Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc. formally announced Friday the postponement of the planned integration of their core banking units until Jan. 1, three months after their original schedule.
The closely watched merger of the two financial groups would create the world’s biggest financial entity, with total assets worth 190 trillion yen.
The reason for the delay is that the two banks — Bank of Tokyo-Mitsubishi and UFJ Bank — want to spend more time to ensure there will be no problems when they combine their banking operations, including computer systems, the banks said.
The merger, which would make the resulting bank the largest in Japan in terms of number of accounts managed, with some 40 million, was initially planned for Oct. 1.
Integration of their other units — including trust banks and brokerages — under the two major financial groups will take place on Oct. 1 as scheduled.
“Because of the scale of the new bank and its social responsibility, we will do our best to test system integration to check every possible risk carefully and thoroughly,” Nobuo Kuroyanagi, president and CEO of Mitsubishi Tokyo Financial Group, told a news conference.
The two financial groups plan to increase the number of the wide-ranging tests they are currently conducting to connect automated teller machines at all branches using real customer data, he explained.
The two groups will shoulder all costs corporate customers may have to pay due to the delay. But Kuroyanagi added that the additional costs would not large enough to lower their group earnings outlook for the business year to March 2006.
“Now that settlement systems are as necessary to people as air and water, society will not condone any problems” regarding financial transactions, said Hideo Kumano, a senior economist at Dai-ichi Life Research Institute, adding that the safety of such systems is now virtually a social consensus.
The delay of the banks’ merger was caused by Financial Services Agency’s request last month that the two groups implement every measure necessary to avoid problems that might happen when the banking units combine their computer systems.
The financial watchdog had also instructed the two banking groups to submit earlier this month an updated report on their system integration work.
A similar request was issued in May.
On Friday, the two groups did not deny that the FSA position had been one factor that pushed back the merger date.
The FSA is still haunted by the mass chaos that ensued as a result of a glitch in the computer system when three banks were merged to form the Mizuho Financial Group in April 2002.
In that incident, millions of transactions could not be conducted, including payments of utilities bills, phone bills and credit card bills.
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