Suruga Bank's loan growth was built on forged documents — the FSA stopped it

Suruga Bank was a regional lender based in Shizuoka, Japan, that had grown rapidly by making loans to individual investors buying rental property, especially shared houses and small apartment buildings. The loans were its engine: they grew the loan book and, with it, the share price.

The growth was built on bad paper. A third-party investigation committee reported in September 2018 that the forgery and falsification of loan applications and related documents had been widespread, and that many employees, including an executive, were involved. Sales staff and property sellers had altered borrowers' income and savings figures so that loans would be approved.

Japan's Financial Services Agency responded on 5 October 2018 with a six-month partial business suspension order, banning Suruga from issuing new real-estate investment loans from 12 October 2018 to 12 April 2019. The regulator cited a lack of appropriate credit risk management and of measures to prevent malfeasance, and ordered the bank to submit a business improvement plan by the end of November 2018.

For a bank whose business was those loans, being told to stop making them for half a year was a severe blow. Suruga had to shrink and rebuild its lending controls, its shares fell, and its name became shorthand in Japan for the reckless investment-property lending that several banks and property sellers had been practising.