Mizuho corporate culture the root cause of repeated system failures, probe finds

© Reuters. FILE PHOTO: Mizuho Financial Group logo is seen at the company's headquarters in Tokyo, Japan August 20, 2018. REUTERS/Toru Hanai

By Takashi Umekawa

TOKYO (Reuters) -Mizuho Financial Group Inc's corporate culture is the fundamental cause behind its long history of system failures as it is not able to respond well to crises, lacks tech expertise and has not shown progress, a third-party investigation found.

The damning report commissioned by Japan's third-largest lender comes after four system breakdowns between February and March this year despite the bank having spent more than $3.6 billion to revamp its systems in 2019. That revamp followed two large-scale breakdowns in 2002 and 2011.

One of the glitches this year affected most of its ATMS, leaving customers unable to retrieve thousands of bank cards and bankbooks stuck inside in the machines.

Mizuho said in a statement on Tuesday it will set up an internal committee to prevent recurrences and plans to recruit executives from tech companies to improve know-how.

Chief Executive Tatsufumi Sakai will have his pay halved for six months to take responsibility for the problems while Koji Fujiwara, the head of Mizuho's main banking unit, will take a 50% pay cut for four months.

"We, as a whole organization, strongly recognise it's necessary to take fundamental preventive measures in order not to let such issues happen again," Mizuho said in a statement.

Mizuho did not, however, announce Fujiwara's resignation which had been flagged by domestic media.

A news conference will be held from 5 p.m. Tokyo time (0800 GMT).

The report said Mizuho rotated tech staff too often which prevented the accumulation of knowledge and that managers were too hesitant to question the status quo.

"The atmosphere within the company is one where managers believe the best course is to take the stance that they have done what they are supposed do rather than taking the risk of actively expressing their opinion. This contributes to a lack of positive and proactive action on their part," the report said.

The report was compiled by a four member team led by lawyer Shuji Iwamura and included another lawyer, a former Fair Trade Commission official and a former NTT DoCoMo executive.

Mizuho's shares closed up 0.4%.

($1 = 110.0700 yen)