FORM 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of July 2018

Commission File Number 001-33098

Mizuho Financial Group, Inc.

(Translation of registrant’s name into English)

5-5, Otemachi 1-chome

Chiyoda-ku, Tokyo 100-8176

Japan

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F  ☒    Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐    No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-                    .

 

 

 

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date:   July 30, 2018
Mizuho Financial Group, Inc.
By:  

/s/ Makoto Umemiya

Name:   Makoto Umemiya
Title:   Managing Executive Officer / Group CFO

Table of Contents

The following is the English translation of excerpt regarding the Basel Pillar 3 disclosures and the relevant information from our Japanese language disclosure material published in July 2018. The Japanese regulatory disclosure requirements are fulfilled with the Basel Pillar 3 disclosures and Japanese GAAP is applied to the relevant financial information. In this report, “we,” “us,” and “our” refer to Mizuho Financial Group, Inc. and, unless the context indicates otherwise, its consolidated subsidiaries. “Mizuho Financial Group” refers to Mizuho Financial Group, Inc.

 

Key Metrics

      2  

∎   Key Metrics

      2  

Status of Mizuho Financial Group’s Consolidated Capital Adequacy

      3  

∎   Scope of Consolidation

      3  

∎   Risk-based Capital

      4  

∎   Summary of Risk Management and Risk-weighted Assets (RWA)

      14  

∎   Linkages between Financial Statements and Regulatory Exposures

      16  

∎   Credit Risk

      18  

∎   Counterparty Credit Risk

      29  

∎   Securitization Exposures

      32  

∎   Market Risk

      36  

∎   Investment or Equity Exposure

      38  

∎   Operational Risk

      38  

∎   Composition of Leverage Ratio

      39  

∎   Indicators for Assessing Global Systemically Important Banks (G-SIBs)

      40  

∎   Disclosure of Information for the Fiscal Year Ended on March 31, 2017 According to the Relevant Old FSA Notice

      41  

Status of Sound Management of Liquidity Risk

      57  

∎   Liquidity Coverage Ratio

      57  

∎   Status of Major Liquid Assets

      58  

∎   Status of Major Funding

     58  

Compensation of Directors, Corporate Auditors and Employees

      59  

∎   Compensation of Directors, Corporate Auditors and Employees

      59  

Our Internal Control Systems

      63  

Overview of Risk Management

      63  

Credit Risk Management

      64  

Market Risk Management

      67  

Liquidity Risk Management

      70  

Operational Risk Management

      71  

 

1

Table of Contents

Key Metrics

Under the capital adequacy ratio regulations agreed upon by the Basel Committee on Banking Supervision, banks are required to meet certain minimum capital requirements. We calculate our capital adequacy ratio on a consolidated basis based on “the criteria used by a bank holding company for deciding whether or not the adequacy of equity capital of the bank holding company and its subsidiaries is appropriate in light of the assets owned by the bank holding company and its subsidiaries pursuant to Article 52-25 of the Banking Law” (Financial Services Agency, or FSA, Notice No.20 issued in 2006).

We also calculate our leverage ratio on a consolidated basis according to “the leverage ratio on a consolidated basis separately prescribed by the Commissioner of the Financial Services Agency according to Article 1 Paragraph 1 item 7 of the Matters Separately Prescribed by the Commissioner of the Financial Services Agency Regarding Status of the Adequacy of Equity Capital pursuant to Article 19-2 Paragraph 1 Item 5 Sub-item (d) etc. of the Ordinance for the Enforcement of the Banking Law” (FSA Notice No.13 issued in 2015).

Liquidity standards agreed upon by the Basel Committee on Banking Supervision require our liquidity coverage ratio to surpass certain minimum standards. We calculate our consolidated liquidity coverage ratio (the “Consolidated LCR”) in accordance with the regulation “The Evaluation Criterion on the Sound Management of Liquidity Risk Defined, Based on Banking Law Article 52-25, as One of Criteria for Bank Holding Companies to Evaluate the Soundness of Their Management and the Ones of Their Subsidiaries and Others, which is also One of Evaluation Criteria on the Soundness of the Banks’ Management”(the FSA Notice No. 62 of 2015 (the “Notice No. 62”)).

∎ Key Metrics

KM1: Key Metrics

 

         (millions of yen, except percentages)  
Basel III Template No.        a      b      c      d      e  
       As of
March 31,
2018		      As of
December 31,
2017		      As of
September 30,
2017		      As of
June 30,
2017		      As of
March 31,
2017		  
                                        

Capital

               
1  

Common Equity Tier 1 capital

      7,437,048        7,597,964        7,280,598        7,157,984        7,001,664  
2   Tier 1 capital      9,192,244        9,321,858        9,004,810        8,423,437        8,211,522  
3   Total capital      10,860,440        11,260,104        10,946,675        10,410,297        10,050,953  

Risk weighted assets

               
4   Risk weighted assets      59,528,983        63,414,867        61,695,509        61,785,213        61,717,158  

Capital ratio

               
5  

Common Equity Tier 1 capital ratio

      12.49 %       11.98 %       11.80 %       11.58 %       11.34 % 
6   Tier 1 capital ratio      15.44 %       14.69 %       14.59 %       13.63 %       13.30 % 
7   Total capital ratio      18.24 %       17.75 %       17.74 %       16.84 %       16.28 % 

Capital buffer

               
8  

Capital conservation buffer requirement

      1.87 %       1.25 %       1.25 %       1.25 %       1.25 % 
9  

Countercyclical buffer requirement

      0.01 %       0.00 %       0.00 %       0.00 %       0.00 % 
10  

Bank G-SIB/D-SIB additional requirements

      0.75 %       0.50 %       0.50 %       0.50 %       0.50 % 
11  

Total of bank CET1 specific buffer requirements

      2.63 %       1.75 %       1.75 %       1.75 %       1.75 % 
12  

CET1 available after meeting the bank’s minimum capital requirements

      7.99 %       7.48 %       7.30 %       7.08 %       6.84 % 

Leverage ratio

               
13   Total exposures      214,277,824        217,478,350        217,304,488        208,006,656        207,401,679  
14   Leverage ratio      4.28 %       4.28 %       4.14 %       4.04 %       3.95 % 

Liquidity coverage ratio (LCR)

               
15  

Total HQLA allowed to be included in the calculation

      60,159,630        63,459,113        60,568,697        61,146,475        59,034,682  
16   Net cash outflows      50,079,075        50,808,181        48,025,220        47,132,781        45,611,601  
17   LCR      120.1 %       124.8 %       126.1 %       129.7 %       129.4 % 

 

Note:

   Base III Template No. from 15 to 17 are quarterly averages.

 

2

Table of Contents

Status of Mizuho Financial Group’s Consolidated Capital Adequacy

Following the partial revision of “Matters Separately Prescribed by the Commissioner of the Financial Services Agency Regarding Status of the Adequacy of Equity Capital Pursuant to Article 19-2, Paragraph 1, Item 5, Sub-item (d), etc. of the Ordinance for the Enforcement of the Banking Law,” the disclosure of any information concerning the fiscal year ended March 31, 2018 is made in accordance with the relevant FSA Notice issued after the revision (the “New FSA Notice”). The figures relating to our banking activities for the fiscal year ended March 31, 2017 are disclosed in accordance with the relevant FSA Notice issued before the revision (the “Old FSA Notice”) (See pages 41 to 56 for the disclosure items which are different from those disclosed according to the new FSA Notice).

∎ Scope of Consolidation

(1) Scope of Consolidation for Calculating Consolidated Capital Adequacy Ratio

(A) Difference from the companies included in the scope of consolidation based on consolidation rules for preparation of consolidated financial statements (the “scope of accounting consolidation”)

None as of March 31, 2017 and 2018

(B) Number of consolidated subsidiaries

 

     As of March 31, 2017      As of March 31, 2018  

Consolidated subsidiaries

      139        124  

Our major consolidated subsidiaries are Mizuho Bank, Ltd., Mizuho Trust & Banking Co., Ltd. and Mizuho Securities Co., Ltd.

The following table sets forth information with respect to our principal consolidated subsidiaries as of March 31, 2018:

 

Name

    Country of
organization		     

Main business

    Proportion of
ownership
interest
(%)		      Proportion of
voting
interest
(%)		  

Domestic

            

Mizuho Bank, Ltd.

      Japan      Banking      100.0        100.0  

Mizuho Trust & Banking Co., Ltd.

      Japan      Trust and banking      100.0        100.0  

Mizuho Securities Co., Ltd.

      Japan      Securities      95.8        95.8  

Mizuho Research Institute Ltd.

      Japan      Research and consulting      98.6        98.6  

Mizuho Information & Research Institute Inc.

      Japan      Information technology      91.5        91.5  

Asset Management One Co., Ltd.

      Japan      Investment management      70.0        51.0  

Trust & Custody Services Bank, Ltd.

      Japan      Trust and banking      54.0        54.0  

Mizuho Private Wealth Management Co., Ltd.

      Japan      Consulting      100.0        100.0  

Mizuho Credit Guarantee Co., Ltd.

      Japan      Credit guarantee      100.0        100.0  

Mizuho Realty Co., Ltd.

      Japan      Real estate agency      100.0        100.0  

Mizuho Factors, Limited

      Japan      Factoring      100.0        100.0  

Mizuho Realty One Co., Ltd.

      Japan      Holding company      100.0        100.0  

Defined Contribution Plan Services Co., Ltd.

      Japan      Pension plan-related business      60.0        60.0  

Mizuho-DL Financial Technology Co., Ltd.

      Japan     

Application and Sophistication

of Financial echnology

      60.0        60.0  

UC Card Co., Ltd.

      Japan      Credit card      51.0        51.0  

J.Score CO., LTD.

      Japan      Lending      50.0        50.0  

Mizuho Trust Systems Company, Limited.

      Japan      Subcontracted calculation services, software development      50.0        50.0  

Mizuho Capital Co., Ltd.

      Japan      Venture capital      50.0        50.0  

Overseas

            

Mizuho Americas LLC

      U.S.A.      Holding company      100.0        100.0  

Mizuho Bank (China), Ltd.

      China      Banking      100.0        100.0  

Mizuho International plc

      U.K.      Securities and banking      100.0        100.0  

Mizuho Securities Asia Limited

      China      Securities      100.0        100.0  

Mizuho Securities USA LLC

      U.S.A.      Securities      100.0        100.0  

Mizuho Bank Europe N.V.

      Netherlands      Banking and securities      100.0        100.0  

Banco Mizuho do Brasil S.A.

      Brazil      Banking      100.0        100.0  

Mizuho Trust & Banking (Luxembourg) S.A.

      Luxembourg      Trust and banking      100.0        100.0  

Mizuho Bank (USA)

      U.S.A.      Banking and trust      100.0        100.0  

Mizuho Bank (Switzerland) Ltd

      Switzerland      Banking and trust      100.0        100.0  

Mizuho Capital Markets LLC

      U.S.A.      Derivatives      100.0        100.0  

PT. Bank Mizuho Indonesia

      Indonesia      Banking      99.0        99.0  

(C) Corporations providing financial services for which Article 9 of the FSA Notice No. 20 is applicable

None as of March 31, 2017 and 2018.

(D) Companies that are in the bank holding company’s corporate group but not included in the scope of accounting consolidation and companies that are not in the bank holding company’s corporate group but included in the scope of accounting consolidation

None as of March 31, 2017 and 2018.

(E) Restrictions on transfer of funds or capital within the bank holding company’s corporate group

None as of March 31, 2017 and 2018.

(F) Names of any other financial institutions, etc., classified as subsidiaries or other members of the bank holding company that are deficient in regulatory capital

None as of March 31, 2017 and 2018.

 

3

Table of Contents

∎ Risk-based Capital

(1) Summary of Approach to Assessing Capital Adequacy

In order to ensure that risk-based capital is sufficiently maintained in light of the risk held by us, we regularly conduct the following assessment of capital adequacy in addition to adopting a suitable and effective capital adequacy monitoring structure.

Maintaining a sufficient BIS capital ratio

We confirm our maintenance of a high level of financial soundness by conducting regular evaluations to examine whether our risk-based capital is adequate in qualitative as well as quantitative terms, in light of our business plans and strategic targets to match the increase in risk-weighted assets acquired for growth, in addition to maintaining our capital above the minimum requirements of common equity Tier 1 capital ratio, Tier 1 capital ratio, total capital ratio and capital buffer ratio.

Balancing risk and capital

On the basis of the framework for allocating risk capital, after obtaining the clearest possible grasp of the group’s overall risk exposure, we endeavor to control risk so as to keep it within the range of our business capacity by means of allocating capital that corresponds to the amount of risk to the principal banking subsidiaries, etc., within the bounds of our capital, and we conduct regular assessments to ensure that a sufficient level of capital is maintained for our risk profile. When making these assessments, we calculate the potential losses arising from assumed stress events and risk volumes, which we assess whether they balance with the group’s capital. Stress events are based on risk scenarios that are formulated based on the current economic condition and the economic outlook, etc. and from scenarios such as the occurrence of historical stress events. In addition, we examine whether an appropriate return on risk is maintained in the assessments.

 

4

Table of Contents

(2) Composition of Capital, etc.

(A) Composition of capital disclosure

Composition of capital disclosure (International standard)

 

 
            (Millions of yen)  
            As of March 31, 2017     As of March 31, 2018  

Basel III template

                 Amounts
excluded
under
transitional
arrangements		           Amounts
excluded
under
transitional
arrangements		  
                                 

Common equity Tier 1 capital: instruments and reserves

   (1)                                                                                                            

1a+2-1c-26

  

Directly issued qualifying common share capital plus related stock surplus and retained earnings

       6,905,510          /             7,292,638          /   

1a

  

of which: capital and stock surplus

       3,390,691       /       3,391,471       /  

2

  

of which: retained earnings

       3,614,841       /       4,002,350       /  

1c

  

of which: treasury stock (-)

       4,849       /       5,997       /  

26

  

of which: national specific regulatory adjustments (earnings to be distributed) (-)

       95,173       /       95,186       /  
 

of which: other than above

       —         /       —         /  

1b

  

Subscription rights to common shares

       1,754       /       1,163       /  

3

  

Accumulated other comprehensive income and other disclosed reserves

       1,216,780       304,195       1,677,534       /  

5

  

Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)

       14,537       /       14,344       /  
 

Total of items included in common equity Tier 1 capital: instruments and reserves subject to phase-out arrangements

       22,881       /       /       /  
 

of which: amount allowed in group CET1 capital subject to phase-out arrangements on common share capital issued by subsidiaries and held by third parties

       22,881       /       /       /  
6  

Common equity Tier 1 capital: instruments and reserves

   (A)     8,161,464       /       8,985,680       /  

Common equity Tier 1 capital: regulatory adjustments

   (2)        
8+9  

Total intangible assets (net of related tax liability, excluding those relating to mortgage servicing rights)

       619,806       154,951       794,953       /  

8

  

of which: goodwill (net of related tax liability, including those equivalent)

       79,695       19,923       85,103       /  

9

  

of which: other intangibles other than goodwill and mortgage servicing rights (net of related tax liability)

       540,111       135,027       709,850       /  
10  

Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)

       36,601       9,150       42,352       /  

11

  

Deferred gains or losses on derivatives under hedge accounting

       8,137       2,034       (67,578 )      /  

12

  

Shortfall of eligible provisions to expected losses

       9,381       2,352       61,964       /  

13

  

Securitization gain on sale

       52       13       —         /  

14

  

Gains and losses due to changes in own credit risk on fair valued liabilities

       593       148       3,960       /  

15

  

Net defined benefit asset

       443,158       110,789       691,380       /  

16

  

Investments in own shares (excluding those reported in the net assets section)

       5,473       1,368       1,457       /  

17

  

Reciprocal cross-holdings in common equity

       —         —         —         /  

18

  

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount above the 10% threshold)

       36,595       9,148       20,140       /  

19+20+21

  

Amount exceeding the 10% threshold on specified items

       —         —         —         /  

19

  

of which: significant investments in the common stock of financials

       —         —         —         /  

20

  

of which: mortgage servicing rights

       —         —         —         /  

21

  

of which: deferred tax assets arising from temporary differences (net of related tax liability)

       —         —         —         /  

 

5

Table of Contents

22

   Amount exceeding the 15% threshold on specified items       —         —         —                         /  

23

  

of which: significant investments in the common stock of financials

       —         —         —         /  

24

  

of which: mortgage servicing rights

       —         —         —         /  

25

  

of which: deferred tax assets arising from temporary differences (net of related tax liability)

       —         —         —         /  

27

  

Regulatory adjustments applied to common equity Tier 1 due to insufficient additional Tier 1 and Tier 2 to cover deductions

       —         /       —         /  

28

   Common equity Tier 1 capital: regulatory adjustments   (B)     1,159,800       /       1,548,631       /  

Common equity Tier 1 capital (CET1)

          

29

   Common equity Tier 1 capital (CET1) ((A)-(B))   (C)     7,001,664       /       7,437,048       /  

Additional Tier 1 capital: instruments

   (3)                                                                                                            

30   31a

  

Directly issued qualifying additional Tier 1 instruments plus related stock surplus of which: classified as equity under applicable accounting standards and the breakdown

       —            /          —            /   

30   31b

   Subscription rights to additional Tier 1 instruments       —         /       —         /  

30   32  

  

Directly issued qualifying additional Tier 1 instruments plus related stock surplus of which: classified as liabilities under applicable accounting standards

