Are Apartment Loans Entering an Era of “Unborrowable” Financing? The Aftermath of Suruga Bank’s ¥12.1 Billion Settlement
On December 15, 2025, Suruga Bank and the Suruga Bank Fraudulent Lending Victims Legal Team (the “SI Victims Legal Team”) held a joint press conference regarding the fraudulent lending issue involving investment real estate, announcing that they would seek a resolution based on the court’s mediation recommendation.
This initiative is intended to resolve a large number of disputed cases concerning Suruga Bank’s past fraudulent lending for apartment and condominium investments (commonly referred to as the “Apartment/Condo Issue”) in accordance with judicial mediation recommendations.
In this article, we would like to examine the impact that this agreement may have on apartment loans.
What Is the Apartment/Condo Issue?
This issue originated in the fraudulent lending scandal related to share-house investment loans that came to light around 2018. Subsequently, it was alleged that document falsification and overstatements of projected income also occurred in loans for apartment and condominium investments. In response, the affected parties formed a legal team and have continued civil mediation proceedings since February 2022.
The present agreement reflects the mediation recommendation issued by the Tokyo District Court’s mediation committee in October 2025, which both parties accepted and followed with a joint statement.
Key Points of the Mediation Agreement
1. Classification of Properties and Settlement Payments
In the mediation, approximately 600 apartment and condominium loan cases were classified into two categories:
cases in which “it cannot be said that there is no possibility that an unlawful act was committed” (so-called “gray cases”), and cases that do not fall into that category.
- Gray cases: 194 properties
→ For these cases, the mediation committee recommended that Suruga Bank pay settlement money totaling ¥12.1 billion, which both parties accepted. - White cases (cases deemed to have a low likelihood that unlawful conduct occurred): 410 properties
→ Rather than a comprehensive settlement through mediation, Suruga Bank will present individual solutions and provide repayment support tailored to each borrower’s circumstances.
Under this settlement framework, monetary payments are made for cases that the judiciary (the mediation committee) evaluated as having a possible basis for unlawful conduct, and the bank accepted this approach in full.
2. Individual Support Measures (for White Cases)
For white cases—where unlawful conduct was considered unlikely—the following individualized support measures have been proposed:
- Partial waivers of overdue interest and penalty charges
- Consultations regarding remaining debt after voluntary property sales (in some cases, 0% interest and long-term repayment plans)
- Interest rate reductions with a lower bound of 1% for the time being, and arrangements allowing lump-sum repayment of part of the principal at final maturity
- Individual consultations on repayment plans and consideration of measures to support a return to profitability, among others
In addition, the joint statement clearly specifies that no collection actions will be taken that would make it difficult for borrowers to maintain ordinary daily life (which is understood to mean that aggressive debt collection measures such as standard seizures will not be pursued).
3. Joint Statement by Both Parties
Both parties stated that they take the mediation recommendation seriously and will “seek an early resolution of the Apartment/Condo Issue.” They indicated that the resolution process will proceed based on judicial judgment while respecting the intentions of each individual petitioner.
Why Was the Mediation Proposal “Harsh on the Lender”?
The recommendation and agreement effectively require Suruga Bank to make substantial payments after the judiciary acknowledged the possibility of unlawful conduct by the bank. In that sense, the outcome can be seen as unfavorable to Suruga Bank.
In fact, Suruga Bank has previously argued that “there are many past court cases in which unlawful conduct was not recognized.” During the mediation as well, the bank maintained the position that individualized resolutions reflecting specific circumstances, rather than a uniform and comprehensive settlement, would be more reasonable. The mediation committee stated as follows:
“The mediation committee believes that, in relation to the petitioners listed in the attached schedule [the gray cases involving 194 properties], it cannot be said that there is no room for the establishment of unlawful conduct by the respondent [Suruga Bank]. On the other hand, if this dispute were to proceed to litigation, there would be significant factual and legal hurdles to recognizing the unlawful conduct alleged by the petitioners, and it cannot necessarily be said that the establishment of unlawful conduct would be recognized.”
(Source: Suruga Bank press release)
As shown above, even with respect to the gray cases, the mediation committee acknowledged that establishing unlawful conduct would face high hurdles if the matter were taken to court.
However, the fact that Suruga Bank has this time fully complied with the judiciary’s recommendation and agreed to pay ¥12.1 billion can be viewed as a decision made with strong awareness of public opinion and social demands from bodies such as the Financial Services Agency (FSA).
It has been reported that the FSA is also calling for an early resolution, and it is highly likely that considerations of management responsibility and the restoration of trust influenced the bank’s decision. (Banks are a heavily regulated industry, and one could say they are inherently vulnerable to pressure from regulators.)
Impact on Apartment Loan Screening and the Market Going Forward
The author believes that this agreement between Suruga Bank and the legal team is likely to have the following impacts on apartment loans.
(1) Stricter Screening Standards
This mediation agreement represents a significant risk factor for banks. In particular, the judiciary’s intervention and acknowledgment of the possibility of unlawful conduct may serve as a signal to other financial institutions that “apartment and condominium investment lending carries high risk.”
As a result, the following trends can be expected across the financial sector:
- Stricter evaluation of the profitability of investment property loans (especially apartment and condominium loans)
- More rigorous scrutiny of loan documentation and the introduction of mandatory third-party audits
- More cautious assessment of projected rental income as a source of repayment
- Stricter evaluation of collateral value and borrower attributes (personal creditworthiness, investment experience, etc.)
In other words, the screening process prior to loan execution is likely to become more stringent and time-consuming.
(2) Increased Burden and Opportunity Loss for Borrowers
From the borrower’s perspective, this agreement can also be seen as accelerating lenders’ risk-avoidance tendencies. In particular, the following impacts are anticipated:
- Priority lending to borrowers with strong profiles (high income, strong creditworthiness)
- Greater difficulty for small-scale or first-time investors to obtain financing
- Increased requirements for documentation submission and detailed explanations of income assumptions during screening
- Less favorable borrowing terms compared with the past (interest rates, loan tenors)
This means that access for borrowers is likely to narrow, resulting in more situations in which securing investment loans becomes difficult.
The author believes that this mediation agreement reflects Suruga Bank’s decision to accept an outcome unfavorable to lenders, driven by strong awareness of public opinion and regulatory pressure from the FSA.
Although the bank maintained that there were many cases in which unlawful conduct could not be established (the so-called white cases), social pressure in the form of a judicial recommendation ultimately placed the bank in a position where it had little choice but to accept a substantial settlement payment of ¥12.1 billion.
Such a “major concession by the lender” is likely to influence the screening stance of other financial institutions as well, prompting a more cautious approach to lending.
The mediation agreement between Suruga Bank and the victims’ legal team—based on a judicial recommendation and involving a degree of responsibility acknowledgment and a large financial payment—represents a significant milestone for the financial industry.
From the perspective of other banks, some may feel that “this created unnecessary trouble,” while others may sense that “times have changed, and lender responsibility is being scrutinized more severely than ever.”
As the apartment loan market is expected to see stricter lending processes and harsher conditions for borrowers going forward, investors and borrowers alike will need to engage in more careful planning and more sophisticated financing strategies.
