June 19, 2002
Financial Services Agency

Administrative Order Against Mizuho Financial Group

1. Since the onset of system disruptions within the Mizuho Financial Group (hereinafter referred to as ''Mizuho''), the Financial Services Agency has been pursuing the facts behind the disruptions, by, for instance, requiring the prompt submission of reports and embarking on on-site inspections as of May 8. The facts as have been found through those efforts are described in Attachment 1.
2. On June 11, the Financial Services Agency notified Mizuho of the results of the inspections, and also requested it to submit a report, no later than June 18, laying down relevant improvement plans and countermeasures to address the matter, as well as taking the proper measures to identify responsibility for mismanagement. In response to this, Mizuho submitted its improvement plans, countermeasures etc. on June 18, as described in Attachment 2.
3. On the basis of the above, the Financial Services Agency has, for the purpose of ensuring sound and proper management of the bank's operations, issued the following order against Mizuho on June 19, requiring the improvement of the bank's business, in accordance with the provisions of Article 26 and the other relevant articles of the Banking Law.

1. Ensure complete implementation of the improvement plans and countermeasures as well as the measures to identify responsibility for the disruptions, as laid down in the report prepared pursuant to Section 1of Article 24 and the other relevant articles of the Banking Law;
2. Of the improvement plans and countermeasures under Order 1 above, promptly prepare and submit a plan for those which require more detailed planning for their implementation;
3. Report every three months the progress in the implementation of the aforementioned Orders.

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(Attachment 1)

The Facts behind the Disruptions

1. On April 1 and April 8, disruptions occurred in Mizuho Bank's ATMs due to malfunctioning of the global processor, which is a computer that serves to establish external connections. Due to system failures and confusions in handling of data etc. at Mizuho Bank, other disruptions also occurred, such as delays in automatic bank debits, delays in payment notifications to companies authorizing automatic bank debits, delays in fund transfers between accounts, and duplicate debits.
2. Meanwhile, Mizuho Corporate Bank (CB) also experienced disruptions, also due to system failures etc., such as delays in fund transfers between accounts, delays in automatic bank debits, delays associated with bill collection bill transactions and others. On May 20, delays in funds transfers also occurred in some of its branches due to a failed renewal of registered information for those branches.
3. The main causes for those system disruptions were: (i) minimum necessary preparations were not made, such as the failure to properly conduct system tests or implementation tests for the purpose of verifying the functioning of the system, (ii) there were serious flaws in the reporting and communication structure within the group, and cross-checking was insufficient, as reflected in the fact that important pieces of information such as those on the inadequacy of tests were kept within the system development sections of the bank responsible for its development, and (iii) CB did not have the adequate operational infrastructure to support large-scale office operations.
   
   Additionally, as a result of (ii) above, accurate reports were not submitted to the authorities, and repeated supervisory check-ups by the authorities failed to work effectively.
4. The root cause for the failure to make even the minimum preparations, as has been described above, lies with the fact that the former management of the group did not fully recognize the risks associated with system integration, and consequently delayed necessary decision-making on basic issues, which should have been the prerequisite for the development of the system upon integration, and, accordingly, not enough time was allocated for system development and tests, and for office training.
5. On top of this, they failed to take act properly in the preparatory stage, as evidenced by the fact that they could not respond to the customers' requests for testing. There were also inadequacies in emergency operations after the disruptions occurred, such as unsatisfactory responses to customers and the lack of promptness and accuracy in disclosure of information.
6. Although the recovery work regarding the recent disruptions is almost completed, it is imperative that fundamental measures to prevent their recurrence need to be prepared and implemented without delay, as there are still some remaining problems that need to be resolved, such as lesser-scale disruptions that are reparable within a single day, and some confusion in internal office operations.

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(Attachment 2)

Main Points of Mizuho's Improvement Plans and Countermeasures

1. Recurrence Prevention Measures

2. Restoring Customers' Confidence

3. Identification of Responsibility