       760,000       /       1,220,000       /  

30         

  

Qualifying additional Tier 1 instruments plus related stock surplus issued by special purpose vehicles and other equivalent entities

       —         /       —         /  

34-35

  

Additional Tier 1 instruments issued by subsidiaries and held by third parties (amount allowed in group AT1)

       31,786       /       31,317       /  

33+35

  

Eligible Tier 1 capital instruments subject to phase-out arrangements included in additional Tier 1 capital: instruments

       577,500       /       577,500       /  

33

  

of which: directly issued capital instruments subject to phase out from additional Tier 1

       577,500       /       577,500       /  

35

  

of which: instruments issued by subsidiaries subject to phase out

       —         /       —         /  
 

Total of items included in additional Tier 1 capital: instruments subject to phase-out arrangements

       (13,931 )      /       /       /  
 

of which: foreign currency translation adjustments

       (13,931 )      /       /       /  

36

   Additional Tier 1 capital: instruments   (D)     1,355,354       /       1,828,817       /  

Additional Tier 1 capital: regulatory adjustments

 

    

37

   Investments in own additional Tier 1 instruments       —         —         —         /  

38

   Reciprocal cross-holdings in additional Tier 1 instruments       —         —         —         /  

39

  

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued common share capital of the entity (amount above 10% threshold)

       38       9       121       /  

40

  

Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)

       117,600         29,400       73,500       /  
 

Total of items included in additional Tier 1 capital: regulatory adjustments subject to phase-out arrangements

       27,858       /       /       /  

                         

  

of which: goodwill equivalent

       14,954       /       /       /  
 

of which: intangible fixed assets recognized as a result of a merger

       11,717       /       /       /  
 

of which: capital increase due to securitization transactions

       13       /       /       /  
 

of which: 50% of excess of expected losses relative to eligible reserves by banks adopting internal ratings-based approach

       1,172       /       /       /  

42

  

Regulatory adjustments applied to additional Tier 1 due to insufficient Tier 2 to cover deductions

       —         /       —         /  

43

  

Additional Tier 1 capital: regulatory adjustments

   (E)     145,496       /       73,621       /  

Additional Tier 1 capital (AT1)

          

44

  

Additional Tier 1 capital ((D)-(E))

   (F)       1,209,858       /         1,755,195       /  

Tier 1 capital (T1 = CET1 + AT1)

          

     45     

   Tier 1 capital (T1 = CET1 + AT1) ((C)+(F))   (G)     8,211,522       /       9,192,244       /  

 

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Table of Contents

Tier 2 capital: instruments and provisions

   (4)        

46

  

Directly issued qualifying Tier 2 instruments plus related stock surplus of which: classified as equity under applicable accounting standards and the breakdown

       —            /          —            /   

46

  

Subscription rights to Tier 2 instruments

       —         /       —         /  

46

  

Directly issued qualifying Tier 2 instruments plus related stock surplus of which: classified as liabilities under applicable accounting standards

       684,150       /       828,702       /  

46

  

Tier 2 instruments plus related stock surplus issued by special purpose vehicles and other equivalent entities

       168,300       /       159,405       /  

48-49

  

Tier 2 instruments issued by subsidiaries and held by third parties (amount allowed in group Tier 2)

       10,574       /       10,378       /  

47+49

  

Eligible Tier 2 capital instruments subject to phase-out arrangements included in Tier 2: instruments and provisions

       842,133       /       674,824       /  

47

  

of which: directly issued capital instruments subject to phase out from Tier 2

       168,022       /       135,135       /  

49

  

of which: instruments issued by subsidiaries subject to phase out

       674,110       /       539,688       /  

50

  

Total of general allowance for loan losses and eligible provisions included in Tier 2

       6,510       /       4,794       /  

50a

  

of which: general allowance for loan losses

       6,510       /       4,794       /  

50b

  

of which: eligible provisions

       —         /       —         /  
 

Total of items included in Tier 2 capital: instruments and provisions subject to phase-out arrangements

       180,319       /       /       /  

                         

  

of which: 45% of unrealized gains on other securities

       161,221       /       /       /  
 

of which: 45% of revaluation reserve for land

       19,097       /       /       /  

51

   Tier 2 capital: instruments and provisions   (H)       1,891,987       /         1,678,105       /  

Tier 2 capital: regulatory adjustments

                                                                                                              

52

   Investments in own Tier 2 instruments       409       102       1,892       /  

53

   Reciprocal cross-holdings in Tier 2 instruments       —         —         —         /  

54

  

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued common share capital of the entity (amount above the 10% threshold)

       16,413       4,103       8,016       /  

55

  

Significant investments in the capital banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)

       —         —         —         /  
 

Total of items included in Tier 2 capital: regulatory adjustments subject to phase-out arrangements

       35,732       /       /       /  
 

of which: investments in the capital banking, financial and insurance entities

       34,559       /       /       /  
 

of which: 50% of excess of expected losses relative to eligible reserves by banks adopting internal ratings-based approach

       1,172       /       /       /  

57

   Tier 2 capital: regulatory adjustments   (I)     52,555       /       9,908       /  

Tier 2 capital (T2)

          

58

   Tier 2 capital (T2) ((H)-(I))   (J)     1,839,431       /       1,668,196       /  

Total capital (TC = T1 + T2)

          

59

   Total capital (TC = T1 + T2) ((G)+(J))   (K)     10,050,953       /       10,860,440       /  

Risk weighted assets

   (5)        
 

Total of items included in risk weighted assets subject to phase-out arrangements

       260,992       /       /       /  
 

of which: intangible assets (net of related tax liability, excluding those relating to mortgage servicing rights)

       123,310       /       /       /  
 

of which: deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)

       9,150       /       /       /  
 

of which: net defined benefit asset

       110,789       /       /       /  
 

of which: investments in the capital banking, financial and insurance entities

       17,742       /       /       /  

60

   Risk weighted assets   (L)     61,717,158       /       59,528,983       /  

Capital ratio (consolidated)

          

61

   Common equity Tier 1 capital ratio (consolidated) ((C)/(L))       11.34 %      /       12.49 %      /  

 

7

Table of Contents

62

  

Tier 1 capital ratio (consolidated) ((G)/(L))

       13.30 %      /       15.44 %      /  

63

  

Total capital ratio (consolidated) ((K)/(L))

       16.28 %      /       18.24 %      /  

Regulatory adjustments

   (6)        

72

  

Non-significant investments in the capital of other financials that are below the thresholds for deduction (before risk weighting)

       703,872       /       745,717       /  

73

  

Significant investments in the common stock of financials that are below the thresholds for deduction (before risk weighting)

       118,358       /          142,407       /   

74

  

Mortgage servicing rights that are below the thresholds for deduction (before risk weighting)

       —         /       —         /  

75

  

Deferred tax assets arising from temporary differences that are below the thresholds for deduction (before risk weighting)

       182,672       /       185,172       /  

Provisions included in Tier 2 capital: instruments and provisions

   (7)                                                                                                            

76

  

Provisions (general allowance for loan losses)

       6,510       /       4,794       /  

77

  

Cap on inclusion of provisions (general allowance for loan losses)

       46,343       /       43,678       /  

78

  

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) (if the amount is negative, report as “nil”)

       —         /       —         /  

79

  

Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

       299,309       /       284,521       /  

Capital instruments subject to phase-out arrangements

   (8)        

82

  

Current cap on AT1 instruments subject to phase-out arrangements

       1,041,569       /       833,255       /  

83

  

Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) (if the amount is negative, report as “nil”)

       —         /       —         /  

84

  

Current cap on T2 instruments subject to phase-out arrangements

       843,530       /       674,824       /  

85

  

Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) (if the amount is negative, report as “nil”)

       —         /       7,304       /  

                         

            

 

Notes:

  

1.

   The above figures are calculated based on the international standard applied on a consolidated basis under the FSA Notice No. 20.

2.

   In calculating the consolidated capital adequacy ratio, we underwent an examination following the procedures agreed with Ernst & Young ShinNihon LLC, on the basis of “Treatment in implementing examination by agreed-upon procedures for calculating capital adequacy ratio” (Industry Committee Practical Guideline No. 30 of the Japanese Institute of Certified Public Accountants). Note that this is not a part of the accounting audit performed on our consolidated financial statements. This consists of an examination under agreed-upon procedures performed by Ernst & Young ShinNihon LLC on a portion of the internal control structure concerning the calculation of the capital adequacy ratio and a report of the results to us. As such, they do not represent an opinion regarding the capital adequacy ratio itself nor the internal controls related to the calculation of the capital adequacy ratio.

 

8

Table of Contents

(B) Explanation of (A) Composition of capital disclosure

Reconciliation between “Consolidated balance sheet” and items of consolidated balance sheet and “Composition of capital disclosure”

 

    (Millions of yen)          

Items

   Consolidated balance sheet as
in published financial
statements		    

Cross-

reference to
Appended
template

  

Reference # of Basel III
template under the
Composition of capital
disclosure

    As of March 31, 2017     As of March 31, 2018      

(Assets)

                                                                        

Cash and due from banks

     47,129,583       47,725,360      

Call loans and bills purchased

     1,035,746       715,149                                                         

Receivables under resale agreements

     8,967,777       8,080,873      

Guarantee deposits paid under securities borrowing transactions

     3,350,051       4,350,527      

Other debt purchased

     2,745,204       2,713,742      

Trading assets

     10,361,787       10,507,133     6-a  

Money held in trust

     247,583       337,429      

Securities

     32,353,158       34,183,033     2-b, 6-b  

Loans and bills discounted

     78,337,793       79,421,473     6-c  

Foreign exchange assets

     1,828,782       1,941,677      

Derivatives other than for trading assets

     2,170,750       1,807,999     6-d  

Other assets

     4,180,339       4,588,484     6-e  

Tangible fixed assets

     1,136,329       1,111,128      

Intangible fixed assets

     1,045,486       1,092,708     2-a  

Net defined benefit asset

     797,762       996,173     3  

Deferred tax assets

     56,066       47,839     4-a  

Customers’ liabilities for acceptances and guarantees

     5,273,581       5,723,186      

Reserves for possible losses on loans

     (509,175 )      (315,621 )     
 

 

 

    

 

 

      

Total assets

     200,508,610       205,028,300      
 

 

 

    

 

 

      

(Liabilities)

        

Deposits

     120,045,217       125,081,233      

Negotiable certificates of deposit

     10,631,277       11,382,590      

Call money and bills sold

     1,255,172       2,105,293      

Payables under repurchase agreements

     17,969,753       16,656,828      

Guarantee deposits received under securities lending transactions

     1,679,300       1,566,833      

Commercial paper

     789,705       710,391      

Trading liabilities

     7,923,285       8,121,543     6-f  

Borrowed money

     6,307,230       4,896,218     8-a  

Foreign exchange liabilities

     526,053       445,804      

Short-term bonds

     226,348       362,185      

Bonds and notes

     7,564,535       7,544,256     8-b  

Due to trust accounts

     4,784,077       4,733,131      

Derivatives other than for trading liabilities

     1,784,857       1,514,483     6-g  

Other liabilities

     3,883,168       3,685,585      

Reserve for bonus payments

     67,633       66,872      

Reserve for variable compensation

     3,018       3,242      

Net defined benefit liability

     55,236       58,890      

Reserve for director and corporate auditor retirement benefits

     1,327       1,460      

Reserve for possible losses on sales of loans

     298       1,075      

Reserve for contingencies

     5,680       5,622      

Reserve for reimbursement of deposits

     19,072       20,011      

Reserve for reimbursement of debentures

     32,720       30,760      

Reserves under special laws

     2,309       2,361      

Deferred tax liabilities

     337,800       421,002     4-b  

Deferred tax liabilities for revaluation reserve for land

     66,585       66,186     4-c  

Acceptances and guarantees

     5,273,581       5,723,186      
 

 

 

    

 

 

      

Total liabilities

     191,235,249       195,207,054      
 

 

 

    

 

 

      

 

9

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(Net assets)

                                                                                                                          

Common stock and preferred stock

     2,256,275       2,256,548     1-a  

Capital surplus

     1,134,416       1,134,922     1-b  

Retained earnings

     3,615,449       4,002,835     1-c  

Treasury stock

     (4,849 )      (5,997 )    1-d  
 

 

 

    

 

 

      

Total shareholders’ equity

     7,001,291       7,388,309      
 

 

 

    

 

 

      

Net unrealized gains (losses) on other securities

     1,289,985       1,392,392      

Deferred gains or losses on hedges

     10,172       (67,578 )    5  

Revaluation reserve for land

     145,609       144,277      

Foreign currency translation adjustments

     (69,657 )      (85,094 )     

Remeasurements of defined benefit plans

     144,866       293,536      
 

 

 

    

 

 

      

Total accumulated other comprehensive income

     1,520,976       1,677,534       3
 

 

 

    

 

 

      

Stock acquisition rights

     1,754       1,163       1b

Non-Controlling interests

     749,339       754,239     7  
 

 

 

    

 

 

      

Total net assets

     9,273,361       9,821,246      
 

 

 

    

 

 

      

Total liabilities and net assets

     200,508,610       205,028,300      
 

 

 

    

 

 

      

 

Note:

    The regulatory scope of consolidation is the same as the accounting scope of consolidation.

Appended template

1. Shareholders’ equity

(1) Consolidated balance sheet

 

        

(Millions of yen)

      

Ref.

  

Consolidated balance sheet items

    As of March 31, 2017     As of March 31, 2018    

Remarks

1-a

   Common stock and preferred stock      2,256,275       2,256,548    

1-b

   Capital surplus      1,134,416       1,134,922    

1-c

   Retained earnings      3,615,449       4,002,835    

1-d

   Treasury stock      (4,849 )      (5,997 )   
  Total shareholders’ equity      7,001,291       7,388,309    

(2) Composition of capital

       

Basel III
template

       

(Millions of yen)

      
 

Composition of capital disclosure

    As of March 31, 2017     As of March 31, 2018    

Remarks

 

Directly issued qualifying common share capital plus related stock surplus and retained earnings

      7,000,683       7,387,824     Shareholders’ equity attributable to common shares (before adjusting national specific regulatory adjustments (earnings to be distributed))

1a

  

of which: capital and stock surplus

      3,390,691       3,391,471    

2

  

of which: retained earnings

      3,614,841       4,002,350    

1c

  

of which: treasury stock (-)

      4,849       5,997    
 

of which: other than above

      —         —      

31a

  

Directly issued qualifying additional Tier 1 instruments plus related stock surplus of which: classified as equity under applicable accounting standards and the breakdown

      —         —      

 

2. Intangible fixed assets

       

(1) Consolidated balance sheet

       
         (Millions of yen)      

Ref.

  

Consolidated balance sheet items

    As of March 31, 2017     As of March 31, 2018    

Remarks

                      

2-a

   Intangible fixed assets      1,045,486       1,092,708    

2-b

   Securities      32,353,158       34,183,033    
 

of which: share of goodwill of companies accounted for using the equity method

      24,846       14,588     Share of goodwill of companies accounted for using the equity method
  Income taxes related to above      (295,574 )      (312,342 )   

 

10

Table of Contents

(2) Composition of capital

       

Basel III

       

(Millions of yen)

      

template

  

Composition of capital disclosure  

   

As of March 31, 2017

    

As of March 31, 2018

    

Remarks

                      
8  

Goodwill (net of related tax liability, including those equivalent)

      99,619       85,103    

 

9  

Other intangibles other than goodwill and mortgage servicing rights (net of related tax liability)

            675,139            709,850     Software and other
 

Mortgage servicing rights (net of related tax liability)

      —         —      
20  

Amount exceeding the 10% threshold on specified items

      —         —      
24  

Amount exceeding the 15% threshold on specified items

      —         —      
74  

Mortgage servicing rights that are below the thresholds for deduction (before risk weighting)

      —         —      

3. Net defined benefit asset

       

 

(1) Consolidated balance sheet

 

       
        

(Millions of yen)

      

Ref.

  

Consolidated balance sheet items  

   

As of March 31, 2017

    

As of March 31, 2018

    

Remarks

                      

3

  

Net defined benefit asset

      797,762       996,173    
 

Income taxes related to above

      (243,814 )      (304,793 )   

 

(2) Composition of capital

 

       

Basel III
template

  

Composition of capital disclosure  

   

(Millions of yen)

      
    

As of March 31, 2017

    

As of March 31, 2018

    

Remarks

                      
15  

Net defined benefit asset

      553,947       691,380    

 

4. Deferred tax assets

 

       

(1) Consolidated balance sheet

 

       
        

(Millions of yen)

      

Ref.

  

Consolidated balance sheet items  

   

As of March 31, 2017

    

As of March 31, 2018

    

Remarks

                      
4-a  

Deferred tax assets

      56,066       47,839    
4-b  

Deferred tax liabilities

      337,800       421,002    
4-c  

Deferred tax liabilities for revaluation reserve for land

      66,585       66,186    
 

Tax effects on intangible fixed assets

      295,574       312,342    
 

Tax effects on net defined benefit asset

      243,814       304,793    

 

(2) Composition of capital

 

       
Basel III       

(Millions of yen)

      

template

  

Composition of capital disclosure  

    As of March 31, 2017     As of March 31, 2018    

Remarks

                      
10  

Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)

      45,751       42,352     This item does not agree with the amount reported on the consolidated balance sheet due to offsetting of assets and liabilities.
 

