Japan’s banking regulator will oversee system management at Mizuho Financial Group, a source said on Wednesday, marking a rare act of direct intervention after a series of technical failures undermined confidence in the banking group.

The Financial Services Agency’s move will be part of administrative action against retail lender Mizuho Bank and its parent, Japan’s third-largest lender by assets, according to the source familiar with the matter. The source declined to be named as the move, expected later this month, was not yet official.

A spokesperson for Mizuho declined to comment.

The action by the FSA – one of its most high-profile interventions in recent memory – will bring the computer system of the retail arm of the Japanese banking giant under effective government control.

It comes after a series of technical meltdowns this year, including widespread outages at ATMs, that had sparked frustration among customers and undermined confidence in the lender.

The technical problems are all the more notable given that Mizuho spent more than $3.6 billion to overhaul its systems in 2019. That revamp followed two large-scale breakdowns in 2002 and 2011.

Nana Otsuki, chief analyst at brokerage Monex Inc, said the intervention came with risks for the FSA.

“The FSA’s involvement in Mizuho means if the banking group faces a similar incident again, the FSA would also be blamed for it. That means the FSA is going to take certain risks in taking theses measures,” Otsuki said.

Japan’s chief cabinet secretary, Katsunobu Kato, declined to comment directly on reports of the action against Mizuho, but said banks themselves must be responsible for building systems to provide financial services.

Shares in Mizuho fell 1.2% on Wednesday, while the Nikkei average was little changed.

A third-party report commissioned by the bank found its corporate culture was to blame for its long history of tech system failures, creating an atmosphere where managers are reluctant to express opinions and unable to respond well to crises.

The Nikkei newspaper, which first reported the FSA’s planned move, said the regulator will jointly manage the system with the bank, and order that system updates and maintenance be carried out under its control.

The management structure of the system may also be reviewed if necessary, the Nikkei said.

The regulator will determine where management responsibility lies after clarifying the cause of Mizuho’s recent technical problems, it said.

Reuters