Japan’s natural disaster will have the largest-ever impact on banks
The March 11th earthquake and tsunami in northeast Japan will cost $235 billion in economic damage and may claim Mizuho Financial Group as its key corporate victim. March 22, 2011 | Peter HoflichThere are many things about Japan’s March 11th earthquake and tsunami that set it apart from other natural disasters. The quake was the largest ever recorded in Japan, and economic impact attributed to it is the largest ever. According to World Bank estimates, the economic impact of the quake comes in at $235 billion; and among the 20 most costly natural disasters compiled by The Economist, this is also the second largest as a percentage of GDP at 4.1% of the world’s third-largest economy (the largest, 9.3%, was attributed to forest fires in Indonesia in 1982). Sadly, the Kobe earthquake of 1995 was the second most impactful in economic damage, at $200 billion (but only 1.9% of GDP). It is also the first to significantly impact the nation’s banks, primarily Mizuho Bank, which blames a surge in deposits and remittances following the disaster for a system breakdown that disabled its internet banking service and ATM network. It shut down all of its ATMs over the three-day holiday weekend for maintenance, but kept branches open to allow depositors to withdraw up to $1,150 at a time; by March 22nd, it only had 10% of its 38,000 ATMs working. The glitch also prevented the bank from processing salary payments, and as of March 22nd there were 890,000 transactions worth $10 billion unprocessed. To tide itself over, the bank has had little choice but to go in talks with rivals Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group to get assistance in processing these payments, despite the fact that this will give away dangerous insights into how Mizuho operates. The reputational damage to the bank, which has suffered massive ATM breakdowns before, is enormous, as is the cost of keeping branches open over a three-day weekend. It is certain to lose a lot of business down the road as individual and corporate clients defect. To add to its woes, the bank will also face fines from the regulator as well as a massiv... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Japan, Operational Risk, Risk and RegulationJapan,Oprisk,Risk and Regulation, Japan,Operational Risk,Risk and Regulation, Keywords:Mizuho, Bank Of Japan Mizuho, Bank of Japan
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