• Kyodo, Bloomberg

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Mizuho Financial Group Inc. on Wednesday scrapped a plan to replace the head of its troubled banking arm following four system failures in a matter of two weeks.

Koji Fujiwara, president of Mizuho Bank, will stay on for the time being as the Japanese megabank works to get to the bottom of the issue that has shaken public confidence in the bank as a provider of social infrastructure. He was slated to become the bank's chairman effective April 1.

Mizuho Financial Group will set up a third-party panel of experts to look into the system failures that made thousands of automatic teller machines nationwide temporarily unavailable and delayed foreign currency-denominated remittances. No causal relations between the problems have been found so far.

"We recognize that the series of problems since Feb. 28 have undermined confidence among our customers and in society in our group," Mizuho Financial Group President Tatsufumi Sakai said during a conference.

"It's essential that the problems are examined from an objective and expert point of view," the president said.

Sakai also said he will he will refrain from becoming the chairman of the Japanese Bankers Association on April 1 as earlier planned as he focuses on addressing the system glitches. The position is normally rotated annually among the nation’s three biggest banks.

"In a short period of time, four incidents happened back-to-back,” Sakai said. "When I think about why they happened, I would say risk management failed to function as a result and I take it gravely.”

Japan's financial regulators will conduct an intensive inspection into Mizuho Financial Group and Mizuho Bank over the system failures, sources familiar with the matter said.

Following the inspection, the Financial Services Agency will consider whether to take disciplinary measures including issuing a business improvement order against one of the three Japanese megabanks, according to the sources.

The four system failures occurred in the two weeks since Feb. 28, when over 4,300, or about 80%, of Mizuho's automated teller machines operating nationwide were temporarily suspended and more than 5,000 bank cards and books became stuck inside them.

The sources added that the FSA sees the problems as serious, as they caused trouble in transactions not only among individuals but also companies in such a short period of time.

Investigators of the financial watchdog are usually stationed at bank headquarters and offices during an inspection, but in this case involving Mizuho they are likely to listen to Mizuho officials via online and seek documents by email to prevent the coronavirus from spreading, according to the sources.

The most recent problem was due to hardware trouble at the data center that came last Thursday and had affected foreign currency-denominated and overseas remittances for corporate customers in Japan. The problem was resolved by Friday.

The incident came after minor trouble in early March, further fueling criticism from the bank's customers.

The FSA has ordered Mizuho Bank three times to report on the details of the incidents based on a banking law. The watchdog is also seeking to receive by the end of March reports on measures to ensure such problems do not recur.

The megabank started running its current system in July 2019 following large-scale system failures in April 2002 and March 2011.

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