UPDATE 2-Mizuho says nearly $1 bln settlements may be disrupted by glitch

Fri Mar 18, 2011 2:46am EDT

* System troubles continue from Monday night

* Up to 126 bln yen salary transfer likely disrupted on Friday

* Glitches have already disrupted 650 bln yen worth settlements by Thurs

* Internet banking, ATM ops to be suspended until Mar 21 (Adds details, background)

By Mariko Katsumura

TOKYO, March 18 (Reuters) - Japan's Mizuho Financial Group warned Friday that nearly $10 billion worth of transactions could be disrupted by the failure of its computer systems after last week's devastating earthquake, hobbling basic banking services for businesses and millions of Japanese.

Mizuho, Japan's second-largest bank by assets, said its automatic teller machines, which first showed signs of trouble on Thursday, would be disabled until March 21. Internet banking services would also be down until that date.

Malfunctioning systems have already disrupted a total 500,000 settlements worth 650 billion yen in the past three days, causing delays in salary payments and preventing customers from withdrawing cash.

The system glitches coincide with an increased use of ATM and other services as consumers try to stock up on food and supplies, reflecting fears over radiation leaked from a quake-hit nuclear power plant.

"We are likely to see this kind of trouble again on March 25 and 31 when money transactions are expected to surge before the end of this fiscal year," said Barclays Capital analyst Shin Tamura.

"What they can do over this weekend would just be first-aid kind of stuff and that is not a complete solution," he said.

Mizuho said that it would do everything to fix the glitch, but added that it was unable to say by when.

"We've said that salary payments are an essential part of our lives and that we would do everything to fix the problem by today when many salary transactions are expected," Mizuho Bank's president, Satoru Nishibori, told reporters.

"We are deeply sorry for the trouble and confusion caused by this."

Mizuho, which expects up to an additional 125.6 billion yen's worth of salary payments to be interrupted on Friday, has said the troubles were likely due to a concentration of transactions at some unidentified branches. .

Japanese media have suggested that an overwhelming number of donations sent to quake-hit victims and families might have triggered the system troubles.

Branch offices across the country will remain open until ATM and Internet service is restored and account holders who did not receive their salary will be able to withdraw up to 100,000 yen at a branch, Mizuho said.

Mizuho operated 5,622 ATMs and 440 branches in Japan as of September, making it a key component of the Japanese financial system. ($1 = 78.855 Japanese Yen) (Reporting by Mariko Katsumura; Editing by Nathan Layne)