Zengin Interbank Network: System Glitch Must be Treated with Utmost Seriousness

It took two full days to resolve a fault in the nationwide data communication system that handles interbank settlements. The cause of the failure in the Zengin system must be investigated and thorough measures must be implemented to prevent a recurrence.

The glitch occurred around 8:30 a.m. on Oct. 10, making it impossible for customers of 10 financial institutions — including MUFG Bank, Resona Bank and regional banks — to transfer money to other financial entities. The receipt of funds from other financial institutions also was disrupted.

This system is operated by the Japanese Banks’ Payment Clearing Network (Zengin-Net). When the problem occurred, the operator adopted alternative means of processing transactions, but transfers were significantly delayed. The system was not fully restored until the morning of Oct. 12.

It was the first time for a major issue to hit the system since it began operating in 1973, according to the operator. A total of about 5 million transactions were delayed over the two days, affecting both remittances and the reception of funds, among other transactions.

Financial settlements underpin various economic activities. When delays occur, people’s lives can be seriously disrupted. Zengin-Net should reconsider its crisis-response measures.

In response to the failure of the system, MUFG Bank on Oct. 11 shortened its acceptance time for bank transfers to noon. Some financial institutions did not process transfers accepted on Oct. 11 until the next day or later, while others suspended the acceptance of transfers for the entire day.

Customers of such institutions were hit by various vexing issues, such as delays in receiving salaries, insurance benefits and child allowances. The malfunction initially occurred on Oct. 10 — in Japan, corporate payments and other transactions tend to be concentrated on dates that end with a “5” or a “0” — further compounding the issue.

More than 1,000 financial institutions, including banks and credit unions, utilize the Zengin system, which last fiscal year handled an average of about 8 million transactions each business day, amounting to about ¥14 trillion, the operator said.

Zengin-Net must seriously reflect on its responsibility and urgently pursue the reasons behind the recent trouble.

Each of the 10 financial institutions hit by the problem had updated their respective relay computers that connect to the Zengin system over the three days from Oct. 7 through Oct. 9, when these institutions were closed. It is thought that a problem occurred in the program functions of these machines.

Zengin-Net claims it conducted tests prior to the update, but it is crucial to verify whether these tests were adequate.

The updating of Zengin participants’ relay computers is scheduled to be carried out in 24 installments through 2029; the glitch occurred in the first installment of the update.

It is vital to probe the cause of the program glitch and prevent similar problems from occurring with further updates.

(From The Yomiuri Shimbun, Oct. 14, 2023)