Deferred tax assets that rely on future profitability arising from temporary differences (net of related tax liability)

      182,672            185,172     This item does not agree with the amount reported on the consolidated balance sheet due to offsetting of assets and liabilities.
21  

Amount exceeding the 10% threshold on specified items

      —         —      
25  

Amount exceeding the 15% threshold on specified items

      —         —      
75  

Deferred tax assets arising from temporary differences that are below the thresholds for deduction (before risk weighting)

      182,672       185,172    

 

11

Table of Contents

5. Deferred gains or losses on derivatives under hedge accounting

 

(1) Consolidated balance sheet

   

 

         (Millions of yen)      

  Ref.  

  

Consolidated balance sheet items  

    As of March 31, 2017      As of March 31, 2018    

Remarks

                       
5  

Deferred gains or losses on hedges

      10,172        (67,578 )    

(2) Composition of capital

 

  

Basel III
template

        (Millions of yen)      
 

Composition of capital disclosure  

   

As of March 31, 2017

     

As of March 31, 2018

    

Remarks

11  

Deferred gains or losses on derivatives under hedge accounting

             10,172                (67,578 )    

6. Items associated with investments in the capital of financial institutions

 

(1) Consolidated balance sheet

   

 

         (Millions of yen)      

  Ref.  

  

Consolidated balance sheet items  

    As of March 31, 2017     As of March 31, 2018    

Remarks

                      

6-a

   Trading assets      10,361,787        10,507,133     Including trading account securities and derivatives for trading assets            

6-b

  

Securities

      32,353,158       34,183,033    

6-c

  

Loans and bills discounted

      78,337,793       79,421,473    

Including subordinated loans

6-d

  

Derivatives other than for trading assets

      2,170,750       1,807,999    

6-e

  

Other assets

      4,180,339       4,588,484    

Including money invested

6-f

   Trading liabilities      7,923,285       8,121,543     Including trading account securities sold

6-g

  

Derivatives other than for trading liabilities

      1,784,857       1,514,483    

 

(2) Composition of capital

 

  

Basel III
template

        (Millions of yen)      
 

Composition of capital disclosure  

   

As of March 31, 2017

    

As of March 31, 2018

    

Remarks

 

Investments in own capital instruments

      7,353         3,349      

16

  

Common equity Tier 1 capital

      6,842       1,457    

37

  

Additional Tier 1 capital

      —         —      

52

  

Tier 2 capital

      511       1,892    
 

Reciprocal cross-holdings in the capital of banking, financial and insurance entities

      —         —      

17

  

Common equity Tier 1 capital

      —         —      

38

  

Additional Tier 1 capital

      —         —      

53

  

Tier 2 capital

      —         —      
 

Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold)

           770,182            773,996    

18

  

Common equity Tier 1 capital

      45,743       20,140    

39

  

Additional Tier 1 capital

      48       121    

54

  

Tier 2 capital

      20,517       8,016    

72

  

Non-significant investments in the capital of other financials that are below the thresholds for deduction (before risk weighting)

      703,872       745,717    
 

Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions

      265,358       215,907    

19

  

Amount exceeding the 10% threshold on specified items

      —         —      

23

  

Amount exceeding the 15% threshold on specified items

      —         —      

40

  

Additional Tier 1 capital

      147,000       73,500    

55

  

Tier 2 capital

      —         —      

73

  

Significant investments in the common stock of financials that are below the thresholds for deduction (before risk weighting)

      118,358       142,407    

 

12

Table of Contents

7. Non-Controlling interests

 

         

(1) Consolidated balance sheet

 

         
         (Millions of yen)       

Ref.

  

Consolidated balance sheet items  

   

As of March 31, 2017

     

As of March 31, 2018

     

Remarks

                        

7

  

Non-Controlling interests

      749,339        754,239     

 

(2) Composition of capital

 

         

Basel III

        (Millions of yen)       

template

  

Composition of capital disclosure  

    As of March 31, 2017      As of March 31, 2018     

Remarks

                        

5

  

Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)

      14,537         14,344       After reflecting amounts eligible for inclusion (non-controlling interest after adjustments)

30-

31ab-32

  

Qualifying additional Tier 1 instruments plus related stock surplus issued by special purpose vehicles and other equivalent entities

      —          —        After reflecting amounts eligible for inclusion (non-controlling interest after adjustments)

34-35

  

Additional Tier 1 instruments issued by subsidiaries and held by third parties (amount allowed in group AT1)

      31,786        31,317      After reflecting amounts eligible for inclusion (non-controlling interest after adjustments)

46

  

Tier 2 instruments plus related stock surplus issued by special purpose vehicles and other equivalent entities

      168,300        159,405      After reflecting amounts eligible for inclusion (non-controlling interest after adjustments)

48-49

  

Tier 2 instruments issued by subsidiaries and held by third parties (amount allowed in group Tier 2)

      10,574        10,378      After reflecting amounts eligible for inclusion (non-controlling interest after adjustments)

 

8. Other capital instruments

 

         

(1) Consolidated balance sheet

 

                   
         (Millions of yen)       

Ref.

  

Consolidated balance sheet items  

    As of March 31, 2017      As of March 31, 2018     

Remarks

                        

8-a

  

Borrowed money

      6,307,230        4,896,218     

8-b

  

Bonds and notes

      7,564,535        7,544,256     
 

Total

      13,871,765        12,440,475     

 

(2) Composition of capital

 

         

Basel III

        (Millions of yen)       

template

  

Composition of capital disclosure  

    As of March 31, 2017      As of March 31, 2018     

Remarks

                        

32

  

Directly issued qualifying additional Tier 1 instruments plus related stock surplus of which: classified as liabilities under applicable accounting standards

      760,000        1,220,000     

46

  

Directly issued qualifying Tier 2 instruments plus related stock surplus of which: classified as liabilities under applicable accounting standards

      684,150        828,702     

 

Note:

Amounts as of March 31, 2017 in the “Composition of capital disclosure” are based on those before considering amounts under transitional arrangements and include “Amounts excluded under transitional arrangements” disclosed in “(A) Composition of Capital Disclosure” as well as amounts included as regulatory capital. In addition, items for regulatory purposes under transitional arrangements are excluded from this table.

 

13

Table of Contents

∎ Summary of Risk Management and Risk-weighted Assets (RWA)

(1) Summary of Our Group’s Risk Profile, Risk Management Policies/ Procedures and Structure

See page 63 for a summary of our group’s risk profile and risk management policies, etc.

(2) Summary of RWA

(A) OV1: Overview of Risk-weighted Assets (RWA)

 

          (Millions of yen)  
          a      b      c      d  
          RWA      capital requirements  
Basel III
Template No.		         As of
March 31,
2018		      As of
March 31,
2017		      As of
March 31,
2018		      As of
March 31,
2017		  
                                  
1   

Credit risk (excluding counterparty credit risk)

      38,823,030        /        3,275,858        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
2   

Of which: standardized approach (SA)

      1,820,063        /        145,605        /  
3   

Of which: internal rating-based (IRB) approach

      35,420,038        /        3,003,619        /  
  

Of which: significant investments

      —          /        —          /  
  

Of which: estimated residual value of lease transaction

      —          /        —          /  
  

Others

      1,582,929        /        126,634        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
4   

Counterparty credit risk (CCR)

      4,531,171        /        366,994        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
5   

Of which: SA-CCR

      —          /        —          /  
  

Of which: current exposure method

      216,424        /        17,723        /  
6   

Of which: expected positive exposure (EPE) method

      887,843        /        74,632        /  
  

Of which: credit valuation adjustment (CVA) risk

      2,539,780        /        203,182        /  
  

Of which: central counterparty-related

      193,088        /        15,447        /  
  

Others

      694,035        /        56,009        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
7   

Equity positions in banking book under market-based approach

      2,972,073        /        252,031        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
  

Fund exposures–standardized approach

      —          /        —          /  
     

 

 

     

 

 

     

 

 

     

 

 

  
  

Fund exposures–regarded method

      3,515,582        /        297,289        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
11   

Settlement risk

      4,574        /        386        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
12   

Securitization exposures in banking book

      379,016        /        32,003        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
13   

Of which: IRB ratings-based approach (RBA) or IRB internal assessment approach (IAA)

      110,551        /        9,374        /  
14   

Of which: IRB supervisory formula approach (SFA)

      231,492        /        19,630        /  
15   

Of which: SA/simplified supervisory formula approach (SSFA)

      25,711        /        2,056        /  
  

Of which: 1250% risk weight is applied

      11,261        /        941        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
16   

Market risk

      2,470,321        /        197,625        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
17   

Of which: standardized approach (SA)

      1,406,398        /        112,511        /  
18   

Of which: internal model approaches (IMM)

      1,063,922        /        85,113        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
19   

Operational risk

      3,411,289        /        272,903        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
20   

Of which: basic indicator approach

      591,083        /        47,286        /  
21   

Of which: standardized approach

      —          /        —          /  
22   

Of which: advanced measurement approach

      2,820,206        /        225,616        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
23   

Exposures of specified items not subject to regulatory adjustments

      818,950        /        67,224        /  
     

 

 

     

 

 

     

 

 

     

 

 

  
  

Amounts included in RWA subject to phase-out arrangements

      —          /        —          /  
     

 

 

     

 

 

     

 

 

     

 

 

  
24   

Floor adjustment

      —          /        —          /  
     

 

 

     

 

 

     

 

 

     

 

 

  
25   

Total (after applying the scaling factor)

      59,528,983        /        4,762,318        /  
     

 

 

     

 

 

     

 

 

     

 

 

  

 

Note:  
   We disclose the data for the fiscal year ended March 31, 2018 according to the New FSA Notice.

 

14

Table of Contents

(B) Credit Risk-weighted Assets by Asset Class and Ratings Segment

 

     (Billions of yen)  
     As of March 31, 2017      As of March 31, 2018  
     EAD      RWA      Risk
Weight
(%)		      EAD      RWA      Risk
Weight
(%)		  

Internal ratings-based approach

      189,852.0        50,084.2        26.38        188,162.7        47,619.7        25.30  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Corporate, etc.

      164,623.5        31,312.3        19.02        162,853.7        29,536.1        18.13  

Corporate (except specialized lending)

      78,222.1        28,727.3        36.72        79,917.9        27,232.1        34.07  

Ratings A1-B2

      55,538.0        14,486.4        26.08        58,776.0        13,840.5        23.54  

Ratings C1-D3

      20,306.6        12,002.9        59.10        19,376.2        11,569.6        59.71  

Ratings E1-E2

      1,373.3        1,885.3        137.27        1,182.2        1,625.0        137.45  

Ratings E2R-H1

      1,004.0        352.5        35.11        583.3        196.7        33.73  

Sovereign

      80,314.2        1,023.3        1.27        76,803.1        833.9        1.08  

Ratings A1-B2

      80,165.1        928.3        1.15        76,674.5        758.3        0.98  

Ratings C1-D3

      148.6        94.3        63.49        128.2        75.2        58.70  

Ratings E1-E2

      0.3        0.6        164.61        0.3        0.2        82.31  

Ratings E2R-H1

      0.0        0.0        40.50        0.0        0.0        39.56  

Bank

      5,921.5        1,375.8        23.23        5,986.3        1,313.1        21.93  

Ratings A1-B2

      5,337.6        1,036.1        19.41        5,447.4        1,002.1        18.39  

Ratings C1-D3

      582.4        339.2        58.25        537.5        310.5        57.77  

Ratings E1-E2

      0.0        0.0        184.04        0.0        0.0        129.81  

Ratings E2R-H1

      1.4        0.4        29.54        1.2        0.3        29.94  

Specialized lending

      165.6        185.8        112.16        146.3        156.9        107.22  

Retail

      12,235.5        4,541.9        37.12        11,629.8        3,818.0        32.83  

Residential mortgage

      9,388.0        3,096.3        32.98        9,046.0        2,508.1        27.72  

Qualifying revolving loan

      629.2        415.6        66.05        673.7        513.0        76.14  

Other retail

      2,218.2        1,029.9        46.42        1,910.0        796.8        41.72  

Equities

      4,973.3        8,642.9        173.78        5,136.2        8,436.2        164.25  

PD/LGD approach

      4,180.1        6,068.0        145.16        4,162.6        5,279.2        126.82  

Market-based approach

      793.1        2,574.9        324.64        973.5        3,157.0        324.26  

Regarded-method exposure

      1,744.0        3,341.4        191.58        2,102.9        3,716.1        176.70  

Securitizations

      4,009.5        328.9        8.20        4,169.4        371.5        8.91  

Others

      2,265.9        1,916.6        84.58        2,270.5        1,741.5        76.70  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Standardized approach

      17,523.9        3,508.0        20.01        18,603.6        3,294.7        17.71  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

CVA risk

      /        2,272.3        /        /        2,539.7        /  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Central counterparty-related

      /        195.4        /        /        193.0        /  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      207,375.9        56,060.0        27.03        206,766.4        53,647.3        25.94  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

 

Note:

   “Specialized lending” is specialized lending exposure under supervisory slotting criteria.

 

15

Table of Contents

∎ Linkages between Financial Statements and Regulatory Exposures

(A) LI1: Differences between Accounting and Regulatory Scopes of Consolidation and Mapping of Financial Statement Categories with Regulatory Risk Categories

 

    (Millions of yen)  
 

 

  
    As of March 31, 2018  
 

 

  
    a   b         c     d     e     f     g  
 

 

  

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  Carrying values of items:  
  Carrying
values as
reported in
published
financial
statements/		   Carrying
values under
scope of
regulatory
consolidation		         Subject to
credit
risk
framework		     Subject to
counterparty
credit risk
framework		     Subject to
the
securitization
framework		     Subject to
the market
risk
framework		     Not subject to
capital
requirements
or subject to
deduction
from capital		  

Assets

              

Cash and Due from Banks

   47,725,360                47,725,360       —         —         —         —    

Call Loans and Bills Purchased

   715,149                715,149       —         —         —         —    

Receivables under Resale Agreements

   8,080,873                —         8,080,873       —         —         —    

Guarantee Deposits Paid under Securities Borrowing Transactions

   4,350,527                —         4,350,527       —         —         —    

Other Debt Purchased

   2,713,742                2,127,247       —         551,092       —         35,402  

Trading Assets

   10,507,133                —         5,318,732       —         10,507,133       2,249  

Money Held in Trust

   337,429                337,429       —         —         —         —    

Securities

   34,183,033                32,788,339       —         1,287,391       —         107,303  

Loans and Bills Discounted

   79,421,473                77,937,924       1,305       1,475,430       —         6,812  

Foreign Exchange Assets

   1,941,677                1,941,677       —         —         —         —    

Derivatives Other than for Trading Assets

   1,807,999                —         1,807,999       —         —         —    

Other Assets

   4,588,484                1,549,959       1,936,112       4,161       —         1,098,251  

Tangible Fixed Assets

   1,111,128                1,111,128       —         —         —         —    

Intangible Fixed Assets

   1,092,708                312,342       —         —         —         780,365  

Net Defined Benefit Asset

   996,173                304,793       —         —         —         691,380  

Deferred Tax Assets

   47,839                5,487       —         —         —         42,352  

Customers’ Liabilities for Acceptances and Guarantees

   5,723,186                5,722,952       234       —         —         —    

Reserves for Possible Losses on Loans

   (315,621)               (314,330 )      —         —         —         (1,291 ) 
 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   205,028,300                172,265,461       21,495,785       3,318,075       10,507,133       2,762,827  
 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

              

Deposits

   125,081,233                —         —         —         —         125,081,233  

Negotiable Certificates of Deposit

   11,382,590                —         —         —         —         11,382,590  

Call Money and Bills Sold

   2,105,293                —         —         —         —         2,105,293  

Payables under Repurchase Agreements

   16,656,828                —         16,656,828       —         —         —    

Guarantee Deposits Received under Securities Lending Transactions

   1,566,833                —         1,566,833       —         —         —    

Commercial Paper

   710,391                —         —         —         —         710,391  

Trading Liabilities

   8,121,543                —         4,936,441       —         8,121,543       —    

Borrowed Money

   4,896,218                —         —         —         —         4,896,218  

Foreign Exchange Liabilities

   445,804                —         —         —         —         445,804  

Short-term Bonds

   362,185                —         —         —         —         362,185  

Bonds and Notes

   7,544,256                —         —         —         —         7,544,256  

Due to Trust Accounts

   4,733,131                —         —         —         —         4,733,131  

Derivatives other than for trading liabilities

   1,514,483                —         1,514,483       —         —         —    

Other Liabilities

   3,685,585                —         76,599       —         —         3,608,986  

Reserve for Bonus Payments

   66,872                —         —         —         —         66,872  

Reserve for variable compensation

   3,242                —         —         —         —         3,242  

Net Defined Benefit Liability

   58,890                —         —         —         —         58,890  

Reserve for Director and Corporate Auditor Retirement Benefits

   1,460                —         —         —         —         1,460  

Reserve for possible losses on sales of loans

   1,075                —         —         —         —         1,075  

Reserve for contingencies

   5,622                56       —         —         —         5,566  

Reserve for reimbursement of deposits

   20,011               —         —         —         —         20,011  

Reserve for reimbursement of debentures

   30,760                —         —         —         —         30,760  

Reserves under Special Laws

   2,361                —         —         —         —         2,361  

Deferred Tax Liabilities

   421,002                —         —         —         —         421,002  

Deferred Tax Liabilities for Revaluation Reserve for Land

   66,186                —         —         —         —         66,186  

Acceptances and Guarantees

   5,723,186                —         —         —         —         5,723,186  
 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

   195,207,054                56       24,751,187       —         8,121,543       167,270,708  
 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Notes:   
1.    Since the scope of accounting consolidation and that of regulatory consolidation are the same, the column (a) and (b) have been combined.
2.    Market risk includes foreign exchange risk and commodities risk in the banking book, but only those items in the trading book are recorded.

