TOKYO -- Japan's financial watchdog has decided to require Suruga Bank to halt a financing operation that served as a hotbed of a massive loan scandal.
The Financial Services Agency will issue an order as early as this week temporarily blocking Suruga from making new loans covering real estate investments. It will also tell the Shizuoka Prefecture-based bank to implement radical preventive measures, including overhauls of oversight and compliance.
The suspension is expected to run a few months, with other banking services still available. While Suruga had already halted real estate investment loans on its own, the FSA will have it pull relevant employees from their duties and retrain them.
The bank released a report last month detailing how employees knowingly accepted phony or doctored lending documents to approve applicants of questionable creditworthiness. Clients also had to sign financing packages bundled with unsecured loans they did not need. All the while, executives overlooked the problem.
Much of the wrongdoing was tied to a chain of women-only "share houses" whose construction was financed in large part by Suruga loans.
But Tokyo-based operator Smart Days had trouble filling vacancies and stopped paying investors their share of the rent. It eventually filed for bankruptcy, and the FSA began investigating Suruga in April.
The last time the FSA ordered a Japanese bank to suspend operations was in 2013, when Mizuho Bank and parent Mizuho Financial Group were penalized over financing to organized-crime syndicates.