TOKYO (Reuters) - The investment banking arm of Mizuho Financial Group (TYO:8411) said on Thursday that a scandal involving loans by the Japanese banking group to gangsters was having some negative impact on its securities business.
Speaking at an earnings briefing, Mizuho Securities Managing Executive Officer Hirota Koda said there were indications that some institutional investors were refraining from trading with the securities firm in response to the scandal.
"We have worried our clients. We will do our best to respond to the situation," Koda said. Koda did not quantify the impact on its business.
Mizuho Securities was not directly involved in the scandal, which erupted last month when regulators disclosed that Mizuho Financial Group had learned in late 2010 of roughly $2 million (1.2 million pounds) in mostly car loans to people with links to organised crime but had done almost nothing about the loans for two years.
The loans were made by Mizuho consumer-finance affiliate Orient Corp (TYO:8585) and were among bulk loans the bank later bought from Orient.
Last month Japan's Financial Services Agency ordered Mizuho to improve business practices.
In order to comply with their own internal compliance guidelines, it is not uncommon for institutional investors in Japan to temporarily cut back or stop dealing with banks and brokers who are in the process of being sanctioned by the regulator.
While the scandal appears to have caused some clients to cut back on trading securities through the broker, it had not had any impact on its position on equity underwriting deals, Koda said.
(Reporting by Emi Emoto)