 

 

16

Table of Contents

(B) LI2: Main Sources of Differences between Regulatory Exposure Amounts and Carrying Values in Financial Statements

 

         (Millions of yen)  
         As of March 31, 2018  
         a            b     c     d      e  
         Total            Items subject to:  
              Credit risk
framework		     Counterparty
credit risk
framework		     Securitization
framework		      Market risk
framework		  
1  

Asset carrying value amount under scope of regulatory consolidation (as per template LI1)

      202,265,473          172,265,461       21,495,785       3,318,075        10,507,133  
2  

Liabilities carrying value amount under regulatory scope of consolidation (as per template LI1)

      27,936,345          56       24,751,187       —          8,121,543  
3  

Total net amount under regulatory scope of consolidation

      174,329,127          172,265,405       (3,255,401 )      3,318,075        2,385,589  
4  

Off-balance sheet amounts

      17,311,153          16,446,822       —         864,331        —    
5  

Differences due to consideration of provision for loan losses and write-offs

      401,252          401,252       —         —          —    
6  

Differences due to derivative transactions, etc.

      1,887,980          —         1,887,980       —          —    
7  

Differences due to repurchase transactions

      17,310,011          —         17,310,011       —          —    
8  

Other differences

      (523,103 )         (907,644 )      —         —          —    
9  

Exposure amounts considered for regulatory purposes

      210,716,420          188,205,836       15,942,589       4,182,406        2,385,589  

 

Notes:  
1.   Column (a) is not necessarily equal to the sum of columns (b) to (e) due to assets being riskweighted more than once.
2.   Differences between regulatory exposure amounts and carrying values in consolidated financial statements and the main sources of the differences are as follows.
 

 

•   Off-balance sheet amounts correspond to the differences produced mainly by adding exposures to undrawn commitments and by multiplying customer liabilities for acceptances and guarantees by the credit conversion factor (CCF) assigned to off-balance sheet items under the regulatory capital requirements.

 

•   Differences due to consideration of provision for loan losses, and write-offs are produced mainly by adding general provisions for loan losses, specific provisions for loan losses and partial direct bad debt write-offs to those assets subject to the advanced internal ratings-based approach.

 

•   Differences due to derivative transactions, etc. are produced mainly by incorporating future market value fluctuations and the effect of netting into regulatory exposure amounts. Derivative transactions, etc. include long-settlement transactions.

 

•   Differences due to repurchase transactions are mainly produced by adding the exposure amounts related to assets pledged as collateral and considering the effect of netting and collateral.

 

•   Other differences are produced mainly by considering the offsetting of deferred tax assets against deferred tax liabilities and the regulatory recognized effectiveness of hedging and making regulatory prudential adjustments.

 

17

Table of Contents

∎ Credit Risk

(1) Summary of Risk Profile, Risk Management Policies/ Procedures and Structure

See pages 64 to 66 for a summary of our credit risk profile and credit risk management policies, etc.

(2) Summary of Provision for Loan Losses and Charge-offs

See page 65 for a summary of provision for loan losses and charge-offs.

(3) Quantitative Disclosure on Credit Risk

Counterparty credit risk exposures, securitization exposures, and regarded-method exposures are excluded from the amount of credit risk exposures below.

(A) CR1: Credit Quality of Assets

 

 
          (Millions of yen)  
          As of March 31, 2018  
          a      b      c      d  
          Gross carrying values of                
          Defaulted
    exposures    		      Non-defaulted
exposures		          Reserve          Net values
(a+b-c)		  
   On-balance sheet exposures            
1   

Loans

      645,060        77,305,616        271,369        77,679,307  
2   

Debt securities

      5,946        26,116,905        —          26,122,851  
3   

Other on-balance sheet debt exposures

      2,652        51,697,897        2,526        51,698,023  
     

 

 

     

 

 

     

 

 

     

 

 

  
4   

Total on-balance sheet exposures (1+2+3)

      653,659        155,120,419        273,896        155,500,182  
     

 

 

     

 

 

     

 

 

     

 

 

  
   Off-balance sheet exposures            
5   

Guarantees

      13,776        5,709,421        30,819        5,692,378  
6   

Commitments

      15,249        25,189,759        —          25,205,009  
     

 

 

     

 

 

     

 

 

     

 

 

  
7   

Total off-balance sheet exposures (5+6)

      29,026        30,899,180        30,819        30,897,388  
     

 

 

     

 

 

     

 

 

     

 

 

  
   Total            
     

 

 

     

 

 

     

 

 

     

 

 

  
8   

Total assets (4+7)

      682,685        186,019,600        304,715        186,397,570  
     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

  

1.

   Other on-balance sheet debt exposures include deposits, call loans, bills purchased, other debt purchased, money held in trust and foreign exchange assets, etc.

2.

   Defaulted exposures include restructured loans, loans past due for three months or more, loans to bankrupt borrowers and so on.

3.

   Reserve corresponds to the amount of reserves for possible loan losses

 

18

Table of Contents

(B) Breakdown of Credit Risk Exposures

(a) Breakdown by Geographical Area

 

     (Billions of yen)  
     As of March 31, 2018  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Others      Total  

Domestic

      62,042.2        21,449.0        37,376.2        120,867.5  
  

 

 

     

 

 

     

 

 

     

 

 

  

Overseas

      39,785.8        9,122.3        10,527.5        59,435.7  

Asia

      10,263.4        1,961.2        1,947.9        14,172.7  

Central and South America

      2,947.5        52.0        1,136.3        4,135.9  

North America

      14,172.5        5,074.6        5,917.4        25,164.6  

Eastern Europe

      346.0        —          10.0        356.1  

Western Europe

      7,876.3        1,313.7        844.5        10,034.6  

Other areas

      4,179.8        720.5        671.1        5,571.5  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      101,828.0        30,571.3        47,903.8        180,303.2  
  

 

 

     

 

 

     

 

 

     

 

 

  

Standardized approach portion

      /        /        /        16,604.4  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

 

  1. Standardized approach portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit RWA

 

  2. Exposure to non-Japanese residents is included in Overseas.

 

  3. Others include cash, deposits, call loans, other debt purchased, money held in trust, foreign exchange assets and other assets, etc.

(b) Breakdown by Industry

 

     (Billions of yen)  
     As of March 31, 2018  
     Loans, commitments and
other  non-derivative
off-balance-sheet exposures		      Securities      Others      Total  

Manufacturing

      22,348.0        2,335.3        551.1        25,234.5  

Construction

      1,834.4        235.7        65.5        2,135.6  

Real estate

      9,576.2        814.1        18.0        10,408.5  

Service industries

      5,455.8        440.1        714.2        6,610.2  

Wholesale and retail

      9,536.2        755.6        744.0        11,036.0  

Finance and insurance

      13,028.8        2,395.8        3,706.3        19,131.0  

Individuals

      12,145.6        9.9        114.1        12,269.6  

Other industries

      25,827.4        8,314.1        9,790.1        43,931.7  

Japanese Government; Bank of Japan

      2,075.1        15,270.3        32,200.0        49,545.6  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      101,828.0        30,571.3        47,903.8        180,303.2  
  

 

 

     

 

 

     

 

 

     

 

 

  

Standardized approach portion

      /        /        /        16,604.4  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

 

  1. Standardized approach portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit RWA.

 

  2. Others include cash, deposits, call loans, other debt purchased, money held in trust, foreign exchange assets and other assets, etc.

(c) Breakdown by Residual Contractual Maturity

 

     (Billions of yen)  
     As of March 31, 2018  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Others      Total  

Less than one year

      30,139.5        10,117.3        6,135.9        46,392.7  

From one year to less than three years

      22,692.1        4,828.9        789.9        28,311.0  

From three years to less than five years

      20,637.6        3,738.5        14.5        24,390.7  

Five years or more

      27,872.8        7,042.5        165.4        35,080.9  

Other than above

      485.8        4,843.9        40,798.0        46,127.8  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      101,828.0        30,571.3        47,903.8        180,303.2  
  

 

 

     

 

 

     

 

 

     

 

 

  

Standardized approach portion

      /        /        /        16,604.4  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

 

  1. Standardized approach portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit RWA

 

  2. Others include cash, deposits, call loans, other debt purchased, money held in trust, foreign exchange assets and other assets, etc.

 

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Table of Contents

(C) Exposure to Obligors Claims of Whom Meet the Stipulations in the Article 4 Paragraph 2, 3 or 4 of the Ordinance for Enforcement of the Act on Emergency Measures for the Revitalization of the Financial Functions Enacted in Japan

 

(a) Breakdown by Geographical Area   

 

     (Billions of yen)  
     As of March 31, 2018  
     Exposure      Reserve      Write-Offs  

Domestic

      598.8                  121.9                    13.7  
  

 

 

     

 

 

     

 

 

  

Overseas

                193.0        35.9        1.4  

Asia

      28.6        2.4        0.0  

Central and South America

      63.1        4.3        —    

North America

      19.9        0.3        —    

Eastern Europe

      0.4        0.4        —    

Western Europe

      71.4        24.8        1.3  

Other areas

      9.2        3.4        —    
  

 

 

     

 

 

     

 

 

  

Total

      791.8        157.8        15.2  
  

 

 

     

 

 

     

 

 

  

Standardized approach portion

      14.1        6.9        0.3  
  

 

 

     

 

 

     

 

 

  

 

Note:

Standardized approach portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit RWA

 

(b) Breakdown by Industry   

 

     (Billions of yen)  
     As of March 31, 2018  
     Exposure      Reserve      Write-Offs  

Manufacturing

                190.9                    50.4                      2.8  

Construction

      7.8        0.8        0.1  

Real estate

      43.5        1.8        0.2  

Service industries

      73.6        12.9        1.9  

Wholesale and retail

      198.2        55.0        5.7  

Finance and insurance

      21.5        1.9        —    

Individuals

      103.3        12.3        3.3  

Other industries

      152.6        22.4        0.8  
  

 

 

     

 

 

     

 

 

  

Total

      791.8        157.8        15.2  
  

 

 

     

 

 

     

 

 

  

Standardized approach portion

      14.1        6.9        0.3  
  

 

 

     

 

 

     

 

 

  

 

Note:

Standardized approach portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit RWA.

(D) Exposure by Past Due Period

 

(Billions of yen)

  

As of March 31, 2018

  

Less than one month

    From one month to
less
than two months		      From two months to
less
than three months		      Three months or
more		      Total  

 

                    100.7                  

      46.1        15.1        29.4        191.5  

 

Note:

Excluding claims under bankruptcy or substantial bankruptcy stipulated in the Article 4 paragraph 2 of the Ordinance for Enforcement of the Act on Emergency Measures for the Revitalization of the Financial Functions as well as high risk claims stipulated in the Article 4 paragraph 3.

(E) Exposure to Obligors Claims of Whom have been Restructured for the Purpose of Corporate Restructuring or Supporting the Customer

 

(Billions of yen)

As of March 31, 2018

           
             

Exposure

   

 

    Amount of exposure for which loss    

reserve has increased as a result of

restructuring of lending terms

   

                             Others                            

 

 

    322.7                                                                      

    280.6    42.0

 

Notes:

Excluding claims under bankruptcy or substantial bankruptcy stipulated in the Article 4 paragraph 2 of the Ordinance for Enforcement of the Act on Emergency Measures for the Revitalization of the Financial Functions, high risk claims stipulated in the Article 4 paragraph 3 or claims overdue for more than three months stipulated in the Article 4 paragraph 4.

 

20

Table of Contents

(4) Credit Risk under Internal Ratings-Based (IRB) Approach

(i) Summary of Internal Ratings-Based (IRB) Approach

We have adopted Advanced Internal Ratings-Based (AIRB) Approach as a method to calculate credit risk weighted assets (RWA) since March 31, 2009. The following business units have adopted AIRB approach:

Mizuho Financial Group, Inc., Mizuho Bank, Ltd., Mizuho Trust & Banking Co., Ltd., Mizuho Credit Guarantee Co., Ltd., Mizuho Trust Realty Company Limited, Mizuho Bank (China), Mizuho Bank (USA), Ltd., Mizuho Bank Europe N.V., and Mizuho Capital Markets LLC.

Note: Special purpose companies (SPCs) controlled by the above companies have also adopted the AIRB approach due to their business operations integrated with their parent companies.

The application scope of AIRB is determined through taking into account the importance for each business unit, such as the ratio of its credit RWA to that of the entire group. AIRB is generally applied to those assets held by the business units that have adopted AIRB except for some asset classes considered immaterial for the purpose of calculating credit RWA. In addition, AIRB is used for all equity exposures and credit RWA exposures under Regarded-Method regardless of what approach the business unit has adopted. The standardized approach will be applied to any of those business units and asset classes that do not meet the above conditions.

(ii) Summary of Our Internal Rating System

See page 65 for a summary of our internal rating system and rating assignment procedures.

The following table sets forth information with respect to the definition of obligor ratings:

 

Obligor ratings

(major category)

      Definition of ratings           Classification

 

  A1–A3

              

 

Obligors whose certainty of debt fulfillment is very high, hence their level of credit risk is excellent.

       Investment grade zone
  B1–B2               Obligors whose certainty of debt fulfillment poses no problems for the foreseeable future, hence their level of credit risk is sufficient.      
  C1–C3               Obligors whose certainty of debt fulfillment and their level of credit risk pose no problems for the foreseeable future.       Non-investment grade zone
  D1–D3               Obligors whose current certainty of debt fulfillment poses no problems, however, their resistance to future changes in business environment is low.      
  E1               Obligors who require close watching going forward because there are problems with their borrowing conditions, such as reduced or suspended interest payments, problems with fulfillment such as de facto postponements of principal or interest payments, or problems with their financial positions as a result of their poor or unstable business conditions.      
  E2              
     R *            
  F1               Obligors who are not yet bankrupt but are in financial difficulties and are deemed to be very likely to go bankrupt in the future because they are finding it difficult to make progress in implementing their management improvement plans (including obligors who are receiving ongoing support from financial institutions).       Default

 

 

 

  G1               Obligors who have not yet gone legally or formally bankrupt but who are substantially bankrupt because they are in serious financial difficulties and are not deemed to be capable of restructuring.      
  H1               Obligors who have already gone bankrupt, from both a legal and/or formal perspective.      
* Obligors who have loans in need of monitoring (restructured loans and loans past due for three months or more) out of the obligors who require close watching going forward

 

Estimation of parameters and validation

We use our own estimates for the parameters indicated below in the calculation of credit RWA under the Basel Framework. We generally validate the parameters by backtesting or other methods on an annual basis. Methods of estimation and validation as well as results are approved by the Chief Risk Officer.

 

PD

    Probability of default (likelihood of default of an obligor over a period of one year)

LGD

    Loss given default

EAD

    Exposure at default

The definition of default conforms to the Notice issued by Japan’s Financial Services Agency.

Details of Estimates:

We estimate PD of corporate, sovereign and bank exposures per obligor rating, and that of retail exposures per pool allocations. In making estimations, we make conservative adjustments such as accounting for estimation error on the long-term average of internal default records. We supplement estimations for low default portfolios with external data. We apply the regulatory floor PD (0.03%) to A1-rated obligors in the measurement of credit RWA, except for sovereign exposures. The estimated parameters in almost all the PD categories such as obligor rating or pool allocations exceeded actual defaults in the last three years. The differences stemmed from such reasons as: actual defaults in the last few years were lower than the long-term average of the defaults over the entire period, which was the basis for our estimation; conservative adjustments have been made to estimated parameters.

We estimate LGD based on obligor classifications in our self-assessments or pool allocations, and protection coverage. For LGD per obligor classifications, we estimate LGD under normal economic circumstances based on prior defaulted obligor data, making adjustments in consideration of periods of economic downturn using stochastic methods. Our estimation is based on validation of the time between the default event and the closure of the exposure as well as LGD for low default portfolios etc. With regard to protection, we estimate LGD per type of collateral using some external data.

We estimate EAD based on prior defaulted obligor data.

(iii) Asset Class-based EAD Ratios to the Total EAD by Credit RWA Calculation Approach

 

     As of March 31, 2018  

Internal Ratings-based Approach

      91.18 % 

Corporate

      79.20 % 

Retail

      6.24 % 

Equities

      2.75 % 

Purchase Receivables

      1.75 % 

Others

      1.21 % 
  

 

 

  

Standardized Approach

      8.81 % 
  

 

 

  

Total

      100.00 % 
  

 

 

  

 

Notes:

  

1.

   Counterparty credit risk exposures, securitization exposures, and regarded-method exposures are excluded from the amount of credit risk exposures above.

2.

   As for any portfolio to which the standardized approach is applied, exposure instead of EAD is used for calculation.

