Mizuho glitch cleanup to last a month


Mizuho stock is at odds with a general rise in Tokyo trade on Thursday

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan -- Mizuho Holdings Inc., the world's largest bank by total money managed, says it will take one month to clean up the mess from integrating its three member banks.

Mizuho told CNN on Thursday that its operations will be completely back to normal by May 1. A programming error led to a mammoth glitch in its computer systems on April 1.

"The most important thing is to recover the current situation, and then we'll think about how to prevent this situation's recurrence," Mizuho spokesman Yukio Yokoyama said. "Then we'll find what the cost of the program is, and then we have to think about responsibility for that action."

The systems-integration disaster is likely to claim the heads of Mizuho's former joint CEOs, who already stepped down as previously planned from their positions on April 1 (full story).

Bank pushed ahead on 80% preparation


Mizuho merged into two companies from March 31

Mizuho's three member banks chose March 31, the end of Japan's business year, as the date to merge into two companies: Mizuho Bank and Mizuho Corporate Bank.

But a computer-programming error fouled the sorting of the mammoth amount of data attempting to flow between the three banks: Fuji Bank, Dai-Ichi Kangyo Bank and Industrial Bank of Japan.

About 7,000 ATMs stopped working, millions of automatic transactions stalled and customers paid twice for some utility bills. NTT, Japan's largest phone company, reportedly plans to charge the bank 100 million yen for extra work.

Management is briefing the board, which is widely expected to require the former CEOs to resign completely from the bank, where they now serve as special advisers, as well as return part of their pension pay.

But Mizuho states it is first focusing on getting service back to normal. It is close to clearing the backlog of automated debits, millions of which jammed. Day-to-day banking is already back to normal for new customer transactions.

Heavy criticism of management

There has been heavy criticism of top management, which decided to go ahead with integration despite knowing of problems. The bank's new president, Terunobu Maeda, allegedly had a report on the issue.

Critics contend Mizuho was embarrassed to miss its own deadline for integration, and so pushed ahead despite almost certain disruption for customers.

Mizuho admits it had not fully tested the system before the integration. But the bank responds that the error stemmed not from integration but from data processing.

The bank's spokesman says it did not know of the computer-code mistake, which then snowballed before the bank could fix it, due to the vast amount of data involved.

"At the end of March, we had already processed 80 percent of the data for April 1st. So top management decided, 'Let's go,' " Yokoyama said. "It wasn't because it is embarrassing or anything like that."

"There was a small programming mistake in leading and sorting the information to the three systems, and then the data was a little bit messed up because of the big volume of data," he said. "It came up once, first, on April 1. So two factors caused the problem."

Yamamoto takes responsibility

The bank has reverted to magnetic tape and archive information to correct the transactions that went haywire. Mizuho says it would have been more disruptive to the Japanese banking system in general for it to retract its integration.

Yoshiro Yamamoto, former president of Fuji Bank, says he and his co-CEOs at the time of integration accept responsibility.

Yamamoto joined Katsuyuji Sugita, of Dai-Ichi Kangyo Bank, and Masao Mishimura, of Industrial Bank of Japan, in stepping down as CEO on April 1.

Mizuho stock ended the morning down 0.71 percent at 281,000 yen. That's in contrast to the broad Topix index, which is up 0.66 percent at 1,096.81. The tech-driven Nikkei is up 0.46 percent.