the local mob being forced to seek bank loans, we have yet to hear it.
Finally, Japanese banks handing over loans to the mob is hardly as bad as the US, where considering the government has contemplated launching RICO cases against not just one or two US banks, the banks are the mob.