 

21

Table of Contents

(iv) Quantitative Disclosure on Credit Risk under Internal Ratings-based Approach

(A) CR6: IRB–Credit Risk Exposures by Portfolio and PD Range

 

         (Millions of yen, %, number in the thousands, year)  
         As of March 31, 2018  
         a     b     c     d     e     f     g     h     i     j     k     l  

PD scale

   Original
on-balance
sheet
gross
exposure		     Off-
balance
sheet
exposures
pre CCF		     Average
CCF		     EAD
post CRM
and
post-CCF		     Average
PD		     Number
of
obligors		     Average
LGD		     Average
maturity		     RWA     RWA
density		     EL     Provisions  
                                                                              
  

Sovereign

 

1   

0.00 to <0.15

     65,282,123       493,305       78.14       67,094,685       0.00       0.3       37.99       1.6       633,434       0.94       828       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     30,742       3,142       75.00       9,343       0.27       0.0       37.97       3.5       4,931       52.77       9       /  
4   

0.50 to <0.75

     76,127       14,762       75.00       76,646       0.50       0.0       37.97       1.1       35,076       45.76       146       /  
5   

0.75 to <2.50

     80,202       163       75.00       28,798       1.46       0.0       37.44       1.6       22,058       76.59       158       /  
6   

2.50 to <10.00

     62,602       9,186       75.00       947       3.30       0.0       37.97       2.6       1,068       112.71       11       /  
7   

10.00 to <100.00

     16,952       26       75.00       217       15.16       0.0       8.17       1.1       83       38.66       2       /  
8   

100.00 (Default)

     1,819       —         —         19       100.00       0.0       28.17       1.2       7       37.33       4       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     65,550,571       520,586       77.97       67,210,657       0.00       0.3       37.99       1.6       696,660       1.03       1,163       792  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Banks

 

1   

0.00 to <0.15

     3,444,364       704,050       72.47       4,274,768       0.06       0.3       37.38       1.4       693,677       16.22       1,011       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     106,079       34,292       83.00       157,228       0.27       0.0       34.08       1.5       45,560       28.97       123       /  
4   

0.50 to <0.75

     197,750       55,035       72.89       211,024       0.50       0.0       36.75       1.4       103,707       49.14       378       /  
5   

0.75 to <2.50

     130,564       9,911       75.32       138,643       1.00       0.0       36.73       1.4       102,512       73.93       504       /  
6   

2.50 to <10.00

     20,652       18,128       67.96       24,045       3.13       0.0       40.38       2.2       28,335       117.84       304       /  
7   

10.00 to <100.00

     —         —         —         —         —         —         —         —         —         —         —         /  
8   

100.00 (Default)

     1,287       —         —         1,287       100.00       0.0       96.57       4.9       363       28.25       1,214       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     3,900,699       821,418       72.87       4,806,998       0.16       0.5       37.26       1.4       974,158       20.26       3,536       2,408  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Corporate (except SME and specialized lending)

 

1   

0.00 to <0.15

     35,728,142       21,717,226       73.81       52,701,719       0.07       6.5       37.97       2.4       11,485,859       21.79       15,786       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     4,154,221       1,464,926       75.16       4,954,125       0.27       5.3       33.22       2.6       1,978,399       39.93       4,556       /  
4   

0.50 to <0.75

     3,335,203       874,325       74.03       3,808,160       0.50       3.8       33.57       2.7       2,073,698       54.45       6,434       /  
5   

0.75 to <2.50

     4,212,757       926,478       75.97       4,518,372       1.18       5.2       31.97       2.6       3,145,660       69.61       17,169       /  
6   

2.50 to <10.00

     1,967,931       684,281       70.34       1,912,682       3.86       1.9       32.58       3.0       2,026,392       105.94       24,920       /  
7   

10.00 to <100.00

     478,359       172,021       77.99       418,948       15.16       0.7       28.23       2.2       574,489       137.12       17,943       /  
8   

100.00 (Default)

     420,603       22,230       80.22       414,611       100.00       0.7       38.96       2.1       127,172       30.67       151,385       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     50,297,219       25,861,490       73.92       68,728,619       0.99       24.3       36.78       2.5       21,411,672       31.15       238,196       162,210  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

SME

 

1   

0.00 to <0.15

     82,869       20,926       74.99       98,562       0.07       0.0       31.64       2.3       14,696       14.91       24       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     552,499       29,152       73.71       562,058       0.27       3.0       24.31       2.8       142,029       25.26       378       /  
4   

0.50 to <0.75

     688,348       26,430       74.25       690,992       0.50       3.3       23.91       3.0       229,938       33.27       831       /  
5   

0.75 to <2.50

     1,243,471       29,192       75.43       1,226,916       1.19       5.9       20.75       3.4       491,630       40.07       3,124       /  
6   

2.50 to <10.00

     454,790       12,354       76.30       446,427       3.25       1.7       19.05       3.7       214,824       48.12       2,802       /  
7   

10.00 to <100.00

     147,430       5,173       92.75       140,309       15.16       0.7       17.98       3.1       106,804       76.12       3,828       /  
8   

100.00 (Default)

     146,588       623       66.96       137,093       100.00       0.6       42.41       2.2       43,356       31.62       54,678       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     3,315,998       123,853       75.47       3,302,360       5.83       15.4       22.89       3.2       1,243,280       37.64       65,667       44,718  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Specialized Lending

 

1   

0.00 to <0.15

     2,375,330       262,272       77.84       2,206,165       0.09       0.4       36.49       4.3       707,374       32.06       759       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     386,629       139,797       77.89       373,281       0.27       0.0       38.49       4.1       219,941       58.92       397       /  
4   

0.50 to <0.75

     230,853       74,918       77.70       215,900       0.50       0.0       43.42       4.1       185,680       86.00       471       /  
5   

0.75 to <2.50

     413,034       107,078       75.36       331,811       1.02       0.0       38.49       4.5       335,100       100.99       1,312       /  
6   

2.50 to <10.00

     76,132       14,241       76.45       51,744       4.38       0.0       38.19       3.5       68,274       131.94       867       /  
7   

10.00 to <100.00

     40,737       1,342       94.02       9,364       15.16       0.0       37.97       3.9       18,836       201.13       539       /  
8   

100.00 (Default)

     29,001       389       100.00       25,293       100.00       0.0       64.04       4.2       12,473       49.31       15,201       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     3,551,720       600,039       77.41       3,213,563       1.13       0.6       37.64       4.2       1,547,680       48.16       19,549       13,313  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Equities (PD/LGD approach)

 

1   

0.00 to <0.15

     3,704,926       21,305       100.00       3,726,232       0.05       1.0       90.00       5.0       3,795,623       101.86       /       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         /       /  
3   

0.25 to <0.50

     90,067       —         —         90,067       0.27       0.5       90.00       5.0       142,515       158.23       /       /  
4   

0.50 to <0.75

     43,662       —         —         43,662       0.50       0.3       90.00       5.0       89,021       203.88       /       /  
5   

0.75 to <2.50

     40,387       —         —         40,387       1.15       0.2       90.00       5.0       107,668       266.58       /       /  
6   

2.50 to <10.00

     113,095       —         —         113,095       3.76       0.0       90.00       5.0       425,736       376.44       /       /  
7   

10.00 to <100.00

     915       —         —         915       15.16       0.0       90.00       5.0       5,851       638.79       /       /  
8   

100.00 (Default)

     5,710       —         —         5,710       100.00       0.1       90.00       5.0       64,245       1,125.00       /       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

         3,998,766              21,305       100.00           4,020,072       0.33              2.3       90.00       5.0       4,630,663       115.18       /       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

22

Table of Contents

(-Continued)

 

         (Millions of yen, %, number in the thousands, year)  
         As of March 31, 2018  
         a     b     c     d     e     f     g     h     i     j     k     l  

PD scale

   Original
on-balance
sheet
gross
exposure		     Off-
balance
sheet
exposures
pre CCF		     Average
CCF		     EAD
post CRM
and
post-CCF		     Average
PD		     Number
of
obligors		     Average
LGD		     Average
maturity		     RWA     RWA
density		     EL     Provisions  
                                                                              
  

Purchased receivables (Corporate, etc.)–Default Risk Equivalent

 

1   

0.00 to <0.15

     2,148,219       701,913       75.14       2,671,876       0.08       0.9       38.23       1.9       472,908       17.69       818       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     129,026       94,175       77.74       202,240       0.27       0.2       37.89       2.0       80,622       39.86       212       /  
4   

0.50 to <0.75

     102,644       31,136       79.27       127,326       0.50       0.1       37.89       1.8       66,997       52.61       242       /  
5   

0.75 to <2.50

     83,546       28,528       77.42       105,635       1.04       0.1       37.88       2.3       80,956       76.63       419       /  
6   

2.50 to <10.00

     122,256       30,434       75.58       144,774       5.78       0.0       37.97       1.4       177,211       122.40       3,180       /  
7   

10.00 to <100.00

     1,163       18,484       75.71       15,159       15.16       0.0       37.97       1.6       27,179          179.28       873       /  
8   

100.00 (Default)

     1,720       —         —         1,720       100.00       0.0       93.53       1.0       521       30.29       1,567       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     2,588,578       904,673       75.65       3,268,735       0.51       1.6       38.20       1.9       906,398       27.72       7,314       4,980  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Purchased receivables (Retail)–Default Risk Equivalent

 

1   

0.00 to <0.15

     —         —         —         —         —         —         —         —         —         —         —         /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     —         —         —         —         —         —         —         —         —         —         —         /  
4   

0.50 to <0.75

     —         —         —         —         —         —         —         —         —         —         —         /  
5   

0.75 to <2.50

     —         —         —         —         —         —         —         —         —         —         —         /  
6   

2.50 to <10.00

     —         —         —         —         —         —         —         —         —         —         —         /  
7   

10.00 to <100.00

     —         —         —         —         —         —         —         —         —         —         —         /  
8   

100.00 (Default)

     —         —         —         —         —         —         —         —         —         —         —         /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     —         —         —         —         —         —         —         —         —         —         —         —    
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Purchased receivables (Dilution Risk Equivalent)

 

1   

0.00 to <0.15

     895,557       16,505       100.00       912,062       0.02       0.1       7.96       —         166,817       18.29       411       /  
2   

0.15 to <0.25

     —         —         —         —         —         —         —         —         —         —         —         /  
3   

0.25 to <0.50

     11,735       —         —         11,735       0.27       0.0       37.97       —         3,654       31.13       12       /  
4   

0.50 to <0.75

     17,229       —         —         17,229       0.50       0.0       37.31       —         7,609       44.16       32       /  
5   

0.75 to <2.50

     97,240       5,881       100.00       103,122       1.39       0.0       19.96       —         69,059       66.96       463       /  
6   

2.50 to <10.00

     11,811       —         —         11,811       3.03       0.0       8.82       —         11,116       94.11       140       /  
7   

10.00 to <100.00

     923       —         —         923       15.16       0.0       37.97       —         1,553       168.25       53       /  
8   

100.00 (Default)

     2,139       —         —         2,139       100.00       0.0       47.79       —         1,087       50.85       935       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     1,036,637       22,387       100.00       1,059,024       0.41       0.1       10.06       —         260,898          24.63       2,050       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Retail –qualifying revolving retail exposures (QRRE)

 

1   

0.00 to <0.15

     —         —         —         0       0.13       0.0       78.04       /       0       6.01       0       /  
2   

0.15 to <0.25

     —         —         —         33       0.18       0.4       77.05       /       2       7.79       0       /  
3   

0.25 to <0.50

     —         —         —         60       0.34       2.0       78.04       /       7       12.85       0       /  
4   

0.50 to <0.75

     —         —         —         —         —         —         —         /       —         —         —         /  
5   

0.75 to <2.50

     246,700       882,617       15.67       385,057       2.31       484.0       78.03       /       214,816       55.78       6,961       /  
6   

2.50 to <10.00

     171,502       904,560       8.86       251,550       4.06       1,838.9       78.04       /       204,438       81.27       7,973       /  
7   

10.00 to <100.00

     30,330       15,707       38.33       36,349       18.49       111.4       78.04       /       64,164       176.51       5,245       /  
8   

100.00 (Default)

     547       1,389       12.13       710       100.00       2.1       71.86       /       564       79.48       465       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     449,080       1,804,276       12.45       673,761       3.94       2,439.0       78.03       /       483,995       71.83       20,647       14,060  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Retail–Residential mortgage

 

1   

0.00 to <0.15

     1,753,094       —         —         1,788,294       0.07       134.0       29.40       /       98,880       5.52       396       /  
2   

0.15 to <0.25

     1,555,463       —         —         1,557,206       0.19       98.7       31.48       /       196,694       12.63       984       /  
3   

0.25 to <0.50

     1,995,206       —         —         1,996,178       0.35       137.5       33.88       /       411,553       20.61       2,400       /  
4   

0.50 to <0.75

     1,913,740       106,001       97.52       1,976,720       0.66       176.4       36.68       /       684,897       34.64       4,785       /  
5   

0.75 to <2.50

     1,540,512       869       100.00       1,543,115       1.08       118.2       36.58       /       736,804       47.74       6,054       /  
6   

2.50 to <10.00

     78,221       2,795       100.00       81,793       9.58       6.9       37.92       /       138,206       168.97       2,969       /  
7   

10.00 to <100.00

     31,308       2,477       100.00       33,807       47.05       3.2       40.24       /       66,608       197.02       6,406       /  
8   

100.00 (Default)

     67,581       1,372       100.00       68,903       100.00       4.3       45.19       /       32,533       47.21       28,537       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     8,935,128       113,516       97.68       9,046,019       1.48       679.7       33.80       /       2,366,178       26.15       52,535       35,776  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  

Other retail

 

1   

0.00 to <0.15

     20       —         —         307,294       0.05       41.4       43.50       /       19,034       6.19       75       /  
2   

0.15 to <0.25

     2       —         —         55,690       0.18       4.5       43.16       /       9,068       16.28       43       /  
3   

0.25 to <0.50

     121,031       155       100.00       137,772       0.34       4.1       46.55       /       37,291       27.06       224       /  
4   

0.50 to <0.75

     188,160       550       75.18       184,968       0.69       65.9       26.93       /       41,514       22.44       327       /  
5   

0.75 to <2.50

     1,017,097       3,472       78.21       940,438       1.36       26.4       53.29       /       528,419       56.18       5,988       /  
6   

2.50 to <10.00

     398,879       1,897       63.40       174,889       6.29       16.0       22.22       /       57,981       33.15       2,149       /  
7   

10.00 to <100.00

     98,427       9,870       51.83       49,497       18.27       11.8       31.29       /       32,253       65.16       3,156       /  
8   

100.00 (Default)

     73,064       3,023       94.67       58,600       100.00       2.9       44.01       /       25,897       44.19       23,722       /  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
9   

Sub-total

     1,896,684       18,970       65.72       1,909,152       4.89       173.4       44.68       /       751,460       39.36       35,688       24,303  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total (all portfolios)

     145,521,084       30,812,518       70.60       167,238,965       0.72       3,337.8       38.21       2.20       35,273,045       21.01       446,348       302,564  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Notes:

  

1.

   Counterparty credit risk exposures, securitization exposures, and regarded-method exposures are excluded from the amount of credit risk exposures above.

2.

   On-balance sheet exposures, pre-CCF and pre- CRM off-balance sheet exposures, and the average CCF are allocated to the PD ranges based on pre- CRM PD estimates.

3.

   The number of credits is disclosed as the number of data of obligors for QRRE, residential mortgage and other retail excluding credit for business purpose.

 

23

Table of Contents

(B) CR9: IRB–Backtesting of Probability of Default (PD) per Portfolio

 

(%, the number of data)

  

a

   b   c     d     e     f     g     h     i  

Portfolio

   PD
Range		   External rating equivalent     Weighted
average
PD		     Arithmetic
average
PD by
obligors		     Number of
obligors		     Defaulted
obligors
in the year		     of which:
new
defaulted
obligors
in the year		     Average
historical
annual
default
rate		  
    S&P     Moody’s     Fitch     R&I     JCR         As of
March 31,
2017		     As of
March 31,
2018		        
                                                                             

Corporate, etc.

   0.00 to <0.10     AAA~A-       Aaa~A3       AAA~A-       AAA~A-       AAA~A-       0.05       0.06       2,330       2,395       —         —         —    
  0.10 to <0.20     BBB+~BBB-       Baa1~Baa3       BBB+~BBB-       BBB+~BBB-       BBB+~BBB-       0.15       0.15       5,072       5,272       2       —         0.03  
  0.20 to <1.00     BB+~BB-       Ba1~Ba3       BB+~BB-       BB+~BB-       BB+~BB-       0.48       0.52       20,736       21,267       52       —         0.21  
  1.00 to <5.00     B+~B-       B1~B3       B+~B-       B+~B-       B+~B-       2.06       2.15       9,832       9,041       112       2       1.29  
  5.00 to <100.00     CCC+~CCC-       Caa1~Caa3       CCC+~CCC-       CCC+~CCC-       CCC~C       12.59       12.86       2,500       2,144       197       4       8.02  

Retail–qualifying revolving retail exposures (QRRE)

   0.00 to <0.10     /       /       /       /       /       —         —         —         —         —         —         —    
  0.10 to <0.20     /       /       /       /       /       —         —         —         —         —         —         —    
  0.20 to <1.00     /       /       /       /       /       —         —         —         —         —         —         —    
  1.00 to <5.00     /       /       /       /       /       2.35       2.80       316,263       338,973       5,789       1,004       1.68  
  5.00 to <100.00     /       /       /       /       /       10.17       6.24       137,011       146,695       12,315       1,232       7.85  

Retail–Residential mortgage

   0.00 to <0.10     /       /       /       /       /       0.05       0.05       77,649       71,310       20       —         0.02  
  0.10 to <0.20     /       /       /       /       /       0.14       0.14       101,477       103,939       44       —         0.07  
  0.20 to <1.00     /       /       /       /       /       0.53       0.53       413,756       395,746       966       3       0.28  
  1.00 to <5.00     /       /       /       /       /       1.26       1.22       62,374       75,664       303       —         0.57  
  5.00 to <100.00     /       /       /       /       /       19.03       20.36       11,209       8,551       1,014       —         11.81  

Other retail

   0.00 to <0.10     /       /       /       /       /       —         —         —         —         —         —         —    
  0.10 to <0.20     /       /       /       /       /       —         —         —         —         —         —         —    
  0.20 to <1.00     /       /       /       /       /       0.80       0.66       429,469       340,586       1,333       27       0.31  
  1.00 to <5.00     /       /       /       /       /       2.20       3.08       440,253       322,169       2,020       180       0.73  
  5.00 to <100.00     /       /       /       /       /       17.74       22.92       73,044       47,241       3,113       13       4.23  

 

Notes:

 

  1. Counterparty credit risk exposures, securitization exposures, and regarded-method exposures are excluded from the amount of credit risk exposures above.

