Mizuho aspires to end failed dual bank silo structure
Japanese mega-bank Mizuho’s desperation to shake its accident prone image and prevent a third systems failure has forced it to lay down plans to finally enter the new millennium. May 24, 2011 | Peter HoflichYesterday Mizuho Financial Group announced it will finally initiate plans to effectively merge its two banking units -Mizuho Bank, which handles retail and SME lending, and Mizuho Corporate Bank- and commit at last to the final integration of Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan first announced in 2000 and cursorily achieved in 2003. Since then the bank has suffered various missteps, including two systems outages, a disastrous foray into Wall Street to build up a collateralised debt obligations (CDO) business at the height of the subprime bubble, a misguided $1.2 billion investment into Merrill Lynch in January 2008 and a severely depleted capital base. A recent payments system outage was a wake-up call to the bank that it could not continue in its fragmented state. When the earthquake and tsunami hit the northeast part of Japan around Sendai on March 11h, Mizuho found its payment system unable to support the spike in unscheduled payments that ensued, such as remittances to individuals and businesses in the region and a repatriation of funds by insurers. The bank and its clients suffered weeks of systems outages that at one point built to a backlog of 1.9 million unprocessed payments valued at approximately $20 billion. Costly stopgap procedures, such as keeping branches open on weekends to allow withdrawals of limited amounts of cash when ATMs were down, did little to stem the problem, which is likely to have resulted in a significant loss of business; it certainly dented confidence in the bank, for which system failure is not unprecedented—it had also suffered an outage of similarly massive depth and scale in 2002 when it tried to merge its IT systems, resulting in an ATM outage and severe accounting errors in client accounts. The bank has apologised for the recent system outage on its website, but the damage is done. ...Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, Mergers and Acquisitions, Risk and RegulationCapital & Strategic Issues,Mergers and Acquisitions,Risk and Regulation, Capital & Strategic Issues,Mergers and Acquisitions,Risk and Regulation, Keywords:Mizuho, System Outage Mizuho, system outage
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