Axe falls on Mizuho execs after spate of system glitches

The Yomiuri Shimbun
Tatsufumi Sakai, president of Mizuho Financial Group, Inc., left, and Koji Fujiwara, president of Mizuho Bank, bow at a press conference in Chiyoda Ward, Tokyo, on Friday.

Mizuho Financial Group Inc. President Tatsufumi Sakai and Koji Fujiwara, the president of its banking unit, will stand down on April 1 to take responsibility for a series of system failures at the bank, the group announced Friday.

Mizuho Financial Group Chairman Yasuhiro Sato will also stand down on April 1 and leave the board of directors in June.

Mizuho Bank Deputy President Masahiko Kato will replace Fujiwara on April 1. Sakai’s successor is yet to be selected. The group chairman post is not expected to be immediately filled after Sato steps down.

Sakai apologized for the repeated system glitches at a press conference in Tokyo on Friday.

“As a financial institution that plays a role in social infrastructure, we let a series of system failures occur in a short period of time and were unable to fulfill our role fully,” Sakai said. “We take this very seriously and regret it.”

In February and March this year, Mizuho Bank experienced four system failures in succession, causing problems with automated teller machines, remittances in foreign currencies and other services.

In June, the company took measures to prevent a recurrence but they were not sufficient: four more system glitches occurred in August and September, which involved system stoppages at the bank’s branches.

The Financial Services Agency criticized Mizuho over system failures that have undermined public confidence in Japan’s financial settlement system. The watchdog ordered Mizuho to submit a business improvement plan by Jan. 17 next year, which will include thorough measures to prevent similar failures and drastic reform of its corporate culture. It also asked Mizuho to report on the implementation of the plan every three months from next April.

Numerous missteps

In the business improvement order issued Friday, the FSA highlighted major problems in Mizuho’s corporate governance. The agency found that Mizuho Bank’s leadership had disregarded expertise and taken the risk of system failures lightly.

The FSA’s inspection of Mizuho lasted from March to November this year.

The agency identified the management system and organizational culture as a chief problem when Mizuho was investigating the cause of each system failure.

The FSA focused on a number of missteps taken by the top executives, including a decision to reduce the number of relevant personnel by 60% around the time the bank’s core system went into full operation in 2019; slow responses to the system failures; and missing warning signs before the failures.

“Restructuring, which involved reallocating personnel and cutting maintenance and management costs, was carried out without thoroughly considering the measures needed to minimize damage in the event of an emergency,” a senior FSA official said.

The FSA also pointed out that the board of directors did not sufficiently deliberate on the actual state of operations.

Six of Mizuho’s 13 directors are from outside the company, and members of its committee to nominate top executives are all outsiders. Mizuho appears to be a “model of corporate governance,” which is open to outside checks, but the FSA said the reality was not so.

Sakai expressed his intention to resign at a board meeting this month, having sensed the FSA’s concern about Mizuho’s corporate governance.

His resignation also decided the fates of Fujiwara and Sato, who has led the financial group for more than a decade.

Members of the group’s board of directors, Mizuho’s highest decision-making body, were mostly negative about the resignation of the top executives despite the series of system failures.

Sakai’s leadership had been highly evaluated as the group is expected to recover its annual profit to the ¥500 billion range in the fiscal year ending March 2022,

However, the FSA’s harsh assessment of Mizuho’s leadership made Sakai’s position untenable.