A customer finds the notice of system outage at a Mitsubishi UFJ Bank branch in Tokyo. (© Sankei by by Masahiro Sakai)
A system outage on October 10 prevented Mitsubishi UFJ Bank and other financial institutions from transferring funds to other banks. The Japanese banking system only came back online two full days later, on the morning of October 12.
This failure resulted from malfunction of the Japanese Banks' Payment Clearing Network, Zengin-Net. This is the system used to transfer money between banks.
Ten banks nationwide were impacted. It caused delays in the transfer of salaries and child allowances, small business remittances, insurance payments, and so on. A total of approximately 5.06 million transactions were affected, significantly disrupting people's lives and business activities.
Why It Matters
The financial system is the lifeblood of the economy. We must recognize that the outage was a serious situation. It has shaken confidence in the infrastructure that supports the financial system.
Based on the Funds Settlement Act, the Financial Services Agency (FSA) has issued an order to Zengin-Net to report on the problem.
Zengin-Net must now thoroughly identify the cause of the problem and take action to prevent a recurrence. At the same time, the company should work conscientiously with each bank affected. Together they must promptly assess customer losses and provide necessary compensation.
A Mishap in the System Update
The glitch occurred in the relay computer that connects the Zengin-Net's nationwide interbank data communications system (Zengin System) and financial institutions. During the October 7-9 holiday weekend the Zengin System was updated. Then, on October 10, the first work day, it was discovered that the system was not functioning properly.
This is the first failure affecting bank customers since the Zengin system commenced operations in 1973. They went 50 years without a mishap. However, it would be a huge problem if that fact made them let down their guard.
A detailed review of the backup system meant to offer alternative means in the event of a failure should be investigated. Also, there must be a review of whether Zengin-Net's customer response was appropriate. Then, the recovery procedures to minimize damage in the event of a system failure should be spelled out.
Relay computers are updated each time maintenance due dates are reached and that will continue to hold true in the future. With that in mind, we need to identify areas for improvement and prepare for emergencies. The FSA should also provide thorough supervision and guidance.
Staying Aware To Prevent Repeats
With the rapid evolution of digital technology, unforeseen problems in the financial system are likely to continue to occur. Malicious cyber attacks are also possible. Therefore, the public and private sectors must step up their efforts to ensure that such occurrences do not shake Japan's financial system.
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(Read the editorial in Japanese at this link.)
Author: Editorial Board, The Sankei Shimbun
