Mizuho Financial Group head likely to quit over repeated glitches

Tatsufumi Sakai, president and CEO of Mizuho Financial Group Inc., is likely to step down as financial regulators aim to punish the company for its sloppy handling of repeated glitches at its core banking unit, sources familiar with the matter said Thursday.

Mizuho Financial Group, one of Japan’s major banking groups, seeks to recover public trust by management taking responsibility through Sakai’s resignation.

The development comes as the Financial Services Agency is planning to slap Mizuho Financial Group and Mizuho Bank with administrative sanctions, requesting business improvement measures, possibly within this month, while the Finance Ministry is considering ordering a review of the bank’s operations over suspected violation of the Foreign Exchange and Foreign Trade Control Law in September, the sources said.

The banking group company has started the process to choose Sakai’s successor with the aim of finalizing the pick by the end of this year, though the timing could be pushed back to around next spring if the current top management opts to implement thorough preventive measures before handing over leadership, according to the sources.

Mizuho Bank, one of Japan’s megabanks with branch offices across the country, experienced system glitches eight times this year, affecting automated teller machines and causing other problems.

Regarding the Sept. 30 system glitch, which caused delays in some of its money transfers for foreign exchange trades, the Finance Ministry believes Mizuho Bank failed to take necessary steps to prevent money laundering before foreign currency remittances, the sources said.

The Financial Services Agency is expected to notify Mizuho Bank of its findings in the near future, following the investigation of the series of system issues.

The agency’s view is that the glitches have stemmed from mismanagement by inexperienced operators, as the system itself appears to have no major problems, sources close to the matter said.

Although Mizuho Bank drew up preventive measures in June after experiencing four system glitches, the bank has since been hit by such problems an additional four times.

In June, Mizuho Bank announced remuneration cuts ranging from 10% to 50% for Sakai and 10 other executives as a way to take responsibility for the glitches.

Shortly before the pay cuts were announced, Mizuho Bank head Koji Fujiwara was expected to resign, but the bank put off the decision to replace him in hopes of seeing progress with the preventive steps.

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