Photo/IllutrationSuruga Bank’s head office in Numazu, Shizuoka Prefecture (Asahi Shimbun file photo)

The Financial Services Agency (FSA) decided to issue a partial business suspension order to Suruga Bank over its systemic practice of falsifying documents for improper lending in a “share house” investment scheme.

The order, which could come as early as this week, will prohibit the bank from extending new loans to investors in real estate for a certain period. The FSA will also issue a business improvement order to the bank, based in Numazu, Shizuoka Prefecture.

The FSA rarely gives business suspension orders to banks except in extremely “malicious” cases. In 2013, the agency issued a partial business suspension order to Mizuho Bank for extending loans to gangsters.

The FSA judged that it was necessary to impose strict administrative disciplinary measures against Suruga Bank because many of its employees, including an executive officer, were involved in falsifying documents to make easier for investors to obtain loans.

The bank’s balance of loans stands at 3.2 trillion yen ($28.2 billion), of which 1.9 trillion yen, or around 60 percent, is for real estate.

Many of the problem loans went to investors in share houses, rented accommodations with common spaces for tenants, such as kitchens and bathrooms.

Real estate agents persuaded company employees and others to become owners of share house buildings by promising handsome returns from the rent money collected from the tenants.

Suruga Bank extended loans exceeding 100 million yen to investors per share house.

Documents, such as the investors’ bank account statements, were falsified so that they could obtain loans beyond their means.

For example, real estate agents inflated deposit amounts to make the investors appear richer and more qualified to receive loans. In some cases, the investors were unaware that their documents were being doctored.

Many of the share houses in the investment plan could not attract enough people to fill the rooms, resulting in investors being denied their promised returns and unable to repay their loans to the bank.

From late last year to early this year, the slipshod investment plans forced some of the real estate agents to suspend their business operations or file for bankruptcy.

After suspicions grew that bank employees were involved in the fabrications, Suruga Bank set up a third-party committee in May to investigate.

In its report released on Sept. 7, the committee recognized that many employees, from rank-and-file workers to executives, including branch managers and an executive officer, were involved in the improper lending.

The report also said employees were berated and humiliated if they fell short of their lending quotas.

The committee pointed out management’s heavy responsibility for failing to pay proper attention to the bank’s operations.

Chairman Mitsuyoshi Okano, a member of the bank’s founding family, and President Akihiro Yoneyama resigned from their posts after the report was released.

The bank’s balance of loans for share houses exceeded 200 billion yen, which went to more than 1,200 investors.

Improper lending was also found for investments in used condominium buildings.

Amid fears that some of the improper loans could become irrecoverable, the bank earmarked a huge amount of reserves, resulting in a sharp decline in its profits.