Suruga Bank Ltd. defrauded 300 million yen in loans from the Tokyo Star Bank Ltd. by "deciding" at a board meeting to support Smart Days Inc., a "share house" management company that has since gone bankrupt, multiple people familiar with the arrangement have told the Mainichi Shimbun.
The Financial Services Agency (FSA), which regulates the banking industry, is aware of the arrangement, and is considering ordering Suruga Bank to suspend part of its operations for allowing the illicit decision, which was spearheaded by a board member.
Suruga Bank, headquartered in the city of Numazu in the central Japanese prefecture of Shizuoka, is suspected of illicitly extending loans to those buying real estate to be used as share houses managed by Tokyo-based Smart Days.
According to a number of people familiar with the loan arrangement and Suruga Bank's internal documents, Smart Days requested a loan from the Tokyo Star Bank under the stated purpose of buying land plots for its businesses in October 2017. As the request came only three months after the bank extended 600 million yen in loans to the share house operator through its parent company, and Smart Days was not doing well, the Tokyo Star Bank was apprehensive about accepting the new loan request.
Smart Days therefore asked a Suruga Bank senior executive in charge of sales and marketing at the time to help. The executive, thinking that it was vital for his bank to indicate its continued support for Smart Days, proposed a reconstruction plan for the share house operator at a board meeting in late October that year. The plan was to shift the main focus of business to the operation of inexpensive lodging facilities.
The Suruga board approved the plan. The Tokyo Star Bank received an explanation of the plan from the Suruga executive, and decided to offer an additional 300-million-yen loan.
However, the Suruga executive was aware before the board meeting that it would be difficult to put Smart Days back on track. He also knew that the 600 million yen received from the Tokyo Star Bank earlier was used to pay for operational expenses, and the company had no intention of shifting its business focus to lodging facilities.
It appears that Suruga Chairman Mitsuyoshi Okano, who is a member of the bank's founding family, and other board members received explanations about those circumstances from the executive. Documents supporting such arrangements have been discovered by the FSA's Tokai Local Finance Bureau. Suruga Bank is said to have terminated its cooperative relationship with Smart Days shortly after the Tokyo Star extended the new loan.
Multiple individuals linked to Suruga Bank have told the Mainichi Shimbun that the Suruga executive led the series of illicit arrangements, and received substantial kickbacks from Smart Days. This collusion appears to have been behind his support for the share house operator to win the loan from the Tokyo Star.
Smart Days subsequently refinanced all its loans from the Tokyo Star from another financial institution in Tokyo and ultimately became insolvent. A Tokyo Star official said that the condition for the additional loan was Suruga's support for the share house operator. "We didn't know at that time that (Suruga's) support was false."
(Japanese original by Takashi Narumi, Business News Department)