 

  2. Exposures to sovereign and bank is included in the category of corporate, etc. because their obligors can be presumably specified. Likewise, exposures to corporate (except specialized lending), specialized lending, equity and purchased receivables (corporate) is included in the category of corporate, etc. because the data of the respective portfolios is not separately used for PD estimation. Since purchased receivables (retail) account for a small portion of the entire exposure, they are incorporated with any one of QRRE, residential mortgage or other retail depending on the portfolio classification of the purchased receivables.

 

  3. PD Range indicates the ranges of PD estimates for multiple consolidated internal ratings groups.

 

  4. The following shows the percentages accounted for by the respective portfolios among the credit RWA calculated by the AIRB: Corporate, etc. : 76%, QRRE: 1%, Residential mortgage : 7%, Other retail : 3%

 

  5. The number of credits is disclosed as the number of data of obligors for QRRE, residential mortgage and other retail excluding credit for business purpose.

 

  6. The back testing covers the period from September 30, 2016 to September 30, 2017.

 

24

Table of Contents

(C) CR10: IRB -Specialized Lending under the Slotting Criteria Approach and Equity Exposures under the Market-based Approach etc.

 

(Millions of yen, %)

As of March 31, 2018

  

a

   

b

    c      d      e     f      g      h      i      j      k      l  

Specialized lending under slotting criteria approach

  

Other than HVCRE

  

Regulatory categories

   

Remaining

maturity

    On-
balance
sheet
amount		      Off-
balance
sheet
amount		      RW     Exposure amount      RWA      Expected
losses		  
                   
              P F      O F      C F      I P R E      Total        

Strong

   

 

Less than 2.5 years

      —          —          50 %      —          —          —          —          —          —          —    
  

Equal to or more than 2.5 years

      24,919        —          70 %      —          24,919        —          —          24,919        17,443        99  

Good

    Less than 2.5 years      —          —          70 %      —          —          —          —          —          —          —    
  

Equal to or more than 2.5 years

      —          —          90 %      —          —          —          —          —          —          —    

Satisfactory

         3,464        —          115 %      —          3,464        —          —          3,464        3,984        97  

Weak

         11,108        —          250 %      —          11,147        —          —          11,147        27,868        891  

Default

         3,081        —          —         —          9,312        —          —          9,312        —          4,656  
     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

         42,574        —          —         —          48,844        —          —          48,844        49,296        5,744  
     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

HVCRE

  

Regulatory categories

   

Remaining

maturity

    On-
balance
sheet
amount		      Off-
balance
sheet
amount		      RW                                 Exposure
amount		      RWA      Expected
losses		  

Strong

   

 

Less than 2.5 years

      2,698        700        70 %                  3,225        2,257        12  
  

Equal to or more than 2.5 years

      55,022        16,356        95 %                  67,290        63,925        269  

Good

    Less than 2.5 years      13        —          95 %                  13        13        0  
  

Equal to or more than 2.5 years

      23,260        3,970        120 %                  26,250        31,500        105  

Satisfactory

         —          —          140 %                  —          —          —    

Weak

         —          —          250 %                  —          —          —    

Default

         —          —          —                     —          —          —    
     

 

 

     

 

 

     

 

 

                

 

 

     

 

 

     

 

 

  

Total

         80,996        21,026        —                     96,779        97,696        387  
     

 

 

     

 

 

     

 

 

       

 

 

     

 

 

     

 

 

  

Equity exposures under the market-based approach etc.

  

Equity exposures under the market-based approach

  

Categories

    On-
balance
sheet
amount		      Off-
balance
sheet
amount		      RW                                 Exposure
amount		      RWA         
                                                                           

Exchange-traded equity exposures

      841,626        68,014        300 %                  909,640        2,728,922     

Private equity exposures

      58,551        1,510        400 %                  59,683        238,735     

Other equity exposures

      —          —          —                     —          —       
     

 

 

     

 

 

     

 

 

                

 

 

     

 

 

     

Total

      900,177        69,524        —                     969,324        2,967,658     
     

 

 

     

 

 

     

 

 

       

 

 

     

 

 

     

Equity exposures to which a risk weight of 100% is applied

  

Equity exposures to which a risk weight of 100% is applied

      4,415        —          100 %                  4,415        4,415     

 

Notes:

  

1.

   Counterparty credit risk exposures, securitization exposures, and regarded-method exposures are excluded from the amount of credit risk exposures above.

2.

   PF, OF, CF and IPRE respectively stand for project finance, object finance, commodity finance and income-producing real estate.

(D) Credit RWA Exposures under Regarded-method

 

     (Millions of yen)  
     As of March 31, 2018  

Ending balance

      2,102,954  

 

25

Table of Contents

(5) Credit Risk under Standardized Approach

(i) Status of portfolios to which the standardized approach is applied

Eligible external credit assessment institutions used for determining the risk weight for portfolios to which the standardized approach is applied are Rating and Investment Information, Inc. (R&I) in Japan and S&P Global Ratings overseas.

We apply a risk weight of 100% for all of our corporate exposure.

(ii) Quantitative disclosure on credit risk under standardized approach

(A) CR5: Standardized Approach–Exposures by Asset Classes and Risk Weights

 

                (Millions of yen)  
                As of March 31, 2018  
                a     b     c     d     e     f     g     h     i     j     k  
                Credit exposures amount (post CCF and post-CRM)  

Asset classes

   Risk weight     0%     10%     20%     35%     50%     75%     100%     150%     250%     1,250%     Total  
                                                                               
  1     Cash       10,169       —         —         —         —         —         —         —         —         —         10,169  
  2    

Japanese sovereigns and Bank of Japan

       12,698,108       —         —         —         —         —         —         —         —         —         12,698,108  
  3    

Foreign central sovereigns and central banks

       75,651       —         34,791       —         64,684       —         75,963       —         —         —         251,091  
  4    

Bank for International Settlements,etc.

       —         —         —         —         —         —         —         —         —         —         —    
  5    

Japanese non-central governmental PSEs

       1,089       —         —         —         —         —         —         —         —         —         1,089  
  6    

Non-central governmental PSEs other than foreign central sovereigns, etc.

       —         —         7,731       —         38       —         16       —         —         —         7,786  
  7    

International development banks

       2,983       —         —         —         —         —         —         —         —         —         2,983  
  8    

Japan Finance Organization for Municipalities

       —         36,192       —         —         —         —         —         —         —         —         36,192  
  9    

Japanese government institutions

       —         523,138       —         —         —         —         —         —         —         —         523,138  
  10    

Three regional public sectors of Japan

       —         —         —         —         —         —         —         —         —         —         —    
  11    

Financial institutions and business operators conducting the type I financial instruments business

       —         —         703,187       —         19,773       —         48,083       —         —         —         771,044  
  12    

Corporates, etc.

       —         —         —         —         —         —         1,484,951       —         —         —         1,484,951  
  13    

Regulatory retail portfolios and individuals

       —         —         —         —         —         —         —         —         —         —         —    
  14    

Mortgage housing loan

       —         —         —         —         —         —         —         —         —         —         —    
  15    

Real estate acquisition business, etc.

       —         —         —         —         —         —         —         —         —         —         —    
  16    

Claims past due for 3 months or more (excluding mortgage housing loan)

       —         —         —         —         60       —         12       27       —         —         100  
  17    

Claims past due for 3 months or more regarding mortgage housing loan

       —         —         —         —         —         —         —         —         —         —         —    
  18    

Bills in process of collection

       —         —         —         —         —         —         —         —         —         —         —    
  19    

With guarantee of Credit Guarantee Corporations, etc.

       —         —         —         —         —         —         —         —         —         —         —    
  20    

With guarantee of Regional Economy Vitalization Corporation of Japan

       —         —         —         —         —         —         —         —         —         —         —    
  21    

Investments, etc.(excluding significant investments)

       —         —         —         —         —         —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  22     Total       12,788,002       559,331       745,710       —         84,557       —         1,609,027       27       —         —         15,786,656  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Note:

  

Counterparty credit risk exposures, credit risk related to securitization transactions, and exposures which are underlaid with the plural number of assets and transactions are excluded from the amount of credit risk exposures above.

(B) Exposures which are underlaid with the plural number of assets and transactions and cannot be judged the risk weights directly in the institutions that adopt The Standardized Approach

 

     (Millions of yen)  
     As of March 31, 2018  

Ending balance

      —    
  

 

26

Table of Contents

(6) Credit Risk Mitigation Techniques

(i) Summary of Risk Profile, Risk Management Policies/ Procedures and Structure

We obtain collateral and guarantees as a means of securing credit. In obtaining the collateral and guarantees, we evaluate the value of the collateral, guarantee performance capability of guarantor and legal enforceability, and we also conduct periodical subsequent re-evaluations. Furthermore, we monitor any concentration of risks in a particular classification, keeping an eye on the concentration of collateral type and/or of credit risks in particular companies including indirect credit exposure such as guarantees. When calculating the credit risk weighted assets for capital adequacy ratio regulations, the effect of credit risk mitigation through financial collateral (mainly deposits and securities), other collateral (mainly real estate) and guarantees by “sovereign, banks or corporations above a certain credit rating” is reflected.

(ii) Quantitative Disclosure on Credit Risk Mitigation Techniques

Counterparty risk exposures, securitization exposures, and regarded-method exposures are excluded from the amount of credit risk exposures below.

(A) CR3: Credit Risk Mitigation Techniques–Overview

 

            (Millions of yen)  
            As of March 31, 2018  
            a      b      c      d      e  
            Exposures
unsecured		      Exposures
secured		      Exposures
secured
by collateral		      Exposures
secured
by financial
guarantees		      Exposures
secured
by credit
derivatives		  
  1      Loans      64,898,669        12,780,637        5,990,412        6,784,828        5,397  
  2      Debt securities      25,670,926        451,924        179,920        272,003        —    
  3      Other on balance debt assets      51,653,415        44,607        5,016        39,591        —    
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  4      Total (1+2+3)      142,223,012        13,277,170        6,175,349        7,096,423        5,397  
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  5      Of which defaulted      461,445        192,214        135,384        56,830        —    

 

Notes:  
1.   Other on-balance debt assets include deposits, call loans, bills purchased, monetary claims bought, money held in trust, and foreign exchange assets, etc.
2.   Defaulted exposures include restructured loans, loans past due for three months or more, loans to bankrupt borrowers and so on.

 

27

Table of Contents

(B) CR4: Standardized Approach–Credit Risk Exposure and Credit Risk Mitigation (CRM) Effects

 

            (Millions of yen, except percentages)  
            As of March 31, 2018  
            a      b      c      d      e      f  
           

 

Exposures before CCF and

CRM

     

 

Exposures post-CCF and
CRM

         

Asset classes

    On-balance
sheet
amount		      Off-balance
sheet
amount		      On-balance
sheet
amount		      Off-balance
sheet
amount		      RWA      RWA
density		  
                                                  
  1     

Cash

      10,169        —          10,169        —          —          0.00  
  2     

Japanese sovereigns and Bank of Japan

      12,698,108        —          12,698,108        —          —          0.00  
  3     

Foreign central sovereigns and central banks

      251,091        —          251,091        —          115,264        45.90  
  4     

Bank for International Settlements,etc.

      —          —          —          —          —          —    
  5     

Japanese non-central governmental PSEs

      1,089        —          1,089        —          —          0.00  
  6     

Non-central governmental PSEs other than foreign central sovereigns, etc.

      7,786        —          7,786        —          1,581        20.31  
  7     

International development banks

      2,983        —          2,983        —          —          0.00  
  8     

Japan finance organization for municipalities

      36,192        —          36,192        —          100        0.27  
  9     

Japanese government institutions

      523,138        —          523,138        —          19,531        3.73  
  10     

Three regional public sectors of Japan

      —          —          —          —          —          —    
  11     

Financial institutions and business operators conducting the type I financial instruments business

      770,920        774        770,657        387        198,607        25.75  
  12     

Corporates, etc.

      1,282,944        261,731        1,282,944        202,006        1,484,893        99.99  
  13     

Regulatory retail portfolios and individuals

      —          —          —          —          —          —    
  14     

Mortgage housing loan

      —          —          —          —          —          —    
  15     

Real estate acquisition business, etc.

      —          —          —          —          —          —    
  16     

Loans past due for 3 months or more (excluding mortgage housing loan)

      100        —          100        —          83        83.26  
  17     

Loans past due for 3 months or more regarding mortgage housing loan

      —          —          —          —          —          —    
  18     

Bills in process of collection

      —          —          —          —          —          —    
  19     

With guarantee of Credit Guarantee Corporation, etc.

      —          —          —          —          —          —    
  20     

With guarantee of Regional Economy Vitalization Corporation of Japan

      —          —          —          —          —          —    
  21     

Investments, etc.(excluding significant investments)

      —          —          —          —          —          —    
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  22     

Total

      15,584,525        262,506        15,584,262        202,393        1,820,063        11.52  
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

(C) CR7: IRB–Effect on RWA of Credit Derivatives Used as CRM Techniques

 

            (Millions of yen)  
            As of March 31, 2018  
            a      b  

Portfolios

    Pre-credit
derivatives
RWA		      Actual RWA  
                      
  1     

Sovereign–FIRB

      —          —    
  2     

Sovereign–AIRB

      577,518        577,518  
  3     

Banks–FIRB

      —          —    
  4     

Banks–AIRB

      930,901        930,901  
  5     

Corporate (except Specialized lending)–FIRB

      —          —    
  6     

Corporate (except Specialized lending)–AIRB

      22,718,567        22,715,534  
  7     

Specialized lending–FIRB

      —          —    
  8     

Specialized lending–AIRB

      1,796,490        1,796,490  
  9     

Retail–qualifying revolving retail exposures (QRRE)

      483,995        483,995  
  10     

Retail–residential mortgage exposures

      2,366,178        2,366,178  
  11     

Other retail exposures

      751,460        751,460  
  12     

Equity–FIRB

      —          —    
  13     

Equity–AIRB

      4,640,872        4,640,872  
  14     

Purchased receivables–FIRB

      —          —    
  15     

Purchased receivables–AIRB

      1,167,296        1,167,296  
     

 

 

     

 

 

  
  16     

Total

      35,433,279        35,430,246  
     

 

 

     

 

 

  

 

28

Table of Contents

∎ Counterparty Credit Risk

(1) Summary of Risk Profile, Risk Management Policies/ Procedures and Structure

In managing the risk pertaining to counterparty credit risk (including central counterparty) in derivatives transactions and repurchase transactions etc., we generally allocate risk capital together with loans, etc., (we take into account wrong way risk for derivatives transactions). For derivatives transactions and repurchase transactions, in cases in which a bilateral netting agreement is valid in light of the legal system of the relevant jurisdiction, we take its effect into consideration. As to derivatives transactions with financial institutions, etc., we periodically, where necessary, deliver and receive collateral to and from the counterparty based on the replacement cost to mitigate credit risk (collateralized derivatives transactions). In conducting such transactions, there is a risk in which we may be required to provide additional collateral in cases where our credit profile deteriorates.

(2) Quantitative Disclosure on Counterparty Credit Risk

(A) CCR1: Analysis of Counterparty Credit risk (CCR) Exposure by Approach

 

           (Millions of yen)  
           As of March 31, 2018  
           a      b      c      d      e      f  
           Replacement
cost		      Potential
future
exposure		      EEPE      Alpha used
for
computing
regulatory
EAD		      EAD
post-CRM		      RWA  
  1    

SA-CCR

      —          —          /        1.4        —          —    
 

Current Exposure Method

      323,382        230,084        /        /        535,507        216,424  
  2    

Internal Model Method

      /        /        1,944,443        1.4        2,722,221        887,843  
  3    

Simple Approach for credit risk mitigation

      /        /        /        /        763,521        39,710  
  4    

Comprehensive Approach for credit risk mitigation

      /        /        /        /        10,332,329        654,325  
  5    

VAR for SFTs

      /        /        /        /        —          —    
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  6    

Total

      /        /        /        /        /        1,798,303  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

(B) CCR2: Credit Valuation Adjustment (CVA) Capital Charge

 

            (Millions of yen)  
            As of March 31, 2018  
            a      b  
            EAD post-CRM      RWA  
  1     

Total portfolios subject to the Advanced CVA capital charge

      —          —    
  2     

(i) VAR component (including the 3×multiplier)

      /        —    
  3     

(ii) Stressed VAR component (including the 3×multiplier)

      /        —    
     

 

 

     

 

 

  
  4     

All portfolios subject to the Standardized CVA capital charge

        3,552,645        2,539,780  
     

 

 

     

 

 

  
  5     

Total subject to the CVA capital charge

      3,552,645        2,539,780  
     

 

 

     

 

 

  

(C) CCR3: Standardized Approach–CCR Exposures by Regulatory Portfolio and Risk Weights

 

                   (Millions of yen)  
                   As of March 31, 2018  
                   a      b      c      d      e      f      g      h      i  
                   Credit exposures amount (post CCF and post-CRM)  

Regulatory portfolio

    Risk weight      0%      10%      20%      50%      75%      100%      150%      Other      Total  
                                                                              
  1     

Japanese sovereigns and Bank of Japan

         742,381        —          —          —          —          —          —          —          742,381  
  2     

Foreign central sovereigns and central banks

         4,065        —          3,934        361        —          289        —          —          8,650  
  3     

Bank for International Settlements,etc.

