(Adds Mizuho background, links, FSA comment, shares)
By Noriyuki Hirata
TOKYO, Oct 29 (Reuters) - Japan’s financial regulator will widen a probe next week into whether all three of the country’s big banks, including top lender Mitsubishi UFJ Financial Group , conducted transactions with Japanese gangsters, known as the yakuza.
Second-ranked Mizuho Financial Group has already come under regulatory scrutiny and has sanctioned 54 executives, including its president, following revelations that a consumer finance affiliate extended more than $2 million in loans to people tied to organized crime.
Mitsubishi UFJ (MUFG), Mizuho and Sumitomo Mitsui Financial Group Inc (SMFG) were given notice on Tuesday of the inspections, the head of the Financial Services Agency’s (FSA) investigation unit told a parliamentary committee.
FSA inspectors will arrive at the three banks to begin their investigations next Tuesday, the official said. In addition to looking at whether the banks had dealings with people linked to organized crime, the inspection will also focus on compliance practices and risk management systems, FSA officials said.
In the case of Mizuho, an earlier FSA inspection found $2 million worth of transactions, mostly in small auto loans, that had been made with people tied to organized crime. Those 230 loans were made by Orient Corp, a consumer financing company affiliated with and financed by Mizuho.
This time, FSA investigators will examine transactions elsewhere in the company, including the parent bank, officials said.
The Mizuho case has been an embarrassment to both the bank and Japan’s financial regulators since it put the spotlight again on ties between corporate Japan and the country’s criminal underworld.
Dai-Ichi Kangyo Bank, one of Mizuho’s forerunners, was found in 1997 to have extended loans to a group led by a racketeer, and former executives were arrested for paying him off.
New regulations making business with members of Japan’s crime syndicates took effect in 2011.
Mizuho Bank President Yasuhiro Sato said on Monday his salary will be cut for six months. He submitted a business improvement report to the FSA, but said he had no intent to resign. Takashi Tsukamoto resigned as chairman of Mizuho’s core banking unit, but stays on as chairman of the holding company.
A third-party panel appointed by the bank said it found no evidence that Mizuho had intended to cover up the scandal.
The FSA’s disclosure of the inspections starting next week come at a time when some lawmakers have called for Sato to be summoned to parliament to testify.
Shares in MUFG earlier closed down 1.1 percent, before news of the probe was announced, while Mizuho fell 1 percent. SMFG ended flat. (Writing by Kevin Krolicki; Editing by William Mallard and Ian Geoghegan)