This article is more than 6 years old

This article is more than 6 years old

Japan is to investigate the country's three biggest banks over possible ties to organised crime after it emerged that one major banking group had lent money to people connected to the yakuza.

A recent loan scandal involving Mizuho Financial Group, Japan's second biggest megabank, highlighted organised crime's attempts to gain a foothold in the country's financial sector.

A consumer finance firm affiliated with Mizuho was found to have extended more than $2m dollars (£1.2m) in loans to people tied to the yakuza, the name given to Japan's influential network of crime syndicates.

The chairman of Mizuho, Takashi Tsukamoto, will resign that post but stay on as head of the parent company. Mizuho's president, Yasuhiro Sato, will receive no salary for six months. Dozens of other Mizuho executives will have their pay cut.

After acknowledging that he had been "in a position to know" about the loans, Sato bowed in apology at a press conference, and said: "We have caused a lot of trouble for many people, including shareholders and other stakeholders.

"Again, I apologise sincerely. The problem was that we weren't aware or sensitive enough to loans that were being done by an affiliate company."

A total of 230 loans, mainly for buying cars, were made by Orient Corp, a consumer credit company financed by Mizuho.

Initially, Mizuho said only the bank's compliance officers had known about the loans, but later conceded that senior executives, including Sato, had also been aware of them.

A report by a third-party panel formed to investigate the Mizuho scandal said bank executives failed to act when they learned of the loans in late 2010/early 2011 but had not set out to cover them up. The panel's findings mean the scandal is unlikely to result in any legal action.

In response to criticism that it failed to act for two years after the discovery, Mizuho is expected to end the loans and screen potential clients for potential links to the mob.

The investigation by Japan's Financial Services Agency, scheduled to start next Tuesday, will target Mizuho, Mitsubishi UFJ Financial Group – Japan's biggest bank by assets – and Sumitomo Mitsui Financial Group. Investigators will look into any previous dealings with organised crime and whether the banks are doing enough to prevent loans from finding their way to the yakuza.

This is not the first time evidence has emerged of underworld involvement in Japan's banking industry. In 1997 Dai-Ichi Kangyo bank was found to have lent money to a group led by a racketeer, and several executives were arrested for paying him off.

The latest scandal illustrates the grey area the yakuza inhabits in Japanese society. Membership of a gang is not illegal, and laws making business with crime syndicates illegal have only recently been introduced.

Sections of the Japanese media were critical of the light punishment meted out to Mizuho. In a scathing editorial, the Asahi Shimbun suggested that the bank's initial failure to admit that senior executives knew about the loans was an attempt to deter further investigation.

"If Mizuho does not feel the urgency to reform its corporate culture, we must say it is still gravely ill," the paper said.

The yakuza is a collection of powerful rival gangs that, with help from smaller affiliates, occasionally turn to extreme violence as they compete for wealth and influence in Japan's cities.

In recent years Japan's crime syndicates have made bold attempts to move into white-collar crime after crackdowns on traditional sources of income such as prostitution, loan sharking, gambling and drug smuggling.

The Yamaguchi-gumi, the biggest and wealthiest yakuza group with nearly 40,000 members, has been called "Goldman Sachs with guns".

The failure to rid Japan's financial sector of yakuza involvement has strengthened calls for the police and banks to share information about possible criminal infiltration.

Taro Aso, the finance minister, said Mizuho's mob loans were an "extremely serious problem", adding that regulators would study the panel's report before deciding whether to take any further action.