         —          —          —          —          —          —          —          —          —    
  4     

Japanese non-central governmental PSEs

         —          —          —          —          —          —          —          —          —    
  5     

Non-central governmental PSEs other than foreign central sovereigns, etc.

         —          —          6,843        1,504        —          12        —          —          8,361  
  6     

International development banks

         15,357        —          —          —          —          —          —          —          15,357  
  7     

Japan Finance Organization for Muicipalities

         —          —          —          —          —          —          —          —          —    
  8     

Japanese government institutions

         —          1,076        —          —          —          —          —          —          1,076  
  9     

Three regional public sectors of Japan

         —          —          —          —          —          —          —          —          —    
  10     

Financial institutions and business operators conducting the type I financial instruments business

         —          —          665,336        13,269        —          41,948        —          —          720,554  
  11     

Corporates, etc.

         —          —          —          —          —          679,087        —          —          679,087  
  12     

Regulatory retail portfolios and individuals

         —          —          —          —          —          —          —          —          —    
  13     

Other assets

         —          —          —          —          —          —          —          —          —    
        

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  14      Total         761,805        1,076        676,114        15,135        —          721,337        —          —          2,175,469  
        

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

29

Table of Contents

(D) CCR4: IRB–CCR Exposures by Portfolio and PD Scale

 

           (Millions of yen, %, number in the thousands, year)  
           As of March 31, 2018  
           a      b      c      d      e      f      g  

PD scale

    EAD
post-CRM		      Average
PD		      Number of
counterparty		      Average
LGD		      Average
maturity		      RWA      RWA
density		  
                                                        
 

Sovereign

                                              
  1    

0.00 to <0.15

      9,213,266        0.00        0.0        37.97        4.5        40,100        0.43  
  2    

0.15 to <0.25

      —          —          —          —          —          —          —    
  3    

0.25 to <0.50

      419        0.27        0.0        37.97        2.3        180        42.94  
  4    

0.50 to <0.75

      682        0.50        0.0        37.97        3.0        440        64.52  
  5    

0.75 to <2.50

      2,944        1.28        0.0        37.97        4.9        3,291        111.77  
  6    

2.50 to <10.00

      84        6.34        0.0        37.97        1.6        108        129.20  
  7    

10.00 to <100.00

      —          —          —          —          —          —          —    
  8    

100.00 (Default)

      —          —          —          —          —          —          —    
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      9,217,397        0.00        0.0        37.97        4.5        44,120        0.47  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
 

Banks

                     
  1    

0.00 to <0.15

      1,121,064        0.06        0.3        37.97        2.0        239,768        21.38  
  2    

0.15 to <0.25

      —          —          —          —          —          —          —    
  3    

0.25 to <0.50

      26,824        0.27        0.0        37.97        1.0        11,354        42.32  
  4    

0.50 to <0.75

      3,623        0.50        0.0        37.97        4.0        3,472        95.81  
  5    

0.75 to <2.50

      130        1.11        0.0        35.50        1.1        78        59.96  
  6    

2.50 to <10.00

      1,506        3.13        0.0        37.97        0.9        1,431        95.04  
  7    

10.00 to <100.00

      —          —          —          —          —          —          —    
  8    

100.00 (Default)

      —          —          —          —          —          —          —    
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      1,153,150        0.07        0.4        37.96        2.0        256,105        22.20  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
 

Corporate

                     
  1    

0.00 to <0.15

      1,276,093        0.07        2.3        37.87        3.3        338,813        26.55  
  2    

0.15 to <0.25

      —          —          —          —          —          —          —    
  3    

0.25 to <0.50

      71,739        0.27        1.3        34.64        2.8        31,462        43.85  
  4    

0.50 to <0.75

      45,443        0.50        0.9        34.76        2.4        24,117        53.07  
  5    

0.75 to <2.50

      41,705        1.23        1.3        34.66        2.8        32,929        78.95  
  6    

2.50 to <10.00

      22,779        3.58        0.4        33.64        2.2        22,050        96.80  
  7    

10.00 to <100.00

      2,328        15.16        0.1        30.64        2.2        3,445        147.92  
  8    

100.00 (Default)

      1,301        100.00        0.1        51.99        2.5        446        34.31  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      1,461,390        0.30        6.6        37.45        3.2        453,264        31.01  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
                                                        
 

SME

                                              
  1    

0.00 to <0.15

      147        0.07        0.0        14.18        2.7        12        8.33  
  2    

0.15 to <0.25

      —          —          —          —          —          —          —    
  3    

0.25 to <0.50

      7,928        0.27        0.5        21.80        3.2        1,954        24.64  
  4    

0.50 to <0.75

      5,688        0.50        0.5        22.58        3.3        1,892        33.27  
  5    

0.75 to <2.50

      6,843        1.16        0.9        23.24        3.2        3,136        45.82  
  6    

2.50 to <10.00

      4,172        3.16        0.2        23.43        3.8        2,612        62.61  
  7    

10.00 to <100.00

      999        15.16        0.0        22.64        3.0        984        98.44  
  8    

100.00 (Default)

      559        100.00        0.0        40.35        3.5        126        22.51  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      26,340        3.69        2.5        22.98        3.3        10,718        40.69  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
 

Specialized Lending

                     
  1    

0.00 to <0.15

      209,425        0.10        0.1        40.14        4.5        84,829        40.50  
  2    

0.15 to <0.25

      —          —          —          —          —          —          —    
  3    

0.25 to <0.50

      36,813        0.27        0.0        38.75        4.6        23,601        64.11  
  4    

0.50 to <0.75

      30,159        0.50        0.0        37.97        4.3        23,135        76.70  
  5    

0.75 to <2.50

      34,864        0.96        0.0        37.97        4.1        32,817        94.12  
  6    

2.50 to <10.00

      2,966        3.60        0.0        37.97        4.0        3,861        130.20  
  7    

10.00 to <100.00

      1,194        15.16        0.0        37.97        3.4        2,348        196.71  
  8    

100.00 (Default)

      2,768        100.00        0.0        55.90        4.9        1,540        55.66  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      318,190        1.21        0.3        39.64        4.5        172,134        54.09  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
 

Purchased receivables

                     
  1    

0.00 to <0.15

      —          —          —          —          —          —          —    
  2    

0.15 to <0.25

      —          —          —          —          —          —          —    
  3    

0.25 to <0.50

      —          —          —          —          —          —          —    
  4    

0.50 to <0.75

      —          —          —          —          —          —          —    
  5    

0.75 to <2.50

      —          —          —          —          —          —          —    
  6    

2.50 to <10.00

      —          —          —          —          —          —          —    
  7    

10.00 to <100.00

      —          —          —          —          —          —          —    
  8    

100.00 (Default)

      —          —          —          —          —          —          —    
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      —          —          —          —          —          —          —    
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
 

Retails

                     
  1    

0.00 to <0.15

      —          —          —          —          /        —          —    
  2    

0.15 to <0.25

      —          —          —          —          /        —          —    
  3    

0.25 to <0.50

      —          —          —          —          /        —          —    
  4    

0.50 to <0.75

      —          —          —          —          /        —          —    
  5    

0.75 to <2.50

      834        1.95        0.8        28.77        /        307        36.86  
  6    

2.50 to <10.00

      13        4.03        0.0        4.41        /        0        6.37  
  7    

10.00 to <100.00

      35        13.39        0.0        21.68        /        14        40.29  
  8    

100.00 (Default)

      3        100.00        0.0        36.77        /        1        40.68  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9    

Sub-total

      886        2.83        0.9        28.16        /        323        36.55  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
 

Total (all portfolios)

      12,177,355        0.08        10.9        37.91        4.1        936,667        7.69  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

30

Table of Contents

(E) CCR5: Composition of Collateral for CCR Exposure

 

            (Millions of yen)  
            As of March 31, 2018  
            a      b      c      d      e      f  
            Collateral used in derivative transactions      Collateral used in SFTs  
            Fair value of collateral
received		      Fair value of posted
collateral		      Fair value of
collateral
received		      Fair value of
posted
collateral		  
            Segregated      Unsegregated      Segregated      Unsegregated        
  1      Cash–domestic currency      3,458        481,886        5,310        803,536        1,695,567        2,996,441  
  2      Cash–other currencies      343,180        385,532        257,532        536,166        16,529,816        9,267,379  
  3      Domestic sovereign debt      27,877        303,956        122,227        265,290        1,951,674        2,364,378  
  4      Other sovereign debt      48,205        69,742        253,988        184,402        7,744,419        13,853,163  
  5      Government agency debt      1,234        —          481        —          620,455        1,070,112  
  6      Corporate bonds      55        49,094        21        3,141        493,226        603,156  
  7      Equity securities      —          254,472        —          128,584        1,904,428        1,413,438  
  8      Other collateral      —          7,806        —          4,944        4,464        394,305  
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  9      Total      424,012        1,552,490        639,562        1,926,066        30,944,054        31,962,377  
     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

(F) CCR6: Credit Derivatives Exposures

 

            (Millions of yen)  
            As of March 31, 2018  
            a      b  
            Protection bought      Protection sold  
   Notionals      
  1     

Single-name credit default swaps

      1,120,511        1,142,042  
  2     

Index credit default swaps

      178,477        159,997  
  3     

Total return swaps

      —          —    
  4     

Credit options

      —          —    
  5     

Other credit derivatives

      —          —    
  6     

Total notionals

      1,298,988        1,302,040  
     

 

 

     

 

 

  
  

Fair values

      
  7     

Positive fair value (asset)

      2,480        20,313  
  8     

Negative fair value (liability)

      (18,489 )       (868 ) 
 

(G) CCR8: Exposures to Central Counterparties

      
            (Millions of yen)  
            As of March 31, 2018  
            a      b  
            EAD (post-CRM)      RWA  
  1      Exposures to QCCPs (total)      /        193,088  
  2     

Exposures for trades at QCCPs (excluding initial margin and default fund contributions); of which

      676,795        3,053  
  3     

(i) OTC derivatives

      438,891        425  
  4     

(ii) Exchange-traded derivatives

      115,828        2,035  
  5     

(iii) Securities financing transactions

      122,076        593  
  6     

(iv) Netting sets where cross-product netting has been approved

      —          —    
  7     

Segregated initial margin

      95,392        /  
  8     

Non-segregated initial margin

      531,371        10,967  
  9     

Pre-funded default fund contributions

      332,443        162,394  
  10     

Unfunded default fund contributions

      34,112        16,672  
  11      Exposures to non-QCCPs (total)      /        —    
  12     

Exposures for trades at non-QCCPs (excluding initial margin and default fund contributions); of which

      —          —    
  13     

(i) OTC derivatives

      —          —    
  14     

(ii) Exchange-traded derivatives

      —          —    
  15     

(iii) Securities financing transactions

      —          —    
  16     

(iv) Netting sets where cross-product netting has been approved

      —          —    
  17     

Segregated initial margin

      —          /  
  18     

Non-segregated initial margin

      —          —    
  19     

Pre-funded default fund contributions

      —          —    
  20     

Unfunded default fund contributions

      —          —    

 

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Table of Contents

∎ Securitization Exposures

We classify transactions as securitization exposures based on two characteristics, “non-recourse” and “senior/subordinated structure,” pursuant to the definitions set forth in the FSA Notice No.20, etc.; provided that the transactions do not include those which fall within specialized lending exposure.

(1) Summary of Risk Management Regarding Securitization Exposures

Our role in securitization transactions

We are associated with securitization transactions from various purposes and positions through our banking book and trading book.

(a) Securitization of our assets (“Securitization as originator”)

For the purposes of mitigating credit risk and credit concentration risk, controlling economic capital and responding to the needs of our investors, etc., we engage in securitization transactions, the underlying assets of which include mortgage loans and loans to our corporate customers. When conducting a securitization as an originator, we consider such transactions from various aspects, including the effects of reduction of economic capital and improvement of return on risk as well as the practical effects of risk transfers, and make a comprehensive judgment on the structure and appropriateness of such transactions.

(b) Securitization program (ABCP/ABL) sponsor

As a means of supporting our customers in the securitization of their account receivables and notes receivables, etc., we retain securitization exposure by providing asset-backed loans (ABLs, which are on-balance-sheet transactions), and providing asset-backed commercial paper (ABCP) backup lines (off-balance-sheet transactions), as sponsor to special purpose companies (in the form of Cayman Islands Corporations, etc.). In such cases, in addition to gaining firm understanding of the actual risk profile through due diligence from the viewpoint of investors, we assign internal ratings and make evaluations by assessing such transactions and carefully managing the exposure together with other direct loan assets.

(c) Investment in alternative credit risk assets (“Securitization Transactions as an Investor”)

We hold securitization products, such as ABS, CMBS, RMBS, and CDO, and resecuritization products, the underlying assets of which are mainly RMBS and CDO, etc., for the purpose of investing in alternative credit risk assets that are different from conventional credit risk assets in order to diversify our investment portfolio. The Risk Management Committee, etc. set limits on the amount of investment for Securitization Transactions as an Investor, and we maintain a stringent structure for management of such transactions. In addition, we implement stress tests based on scenarios under the market liquidity depletion and sharp price declines.

In addition, we undertake various securitization program arrangements such as ABL, ABCP and trust schemes, etc., as a means of financing for our customers. We endeavor to understand the actual risk profile, including the underlying assets, and to appropriately disclose the risks and terms of the program to the customers who invest in the product.

Furthermore, we actively act as servicer for securitization transactions, offer settlement account facilities (servicer cash advance) and provide interest rate swaps to securitization conduits.

None of our affiliated entities hold securitization products in which we are involved as originators or sponsors.

The securitization conduits included within the scope of consolidation are as follows:

ROCK FIELD CORPORATION, FANTASTIC FUNDING CORPORATION, ARTEMIS FUNDING CORPORATION, N&M FUNDING CORPORATION, Denshi Saiken Kaitori Godo Kaisha, JAPAN SECURITIZATION CORPORATION, Allstar Funding Co., Ltd, SPARCS FUNDING CORPORATION, PERPETUAL FUNDING CORPORATION, Working Capital Management Co. L.P., ALWAYS CAPITAL CORPORATION, HORIZON CAPITAL CORPORATION There are no securitization conduits that provide credit enhancement beyond what is provided in agreements.

Overview of risk profile of securitization transactions and monitoring system

In addition to price fluctuation and market liquidity risks, securitization and resecuritization products are exposed to risks related to default, recovery and granularity of underlying asset portfolio. The structure of these products also contains risks related to the originators, the administrators, trustees and managers of the underlying assets.

To address these risks, we also analyze the structure in terms of the underlying assets and credit events. We monitor the ability, quality and operating performance of originators and managers in charge of controlling the underlying assets as well as covenant information and credit status of the parties related to the program. In addition, for resecuritization products, we pay attention to the underlying assets of the underlying securitization products. We also assign internal ratings to all products and review the rating at least once a year. If there is a change in the credit situations, we will review the internal rating as appropriate. As mentioned above, we have established a system to comprehensively understand the risk characteristics of securitization exposures and manage these exposures.

We conduct credit risk measurements on all credit transactions, including securitization transactions. Furthermore, we carry out periodic monitoring on investment amount and performance on securitization transactions and report the situations to our Risk Management Committee, etc.

Response to Basel Framework

In calculating credit risk-weighted assets of securitization exposure under the internal ratings-based approach, we apply the ratings-based approach (“RBA”) if the asset has a rating obtained from eligible external credit assessment institutions and apply the supervisory formula approach (“SF”) in other cases pursuant to the FSA Notice No. 20. We apply a risk weight of 1,250% under Basel III when neither RBA nor SF can be applied.

In addition, in calculating credit risk-weighted assets of securitization exposure under the standardized approach, we calculate based on risk weight according to ratings by eligible external credit assessment institutions and weighted average risk weight of underlying assets.

In terms of securitization exposure in our trading book that is subject to market risk regulations, we adopt the standardized measurement method and calculate market risk equivalent amounts in connection with the specific risks of securitization products based on risk weights according to ratings assigned by eligible external credit assessment institutions pursuant to the FSA Notice No. 20.

As for the eligible external credit assessment institutions, we refer to Rating and Investment Information, Inc. (R&I), Japan Credit Rating Agency, Ltd. (JCR), Moody’s Investors Service Inc. (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings, Ltd. in determining securitization exposure risk weight.

(2) Accounting Policies for Securitization Transactions

The point at which financial assets and liabilities relating to securitization transactions begin or cease to be recognized, their evaluation and accounting treatment are pursuant to “Accounting Standards Relating to Financial Products” (Business Accounting Standards No. 10).

