Japan’s financial watchdog, the Financial Services Agency, is conducting onsite inspections of the internal audit functions of the country’s regional banks to ensure they are functioning properly.
The probe comes after a failure by internal audit at one of the banks, Higashi-Nippon Bank, to identify and stop improper practices, including illegally charging fees on loans in addition to interest. The FSA accused the bank of rampant inappropriate practices at the bank and issued a business improvement order last month, including requirements to improve the internal audit function.
The FSA is also urging other regional banks, who are struggling under the Bank of Japan’s negative interest rate policy, to beef up internal audit and for internal audit to serve as a check on management practices.