By Yuki Nitta

TOKYO (Reuters) – Japan’s banking regulator will oversee system management at Mizuho Financial Group, a rare punishment following a series of technical failures at the banking group, a source told Reuters on Wednesday.

According to an anonymous source, this move by the Financial Services Agency will be taken as part of an administrative proceeding against Mizuho Bank (the third-largest Japanese lender, assets). Because the change, which is expected to take place later this month was not yet officially announced, the source refused to name.

Mizuho did not respond to requests for comment.

FSA’s decisive action – the largest in recent history – will allow the government to effectively control the Japanese bank giant’s computer system.

After a number of technical breakdowns in this financial sector, which included widespread ATM malfunctions that caused frustration and undermined trust, the FSA’s action comes as a result.

These technical issues are even more significant considering that Mizuho spent over $3.6 billion in 2019 to upgrade its systems. This overhaul came after two major system failures that occurred in 2012 and 2011.

Katsunobu Kato Japan’s chief Cabinet Secretary declined to speak directly to the reports on Mizuho but stated that financial institutions must own systems and be accountable for providing them with services.

Shares in Mizuho fell 0.8% by late morning, while the average was flat.

The bank commissioned a third party report to find that the bank’s corporate culture is to blame for its history of failures in tech systems. This has led to managers being reluctant to voice their opinions and making it difficult to react to crisis situations.

According to the Nikkei, the FSA will be jointly managing the system along with the bank. The regulator will also order system updates and maintenance to be under its control.

According to the Nikkei, it is possible that the management structure could be revamped if needed.

It said that the regulator would determine who management is accountable after determining what caused Mizuho’s latest technical issues.