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Gov't-linked bank to punish 1,000 staff over illicit loans to smaller firms

The headquarters of Shoko Chukin Bank's main branch is pictured in Tokyo's Chuo Ward in this file photo taken on May 24, 2017. (Mainichi)

The government-linked Shoko Chukin Bank is set to punish about 1,000 employees and managers for involvement in document falsifications and other irregularities regarding low-interest loans extended to "crisis-hit" companies that did not meet eligibility criteria, it has been learned.

The unusually large-scale punishment, which will be announced possibly by the end of the week, will cover over a quarter of the bank's 3,800-strong staff, underscoring a corporate-wide malpractice.

According to a source close to the scandal, about half of the 1,000 workers subject to punishment are employees who were directly involved in the irregularities. The remaining are their superiors as well as employees who carried out loan screenings and other work at the bank's headquarters. Because the misconduct took place at almost all branches, the bank decided to hold managerial staff responsible for overlooking irregularities for years, thereby attempting to revamp the bank's corporate culture.

President Kenyu Adachi, who was formerly a vice minister of the Ministry of Economy, Trade and Industry, is set to step down to take responsibility for the scandal.

The low-interest program was intended for small- and medium-sized companies that were struggling temporarily due to crises designated as such by the government, such as the 2008 financial crisis and the 2011 Great East Japan Earthquake, tsunami and nuclear disaster. Many of the illicit loans were extended on the pretext of dealing with deflation and the rising costs of raw materials and energy, which were designated as a "crisis" by the government in 2014.

The irregularities came to the surface in April this year when a third-party panel conducted a random sampling survey. The panel found a total of 816 cases of document falsifications and other wrongdoings at 35 branches across the country, with the amount of loans extended in those cases totaling roughly 19.8 billion yen.

An in-house probe conducted following the revelation uncovered several thousand cases of irregularities involving the low-interest "crisis" loans, as well as other misconduct in institutional financing and economic statistical surveys.

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