Mizuho’s $ 4 billion system to come under unprecedented state scrutiny

TOKYO – The Japanese financial regulator will oversee Mizuho Financial Group’s ailing IT system over the next few months to prevent further crashes, taking an unprecedented step that follows a series of blackouts at its retail banking unit this year, learned Nikkei.

The Financial Services Agency is expected to announce the action as early as this week. The FSA informed Mizuho Bank of its plans on Tuesday.

Under the FSA’s supervisory order, the agency will oversee an inspection and system improvements for Mizuho, ​​Japan’s third-largest banking group in terms of assets. The initial timeframe for the action will last until the end of the year.

The FSA’s intervention comes after seven software and hardware failures at Mizuho this year, starting in February, when customers had to wait hours to retrieve bank cards swallowed by ATMs. The group has taken its own steps to avoid further disruption, but officials see the possibility of underlying flaws in the system itself.

Under the supervision of the FSA, Mizuho will be ordered to stop new operations and services that increase the workload of the system. A team brought together by the agency and Mizuho will make system inspection their top priority.

Dubbed Minori, Mizuho’s banking system was completed in 2019 at a cost of 450 billion yen ($ 4.12 billion at current rates). If the FSA’s investigation uncovers fundamental flaws, Mizuho could face additional costs.

The bank has been under FSA inspection since the ATM crash in February. The agency was set to issue a business improvement order in September when another outage occurred in August, followed by another ATM outage this month.

Mizuho attributed the series of failures to different causes.

Japan’s banking law gives the FSA the power to order necessary measures for banking supervision, but this power has never been used to oversee inspections of the system.

The FSA intends to pass judgment on management’s liability for disruptions until after its diagnosis of the underlying causes.

System issues have plagued Mizuho since its inception following the merger of three lenders. Mizuho Bank suffered a major transaction disruption when it opened in 2002. Another widespread ATM outage occurred after the 2011 tsunami in northeastern Japan.

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