CORRECTED-UPDATE 1-Mizuho's top management knew of organised crime loans
(Corrects loan totals in paragraph 12)
TOKYO Oct 8 (Reuters) - Officials at Mizuho Financial Group , Japan's second-biggest bank, admitted top management knew at least three years ago about loans to criminal groups, highlighting the entrenched position of organised crime in the Japanese business world.
Bowing deeply for the cameras in the second such ritual of contrition in less than a week, top Mizuho officials reversed their previous position that knowledge of the loans had extended only to compliance officers.
Mizuho President Yasuhiro Sato told a news conference on Tuesday that an internal probe this week showed former president Satoru Nishibori was made aware of the loans in 2010. Nishibori served as president from 2009 to 2011 and is now an adviser to the bank. He was not made available by Mizuho to comment.
"We lacked enough awareness about the matter of anti-social forces," Sato said, using a common euphemism for organised crime. "We have to criticise ourselves for that."
The latest revelation is sure to prompt further criticism of the Japanese megabank. More broadly, it is the latest reminder that organised crime has long been entrenched in Japan's business and political circles.
In 1997 for example, Nomura Securities Co executives were arrested for payoffs to extortionists and the country's biggest bank, Mitsubishi UFJ Financial Group Inc, also was shown to have had transactions with criminal elements in 2007. More recently, Japan's justice minister in the previous government resigned last October over his past ties to a crime syndicate.
The government in the past three years has cracked down on business ties to the "yakuza" underworld with a law that criminalises payments to designated organised crime outfits, increasing the pressure on legitimate businesses not to associate with the groups.
The mob's pervasive influence is even complicating one of Prime Minister Shinzo Abe's economic-revitalisation plans to legalise casinos in a bid to ramp up tourism revenue. The plan includes creating a Las Vegas-style regulator to try to shut out the mob, according to a draft reviewed by Reuters last week.
Mizuho's Sato said he is stepping down from one of Abe's high-profile economic panels to take responsibility for the scandal, which already led to a reprimand from Japan's banking regulator late last month.
The bank says it does not yet know when the loans were extended. Sato, who become president in June 2011, said he learned about the loans in March this year. Mizuho set up an independent panel of outside lawyers on Tuesday.
Last month, the Financial Services Agency (FSA) ordered Mizuho to improve its business practices over the more than 200 million yen ($2.06 million) loans, extended indirectly via a partially bank-owned finance firm, Orient Corp.
Orient made some 230 auto loans and other credits totalling 200 million yen to clients who turned out to be yakuza members, regulators say.
Company officials could not be reached on Tuesday for comment. The FSA said it was very problematic that the bank did not move promptly to terminate transactions after its own client database spotted such clients.
The FSA's business improvement order was the second for Mizuho since 2011, when the bank was hit by a large-scale computer system failure that caused outages of automated teller machines and thousands of wire transfers in the immediate aftermath of the earthquake and tsunami in northeastern Japan. (Reporting by Taiga Uranaka and Taro Fuse; Editing by William Mallard and Matt Driskill)
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