Photo/IllutrationSuruga Bank’s new president, Michio Arikuni, apologizes at a news conference in Numazu, Shizuoka Prefecture, on Sept. 7. (Asahi Shimbun file photo)

A regional bank, which was touted as a role model of sorts, has turned out to have been the scene of improper practices that one would normally only expect to see in novels and TV dramas.

We are left flabbergasted at the revelation.

A third-party committee for Suruga Bank, which is based in Numazu, Shizuoka Prefecture, has released a report of its investigation into the bank’s scandal.

The 300-page document cited internal e-mails and interviews of the bank’s directors and employees in describing a horrible development, which could roughly be summarized as follows.

The board of directors, which is headed by a member of the founding family, left all bank operations up to its executive directors, and turned a blind eye to corporate compliance as it was only interested in business performance figures.

An executive officer in charge of sales would berate employees in the screening division, who were more cautious about extending loans.

The executive officer dashed headlong into extending risky real estate loans, including for “share houses,” where multiple tenants share common fixtures, such as bathrooms and kitchens.

At one branch office that was assigned an excessive quota, one boss said in reprimanding a subordinate, “Why don’t you jump off a building if you can’t achieve your numerical target?” Employees under emotional pressure from abuse of authority went so far as to falsify documents.

All that left behind a mountain of loans that both drove the borrowing customers into a corner and presented a high risk of bad loans for the bank.

The entire picture of the irregularities, including the total amount of improper loans extended and the total number of individuals involved, remains yet to be determined partly because of the constraints of time available for the latest investigation. More should be made clear about what happened.

One thing, however, is clear. Given the enormous extent of the impropriety, Suruga Bank would have no choice but to try to make a fresh start that is almost tantamount to dissolution if it were to remain in the banking business.

It was only natural that the bank’s five directors with managerial titles, including Chairman Mitsuyoshi Okano from the founding family, stepped down.

The third-party committee pointed out, among other things, that they failed to exercise the due care of a good manager as corporate directors and also partly violated laws and regulations.

Suruga Bank officials said the bank will determine if its directors and auditors, including those who have stepped down, are legally liable and will take appropriate measures.

The bank should deal rigorously with the case, while punishing its employees who were involved in the improper practices.

Michio Arikuni, who took over as president, said he will eliminate the top-down corporate culture and an excessive emphasis on business performance figures.

He also said he will review the bank’s disproportionate emphasis on real estate loans in urban areas, such as the greater Tokyo region.

Both measures are essential, but they are easier said than done.

It remains to be seen how the bank will be able to part with its pursuit of immediate profits and business scale and win back the trust of customers and society.

Arikuni, the new president, was pointed out by the third-party committee as bearing management responsibility to a certain extent. He should realize he is fighting with his back to the wall.

He should also face up sincerely to the bank’s customers who have suffered losses from the improper loans.

The Financial Services Agency should also feel responsibility for having overlooked impropriety of this magnitude and having praised Suruga Bank for its high profitability. The agency should conduct intensive inspections and administer rigorous punishments.

Suruga Bank may only represent an extreme case, but the latest investigation report is full of implications for how organizations and financial businesses are operated in Japan. It deserves to be read by corporate workers and would-be investors in real estate.

--The Asahi Shimbun, Sept. 9