"One bank takes you to a world of new solutions," read advertisements for the April debut of Mizuho Bank, the world's largest in terms of assets and one of the amalgamations that is supposed to represent the future power of post-crisis banking in Japan. A world of near- chaos has been more like it.
Maybe the mess at Mizuho ought to have been expected of a bank made of three dinosaurs in uncomfortable communion. Dai-Ichi Kangyo, Fuji and the Industrial Bank of Japan surprised everyone in August 1999 when they announced that they would merge into "a national champion," as a colleague who was there put it, "and a champion with a somewhat anti-foreign tilt to its ambitions."
A long time has passed since then, and the stock has traded well, especially during this spring's (manipulated) run-up in bank shares. But when Mizuho's doors formally opened for business on April 1, you would have thought the merger idea had been imposed upon the three participants more or less by force a few weeks earlier.
On the face of it, the problem is the information technology system chosen by the new bank. Automated teller machines across the country malfunctioned almost immediately. Some 2.5 million automated transfers from clients to utilities went unpaid -- a big deal in Japan, where "auto-pay" is the prevalent system for settling household and industry accounts.
Indeed, considering Mizuho's size, to impose a cease-business order on the bank while it cleans up its act would adversely impact something like a third of the Japanese economy, by the estimates I hear. The pols and the authorities have been breathing fire over this mess, but they are essentially stuck. "It's so big they can't do anything about it," a banking friend in Tokyo tells me.
You would think that the three banks of which Mizuho is comprised would now be fighting over the IT system and how best to fix it. Not so. The internal arguments, I'm told, are over which of the banks should take responsibility, how many managers from each bank should fall on their swords, and how the newly opened positions shall be apportioned.
Old habits die hard
There is a lesson in this of fundamental importance. Japanese banks may have a grand strategy for remaking themselves into global competitors able to take on foreign institutions in their domestic market, but they have yet to outgrow habits that extend back to the Meiji era (1868-1912), when Japan began to modernize.
The grand strategy, to put a complex matter simply, dates back 10 or 15 years, when the Finance Ministry set out to create three or four -- depending upon whom you talk to -- large universal banks based roughly on the German model. German banks may not strike readers as an efficacious model for anything now, but as the architecture of a system that would suit Japan, there is sense in the design.
Turf battle
But what problems -- what distance between concept and execution. And the IT fiasco at Mizuho is revealing in this respect. As a friend close to the situation puts it, "We've actually got, by way of an IT accident, a clear light to shine on the details of a classic Japanese turf battle. For a moment, at least, all the sociological behavior is in plain view."
Turf battles are old and notorious among the Japanese. In corporate Japan today, they resemble nothing so much as the castle-to-castle warfare characteristic of the days of the daimyos and their han, their small fiefdoms.
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