Suruga Bank Reaches Broad Settlement Agreement in Mediation over Fraudulent Loans — Markets Watch What Comes After the Resolution
Regarding Suruga Bank’s fraudulent lending scandal, the bank and the borrowers’ legal team have reached a broad agreement by accepting the court’s mediation recommendation. Under the agreement, settlement payments will be made for properties where the possibility of unlawful conduct by the bank is recognized, with the aim of reaching agreements with borrowers within the current fiscal year. Properties for which such conduct is not recognized will move to individual resolution measures, and negotiations are expected to intensify from 2026. In addition to progress toward resolution, the banking sector is also benefiting from the tailwind of higher interest rates, prompting the market to begin looking beyond Suruga Bank’s next steps.
“It was clearly stated that wages and housing would not be seized, which became a major source of relief. It was a resolute approach,” said Hiroyuki Kawai, head of the legal team, at a joint press conference with Suruga Bank on the 15th, explaining the background to accepting the mediation recommendation. President Hiroaki Kato echoed this sentiment, stating, “We want to avoid situations where people cannot sustain their livelihoods and to create a viable exit.”
Suruga Bank’s fraudulent lending practices came to light in 2018. The issue mainly involved loans for share houses and for investment properties such as apartments and condominiums, where practices such as falsification of bank passbooks and tying loans to time deposits were carried out. The share house issue was fully resolved in April 2022 under a uniform framework in which borrowers could eliminate their debt by selling the properties.
In contrast, the apartment and condominium investment loan issue saw a divide between the legal team, which sought a uniform resolution similar to the share house case, and Suruga Bank, which called for case-by-case handling. Discussions toward mediation began in February 2022. In October 2025, the court presented a final mediation recommendation, which both sides broadly accepted. The focus now shifts to obtaining consent from the borrowers.
Under the mediation recommendation, settlement payments totaling ¥12.1 billion will be paid for approximately 200 properties where unlawful conduct is deemed possible. Around 60 properties have already agreed, and the legal team and Suruga Bank aim to work together to finalize the arrangements by the end of March 2026.
The remaining approximately 400 properties will be addressed through individualized support from Suruga Bank, such as interest rate reductions and partial waivers of delinquency charges, and a special task force has been established to ensure borrowers do not fall into financial hardship. “We want to present a direction as quickly as possible,” a related source said.
Suruga Bank has set aside approximately ¥78 billion as collateral guarantees and loan-loss reserves related to the apartment and condominium investment loan issue. Although settlement payments will be required, reductions in credit costs make it highly likely that the impact will be recorded as profits going forward. In the market, expectations are rising not only for the resolution of the apartment and condominium issue but also for a robust real estate market. The bank’s share price has risen nearly 50% year to date, outperforming the overall increase in bank stocks.
With additional interest rate hikes by the Bank of Japan, core business earnings are expected to expand in fiscal 2026. An early resolution—desired by both Suruga Bank and the borrowers—could also serve as a catalyst for further improving the market’s evaluation of the bank.
