TOKYO -- Japan's Financial Services Agency plans to discipline Higashi-Nippon Bank, a Tokyo-based regional bank, charging that its staff falsified customers' financial records to make them look better than they actually were so as to boost loan numbers, and illicitly charged fees on loans in addition to interest, Nikkei has learned.

Having detected rampant inappropriate practices at the bank, the Japanese financial watchdog is set to issue as early as Friday a business improvement order to the subsidiary of Concordia Financial Group, a major regional banking group headquartered in Tokyo.

The agency plans to point out that the bank has serious deficiencies in its corporate governance and will order it to look into the causes of the situation and make drastic reforms of its internal control structure.

Concordia operates through two banks, the other being Bank of Yokohama, Japan's largest regional bank, headquartered in Yokohama. Higashi-Nippon, a Second Association of Regional Banks member, has a franchise covering mainly Tokyo.

The agency has conducted inspections of Higashi-Nippon's lending practices since 2017.

The bank is believed to have used the practice of lending more money than customers needed and having them deposit part of the money at the lender.

This method allows a lender to earn interest on the money kept at the bank, effectively without lending it.

Such inappropriate financing was found to be used widely at Higashi-Nippon Bank, sources said.