The Korea Herald

피터빈트

Mizuho must regain trust through reform

By 류근하

Published : May 27, 2011 - 18:51

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Mizuho Financial Group Inc., one of the country’s three major banking groups, is being put to the test over whether it can evolve into a financial group with a sense of unity by carrying out necessary reforms.

On Monday, the company announced a plan to integrate the operations of Mizuho Bank, Mizuho Corporate Bank and other banking units under its wing in a few years.

The integration is aimed at regaining public confidence in the group by bolstering its management following a massive computer system failure that occurred days after the March 11 disaster.

The immediate goals of the reform will be to unify the computer system for settlement of transactions and integrate the personnel management and administration systems of group companies.

Mizuho Financial Group President Takashi Tsukamoto said at a news conference Monday that Mizuho Bank President Satoru Nishibori will step down to take responsibility over the computer system failure. He also presented measures to avert a recurrence of such a problem.

However, concrete timetables and integration procedures remain vague and lack a sense of urgency. Reform measures need to be carried out much more rapidly.

Mizuho Holdings Inc., the predecessor of Mizuho Financial Group, was inaugurated in 2000 with three major banks ― Dai-Ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan ― forming its core. The three banks merged in 2002 into two banks ― Mizuho Bank and Mizuho Corporate Bank ― operating under the holding company.

The top posts of the holding company and the two core banks were shared by those heading the former three banks. This led to a lack of corporate unity as each fought to protect his own turf.

The Mizuho group suffered a large-scale computer system failure in 2002. The group came up with corrective measures that included strengthening the computer system and eliminating personnel allocations designed to maintain a balance among the former three banks. However, these measures were not implemented and the computer system crashed again.

Mizuho admitted it lacked experienced personnel capable of understanding and supervising the system and that insufficient cooperation within the group exacerbated the damage caused when the system crashed. We can say unresolved internal divisions were the main cause.

Even now, the two core banks’ fundamental computer systems, which were inherited from the former banks, operate separately. This causes great concern about the systems’ capabilities as it is impossible for a backup system to function in times of trouble.

We feel uneasy when the computer system of a major financial group serving as the social infrastructure for settling financial transactions is so unreliable.

The Mizuho group plans to develop a new system to be shared by the group’s companies. The group must do everything it can to prevent a recurrence of a system failure by improving processing capacity. To secure sufficient investment funds, further restructuring efforts are necessary.

The group’s total assets amount to 160 trillion yen, the second largest after that of Mitsubishi UFJ Financial Group. But in terms of profits, Mizuho ranks last among the three top financial groups, trailing MUFG and Sumitomo Mitsui Financial Group.

Under international rules, major banks will be required to increase their core capital, including internal reserves, from 2013. Strengthening their earning capacity, therefore, is a pressing task.

Banks must urgently deal with changes in their management environments.

(Editorial, The Yomiuri Shimbun)

(Asia News Network)