- The FSA will oversee the IT system – source
- Technical issues persisted despite the overhaul
- Mizuho shares down 1.2%
TOKYO, Sept. 22 (Reuters) – The Japanese banking regulator will oversee the management of the Mizuho Financial Group (8411.T) system, a source said on Wednesday, marking a rare act of direct intervention after a series of technical failures undermined confidence in the banking group.
The Financial Services Agency’s decision will be part of an administrative action against retail lender Mizuho Bank and its parent company, Japan’s third-largest lender in terms of assets, according to the source familiar with the matter. The source declined to be named because the decision, expected later this month, was not yet official.
A spokesperson for Mizuho declined to comment.
The FSA’s action – one of its most high-profile interventions in recent memory – will put the IT system of the retail arm of the Japanese banking giant under effective government control.
It comes after a series of technical meltdowns this year, including widespread ATM outages, which sparked customer frustration and undermined confidence in the lender.
The technical issues are all the more notable as Mizuho spent more than $ 3.6 billion to overhaul its systems in 2019. This overhaul follows two large-scale outages in 2002 and 2011.
Nana Otsuki, chief analyst at brokerage firm Monex Inc, said the intervention posed risks for the FSA.
“The involvement of the FSA in Mizuho means that if the banking group is faced with a similar incident again, the FSA will also be blamed. It means that the FSA will take certain risks in taking these steps,” Otsuki said.
Japanese Chief Cabinet Secretary Katsunobu Kato declined to comment directly on reports of the action against Mizuho, but said banks themselves must be responsible for creating systems to provide services. financial.
Mizuho shares fell 1.2% on Wednesday, while the Nikkei average was little changed.
A third-party report commissioned by the bank found that its corporate culture was to blame for its long history of technology system failures, creating an atmosphere in which managers are reluctant to voice their opinions and unable to respond well to crises. Read more
The Nikkei newspaper, which first reported the FSA’s decision, said the regulator would jointly manage the system with the bank and order system updates and maintenance to be carried out under its control.
The system’s management structure can also be revised if necessary, the Nikkei said.
The regulator will determine where management responsibility lies after clarifying the cause of Mizuho’s recent technical issues, he said.
Reporting by Yuki Nitta and Junko Fujita; Writing by Ritsuko Ando; Editing by Stephen Coates
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