The Financial Services Agency is set to slap a banking group headed by UFJ Holdings Inc. with a series of business-improvement orders over its inappropriate handling of loans to small companies and other operational problems, sources said Wednesday.
The FSA has decided to impose the fresh administrative orders on the UFJ group because it it believes the group should not continue its banking operations under the current regime, they said.
At the end of May, the financial regulator notified the banking group of the final results of its 10-month inspection, which began in August. It was the longest inspection ever conducted by the FSA.
The FSA plans to issue the business-improvement orders in stages later this month after receiving a report from UFJ on the inspection results, they said.
The FSA has already issued a management-improvement order to UFJ Holdings over the banking group's inadequate assessment of the amount of bad loans it held as of the end of March 2003.
The series of administrative orders will force the banking group to dispose of nonperforming loans worth 2.3 trillion yen by next spring and push ahead with drastic management reforms.
The sources said the banking group's balance of loans to small and midsize companies fell short of the target stipulated in its business improvement plan by nearly 3 trillion yen.
The UFJ group extended loans to companies that were not in need of funds during a period close to book-closing in an apparent bid to inflate the amount of loans extended to small companies, the sources said.