(Bloomberg) — Mizuho Financial Group Inc. Chief Executive Officer Tatsufumi Sakai will step down after Japan’s banking regulator issued a business improvement order on the lender, criticizing it for shortcomings in governance and corporate culture behind a series of system glitches this year.
The Financial Services Agency said Mizuho didn’t pay enough attention to risks within its computer systems, according to a statement Friday. The regulator also said Mizuho failed to learn from past incidences and asked the bank to clarify who is responsible for the outages.
Mizuho said Sakai, 62, will step down April 1 and the country’s third-biggest lender will accelerate efforts to select his successor.
“We take it extremely seriously and regret what happened,” Sakai said at a news briefing, referring to the order. “I need to take responsibility by resigning.”
His departure marks the culmination of a months-long inspection by the country’s watchdog into Mizuho to identify the root causes of the technical failures. The regulator originally planned to finish the inspection a lot earlier but had to extend it after the bank suffered fresh incidents in August and September.
Mizuho management’s responsibility “is grave,” the FSA said in the statement. The company “failed to serve their role as a financial institution.”
Other Departures
- Koji Fujiwara, CEO of the Mizuho Bank unit, will also leave April 1 and be replaced by Masahiko Kato
- Satoshi Ishii, who is currently the bank’s IT head, will resign on April 1
- Chairman Yasuhiro Sato will step down April 1, but stays on the board until late June, when new members are chosen
Mizuho has been plagued by major IT problems since it was created from the merger of three lenders more than two decades ago. The smallest of Japan’s three megabanks has also been struggling to catch up with bigger rivals which are expanding beyond traditional lending into investment banking and wealth management.
Key FSA Findings
- Mizuho lacked awareness of the impact on its clients
- Bank didn’t pay enough consideration to client-facing businesses
- Mizuho lacks capacity to rectify problems itself as common failures across past incidents in 2002 and 2011 have happened again
The series of incidents started in February, when ATMs swallowed more than 5,000 cash cards and passbooks. A month later, a hardware failure caused a delay in 300 foreign-currency money transfers. There have been eight such incidents so far this year.
No Repeat
Mizuho had reemphasized its pledge not to repeat system failures after incidents in 2002 and 2011. Each time, the bank received business improvement orders from the regulator.
Sakai, who became CEO in 2018, has been trying to reshape the bank and change its corporate culture. He made major modifications to its organizational structure to focus resources on growth areas and rein in costs. Despite the system troubles, Mizuho reported sharp profit growth for the first half ended in September and announced the first dividend hike in seven years.
Outside directors planned to keep Sakai at the helm even after the system failures because they had a high opinion of his leadership in driving cost cuts, according to multiple senior Mizuho officials. Even after Sakai decided to step down, the outside directors tried to make him chairman and keep him in management, the officials said, asking not to be identified because the discussions were private.
Yet cost cutting wasn’t viewed favorably by the regulator. In Friday’s statement, the FSA said Mizuho reduced spending and relocated staff necessary for the maintenance of its core banking computer system.
(Updates with comment from Sakai in the fourth paragraph)
More stories like this are available on bloomberg.com
©2021 Bloomberg L.P.
