Mizuho said its president, Yasuhiro Sato, will give up six months of pay but remain at his post. The bank also is appointing Tatsuo Kainaka, a former prosecutor and Supreme Court judge with a reputation for toughness, to be its chief compliance officer.
Besides the exit of Mizuho Bank chairman Takashi Tsukamoto, Mizuho's top compliance officer and its risk management director will resign on November 1. Dozens of Mizuho employees face salary cuts. Mr Tsukamoto is also chairman of Mizuho Financial Group and retained that position.
"We caused a great deal of trouble and I want to express my deepest apologies," Mr Sato said.
"I am aware there are various opinions about this, but this is what was decided in this case," he said when asked if the penalties were too weak.
An outside panel reported Monday that its probe found Mizuho lax in cleaning up more than 200 million yen ($2.14 million) in lending, mostly auto loans, to clients associated with "anti-social" elements, a byword for organised crime.
Mizuho, Japan's No. 2 bank by assets, failed to do what was expected in reducing and preventing mob-related loans, the panel said, though it concluded the bank had not engaged in a deliberate cover-up.
The panel headed by former judge Hideki Nakagome, who also led an investigation into accounting fraud at camera and medical equipment maker Olympus, called the lending "captive loans" acquired when Mizuho bought consumer finance company Orient Corp.
Senior Mizuho executives neglected to clean up the loans after discovering them in early 2011. Soon after, Mizuho's management became preoccupied with ATM malfunctions triggered by an influx of donations for victims of the 2011 tsunami disaster.
Mizuho presented a plan for an overhaul to the Financial Services Agency, which last month demanded that the bank devise a strategy for "improvements" to its lending business.
The bank has pledged to end the loans, step up anti-mob screening of incoming business, tighten corporate governance and improve internal awareness about preventing dealings with those linked to organized crime.
The troubles at Mizuho underscore the difficulties financial companies confront in avoiding dealings with Japanese gangs, known as "yakuza." They are entrenched in many areas of the economy despite efforts to freeze them out of the financial system.
But the panel also faulted Mizuho's corporate governance, a perennial problem highlighted by a stream of scandals over negligence, fraud and other troubles at some of Japan's most elite companies.
In a governance report issued July 1, Mizuho outlined a code of conduct that abjures any influence or dealings with "anti-social elements."
The bank pledged to "oppose firmly the activities of any anti-social elements that threaten the rule of law, public order and safety" and to ensure compliance with its code of conduct.
Finance Minister Taro Aso said he needed to learn more details about the case before commenting.
news.com.au 28 Oct 2013