 

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Table of Contents

(3) Quantitative Disclosure on Securitization Exposures

(A) SEC1: Securitization Exposures in the Banking Book by Type of Underlying Assets

 

          (Millions of yen)  
          As of March 31, 2018  
          a      b      c      d      e      f      g      h      i  
          Bank acts as originator      Bank acts as sponsor      Banks acts as investor  
    

type of underlying assets

    Traditional      Synthetic      Sub-total      Traditional      Synthetic      Sub-total      Traditional      Synthetic      Sub-total  
1    Retail (total)–of which      0        —          0        882,415        —          882,415        1,745,598        —          1,745,598  
2   

residential mortgage

      0        —          0        —          —          —          842,644        —          842,644  
3   

credit card

      —          —          —          219,986        —          219,986        93,976        —          93,976  
4   

other retail exposures

      —          —          —          662,429        —          662,429        808,977        —          808,977  
5   

re-securitization

      —          —          —          —          —          —          —          —          —    
6   

Wholesale (total)–of which

      —          422,098        422,098        219,123        —          219,123        913,169        —          913,169  
7   

loans to corporates

      —          422,098        422,098        —          —          —          398,149        —          398,149  
8   

commercial mortgage

      —          —          —          —          —          —          210        —          210  
9   

lease and receivables

      —          —          —          219,123        —          219,123        414,345        —          414,345  
10   

other wholesale

      —          —          —          —          —          —          100,463        —          100,463  
11   

re-securitization

      —          —          —          —          —          —          —          —          —    

(B) SEC2: Securitization Exposures in the Trading Book by Type of Underlying Assets

 

  

 

          (Millions of yen)  
          As of March 31, 2018  
          a      b      c      d      e      f      g      h      i  
          Bank acts as originator      Bank acts as sponsor      Banks acts as investor  
    

type of underlying assets

    Traditional      Synthetic      Sub-total      Traditional      Synthetic      Sub-total      Traditional      Synthetic      Sub-total  
1    Retail (total)–of which      —          —          —          —          —          —          11,560        —          11,560  
2   

residential mortgage

      —          —          —          —          —          —          4,287        —          4,287  
3   

credit card

      —          —          —          —          —          —          2,956        —          2,956  
4   

other retail exposures

      —          —          —          —          —          —          4,316        —          4,316  
5   

re-securitization

      —          —          —          —          —          —          0        —          0  
6   

Wholesale (total)–of which

      —          —          —          —          —          —          11,541        —          11,541  
7   

loans to corporates

      —          —          —          —          —          —          11,240        —          11,240  
8   

commercial mortgage

      —          —          —          —          —          —          —          —          —    
9   

lease and receivables

      —          —          —          —          —          —          301        —          301  
10   

other wholesale

      —          —          —          —          —          —          —          —          —    
11   

re-securitization

      —          —          —          —          —          —          —          —          —    

 

33

Table of Contents

(C) SEC3: Securitization Exposures in the Banking Book and Associated Regulatory Capital Requirements–Bank Acting as Originator or as Sponsor

 

           (Millions of yen)  
           As of March 31, 2018  
           a     b     c     d     e     f     g     h  
           Total
exposures		     Traditional
securitization		     Of which
securitization		     Of which
retail
underlying		     Of which
wholesale		     Of which
re-securitization		     Of which
senior		     Of which
non-senior		  
   Exposure values (by RW bands)  
  1     

£20% RW

     1,478,354       1,075,137       1,075,137          859,674       215,463       —         —         —    
  2     

>20% to 50% RW

     25,515       25,515       25,515       22,741       2,773       —         —         —    
  3     

>50% to 100% RW

     886       886       886       —         886       —         —         —    
  4     

>100% to <1250% RW

     18,201       —         —         —         —         —         —         —    
  5     

1250% RW

     680       —         —         —         —         —         —         —    
   Exposure values (by regulatory approach)  
  6     

IRB RBA (including IAA)

     136,048       136,048       136,048       117,049       18,999       —         —         —    
  7     

IRB SFA

     1,386,908       965,490       965,490       765,366       200,124       —         —         —    
  8     

SA/SSFA

     —         —         —         —         —         —         —         —    
  9     

1250%

     680       —         —         —         —         —         —         —    
   RWA (by regulatory approach)  
  10     

IRB RBA (including IAA)

     11,093       11,093       11,093       9,722       1,370       —         —         —    
  11     

IRB SFA

     110,473       77,763       77,763       58,417       19,345       —         —         —    
  12     

SA/SSFA

     —         —         —         —         —         —         —         —    
  13     

1250%

     8,500       —         —         —         —         —         —         —    
   Capital charge after cap                
  14     

IRB RBA (including IAA)

     940       940       940       824       116       —         —         —    
  15     

IRB SFA

     9,368       6,594       6,594       4,953       1,640       —         —         —    
  16     

SA/SSFA

     —         —         —         —         —         —         —         —    
  17     

1250%

     720       —         —         —         —         —         —         —    
           As of March 31, 2018        
           i     j     k     l     m     n     o        
       Synthetic
securitization		     Of which
securitization		     Of which
retail
underlying		     Of which
wholesale		     Of which
re-securitization		     Of which
senior		     Of which
non-senior		        
   Exposure values (by RW bands)  
  1     

£20% RW

     403,216       403,216       —         403,216       —         —         —      
  2     

>20% to 50% RW

     —         —         —         —         —         —         —      
  3     

>50% to 100% RW

     —         —         —         —         —         —         —      
  4     

>100% to <1250% RW

     18,201       18,201       —         18,201       —         —         —      
  5     

1250% RW

     680       680       —         680       —         —         —      
   Exposure values (by regulatory approach)  
  6     

IRB RBA (including IAA)

     —         —         —         —         —         —         —      
  7     

IRB SFA

     421,418       421,418       —         421,418       —         —         —      
  8     

SA/SSFA

     —         —         —         —         —         —         —      
  9     

1250%

     680       680       —         680       —         —         —      
   RWA (by regulatory approach)  
  10     

IRB RBA (including IAA)

     —         —         —         —         —         —         —      
  11     

IRB SFA

     32,710       32,710       —         32,710       —         —         —      
  12     

SA/SSFA

     —         —         —         —         —         —         —      
  13     

1250%

     8,500       8,500       —         8,500       —         —         —      
   Capital charge after cap  
  14     

IRB RBA (including IAA)

     —         —         —         —         —         —         —      
  15     

IRB SFA

     2,773       2,773       —         2,773       —         —         —      
  16     

SA/SSFA

     —         —         —         —         —         —         —      
  17     

1250%

     720       720       —         720       —         —         —      

 

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Table of Contents

(D) SEC4: Securitization Exposures in the Banking Book and Associated Regulatory Capital Requirements–Bank Acting as Investor

 

           (Millions of yen)  
           As of March 31, 2018  
           a     b     c     d     e     f     g     h  
           Total
exposures		     Traditional
securitization		     Of which
securitization		     Of which
retail
underlying		     Of which
wholesale		     Of which
re-securitization		     Of which
senior		     Of which
non-senior		  
   Exposure values (by RW bands)  
  1     

£20% RW

     2,535,058       2,535,058       2,535,058       1,677,283       857,775       —         —         —    
  2     

>20% to 50% RW

     107,393       107,393       107,393       68,315       39,078       —         —         —    
  3     

>50% to 100% RW

     7,415       7,415       7,415       —         7,415       —         —         —    
  4     

>100% to <1250% RW

     8,678       8,678       8,678       —         8,678       —         —         —    
  5     

1250% RW

     220       220       220       0       220       —         —         —    
   Exposure values (by regulatory approach)  
  6     

IRB RBA (including IAA)

     1,381,546       1,381,546       1,381,546       929,913       451,633       —         —         —    
  7     

IRB SFA

     1,264,262       1,264,262       1,264,262       815,585       448,677       —         —         —    
  8     

SA/SSFA

     12,737       12,737       12,737       100       12,637       —         —         —    
  9     

1250%

     220       220       220       0       220       —         —         —    
   RWA (by regulatory approach)  
  10     

IRB RBA (including IAA)

     99,457       99,457       99,457       67,768       31,689       —         —         —    
  11     

IRB SFA

     121,018       121,018       121,018       69,257       51,761       —         —         —    
  12     

SA/SSFA

     25,711       25,711       25,711       20       25,691       —         —         —    
  13     

1250%

     2,761       2,761       2,761       0       2,761       —         —         —    
   Capital charge after cap  
  14     

IRB RBA (including IAA)

     8,433       8,433       8,433       5,746       2,687       —         —         —    
  15     

IRB SFA

     10,262       10,262       10,262       5,873       4,389       —         —         —    
  16     

SA/SSFA

     2,056       2,056       2,056       1       2,055       —         —         —    
  17     

1250%

     220       220       220       0       220       —         —         —    
           As of March 31, 2018        
           i     j     k     l     m     n     o        
       Synthetic
securitization		     Of which
securitization		     Of which
retail
underlying		     Of which
wholesale		     Of which
re-securitization		     Of which
senior		     Of which
non-senior		        
   Exposure values (by RW bands)  
  1     

£20% RW

     —         —         —         —         —         —         —      
  2     

>20% to 50% RW

     —         —         —         —         —         —         —      
  3     

>50% to 100% RW

     —         —         —         —         —         —         —      
  4     

>100% to <1250% RW

     —         —         —         —         —         —         —      
  5     

1250% RW

     —         —         —         —         —         —         —      
   Exposure values (by regulatory approach)  
  6     

IRB RBA (including IAA)

     —         —         —         —         —         —         —      
  7     

IRB SFA

     —         —         —         —         —         —         —      
  8     

SA/SSFA

     —         —         —         —         —         —         —      
  9     

1250%

     —         —         —         —         —         —         —      
   RWA (by regulatory approach)  
  10     

IRB RBA (including IAA)

     —         —         —         —         —         —         —      
  11     

IRB SFA

     —         —         —         —         —         —         —      
  12     

SA/SSFA

     —         —         —         —         —         —         —      
  13     

1250%

     —         —         —         —         —         —         —      
   Capital charge after cap  
  14     

IRB RBA (including IAA)

     —         —         —         —         —         —         —      
  15     

IRB SFA

     —         —         —         —         —         —         —      
  16     

SA/SSFA

     —         —         —         —         —         —         —      
  17     

1250%

     —         —         —         —         —         —         —      

 

35

Table of Contents

⬛ Market Risk

See pages 67 to 69 for information regarding our market risk management structure, etc.

(1) Trading Activities

In the calculation of the market risk equivalent amounts under the regulatory capital requirements, the risk arising from fluctuations in common factors across the market as a whole (e.g. foreign exchange and interest rates, etc.) is referred to as general market risk, and the risk arising from a deterioration in creditworthiness or market liquidity inherent in bonds and stocks is referred to as specific risk. In principle, we calculate market risk equivalent amounts by determining both general market risk and specific risk by applying the Internal Models Approach (IMA) to the former and the standardized approach to the latter, and by simply adding up both amounts. The Internal Models Approach is applied to trading transactions and calculated by adding up VAR and stressed VAR.

(A) MR1 : Market risk under standardized approach

 

          (Millions of yen)  
          As of March 31, 2018  

No.

         RWA
(Risk equivalent / 8%)		  
1    Interest rate risk (general and specific)      405,247  
2    Equity risk (general and specific)      652,526  
3    Foreign exchange risk      81,926  
4    Commodity risk      167,631  
   Options   
5   

Simplified approach

      —    
6   

Delta-plus method

      24,628  
7   

Scenario approach

      —    
8    Securitization      74,438  
     

 

 

  
9    Total      1,406,398  
     

 

 

  

 

(B) MR3 : IMA values for trading portfolios   

 

          (Millions of yen)  

No.

         As of March 31, 2018  
   VAR (10 day 99%)   
1   

Maximum value

      13,059  
2   

Average value

      7,496  
3   

Minimum value

      4,978  
4   

Period end

      7,120  
   Stressed VAR (10 day 99%)   
5   

Maximum value

      27,270  
6   

Average value

      18,882  
7   

Minimum value

      13,131  
8   

Period end

      17,093  
   Incremental Risk Charge (99.9%)   
9   

Maximum value

      —    
10   

Average value

      —    
11   

Minimum value

      —    
12   

Period end

      —    
   Comprehensive Risk Capital Charge (99.9%)   
13   

Maximum value

      —    
14   

Average value

      —    
15   

Minimum value

      —    
16   

Period end

      —    
17   

Floor (standardized measurement method)

      —    

 

Notes:     

1.

    The historical simulation method is used for the calculation of VAR and stressed VAR under the Internal Models Approach.

2.

    VAR is measured based on the observation period of 3 years (801 business days), a 99% confidence interval and a 1-day holding period. This 1-day VAR is scaled up to 10-business day VAR using the square-root-of-time (Ö T) rule. We update historical data on a daily basis, in principle, and do not weight such data. When re-pricing instruments, we use the full revaluation method, a sensitivity-based approach and the like. We consider change width or rate as market volatility of risk factors according to product attributes.

3.

    When measuring stressed VAR, the same measurement approach as VAR is used except for the observation period of 1 year (265 business days). As a stressed period, we select a period which has an adequate length of time and is considered the most stressful under a certain set of criteria established based on the most recent portfolio.

4.

    When applying the internal model, we regularly verify the preconditions used for VAR measurement.

 

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Table of Contents

(C) MR4 : Back testing results of IMA

 

LOGO

 

Note:

 

     The above graphs show the results of backtesting performed for the most recent 250 business days including the reporting reference date.

(2) Banking Activities

To comply with Interest Rate Risk in the Banking Book (IRRBB) requirements, we are required to calculate expected changes in the economic value of equity (DEVE) arising from banking activities and expected changes in net interest income (DNII) from the reference date until the date no later than 12 months from the reference date under interest rate shock scenarios (i.e. parallel up and downwards shifts in the yield curve and the like).

(D) IRRBB1 : Interest rate risk

 

          (Millions of yen)  
          a      b      c     d  
          D EVE      D NII  

No.

         As of
March 31,
2018		      As of
March 31,
2017		      As of
March 31,
2018		     As of
March 31,
2017		  
                                 
1    Parallel up      895,416        /        (274,475 )      /  
2    Parallel down      0        /        370,566       /  
3    Steepener      436,819        /        /       /  
4    Flattener      90,789        /        /       /  
5    Short rate up      321,141        /        /       /  
6    Short rate down      69,824        /        /       /  
7    Maximum      895,416        /        370,566       /  
          e      f  
          As of March 31, 2018      As of March 31, 2017  
8    Tier1 capital      9,192,244        /  

 

Notes:     

1.

    Decreased economic values and interest income are shown as positive values.

2.

    As for some of those current deposits and ordinary deposits whose interest rates are not changed at predetermined intervals and from which depositors can withdraw money as desired on demand, we measure the interest rate risk associated with such deposits by applying an appropriate method after recognizing them as core deposits. The average repricing maturities are 0.9 years for yen deposits and 0.1 years for dollar deposits respectively. The longest repricing maturities are 10.0 years for yen deposits and 5.0 years for dollar deposits respectively. We measure interest rate risk associated with term deposits and loans in an appropriate manner by estimating their early redemption rates based on their historical prepayment and cancellation data.

3.

    When aggregating the respective D EVE of multiple currencies, we use the internal model that estimates the correlations between the key currencies based on historical data. When aggregating the respective D NII of multiple currencies, we simply add their respective D NII.

4.

    For the calculation of D EVE and D NII, we set an appropriate interest rate and spread according to a certain discount rate and reference rate.

5.

    When making the calculations above, we use regulatory defined preconditions including an interest rate shock scenario.

 

37

Table of Contents

⬛ Investment or Equity Exposure

(1) Summary of Risk Profile, Risk Management Policies/ Procedures and Structure

With regard to equities, we manage default risk through our credit risk management structure and price fluctuation risk through our market risk management structure. With regard to subsidiaries and related companies in which we invest, we manage their risks on a consolidated basis, and manage them appropriately in accordance with their management classification. In addition, securities, a part of equity exposure, are valued as follows: Japanese stocks with quoted market prices are valued based on the average quoted market price over the month preceding the consolidated balance sheet date; other securities which have readily determinable fair values are valued at the quoted market price if available, or otherwise based on their reasonable value at the consolidated balance sheet date (cost of securities sold is calculated primarily by the moving average method); and other securities the fair values of which are extremely difficult to determine are stated at acquisition cost or amortized cost and determined by the moving average method.

⬛ Operational risk

(1) Summary of Operational Risk Management and Procedures

See pages 71 to 73 for a summary of our operational risk management policies, etc.

(2) Approach Used for the Measurement of Operational Risk Equivalent

We use the advanced measurement approach for the calculation of operational risk equivalent. See pages 72 to 73 for the outline and the scope of application of the advanced measurement approach. In the measurement of operational risk equivalent, we do not recognize the risk mitigating impact of insurance.

 

38

Table of Contents

⬛ Composition of Leverage Ratio

 

                             (Millions of yen)  

Corresponding
line # on
Basel III

disclosure

template

(Table 2)

  

Corresponding
line # on

Basel III

disclosure

template

(Table 1)

  

Item

     As of March 31, 2017     As of March 31, 2018  
On-balance sheet exposures      (1 )     
1        

On-balance sheet exposures before deducting adjustment items

        174,146,451       178,888,103  
  1a   1  

Total assets reported in the consolidated balance sheet

        200,508,610       205,028,300  
  1b   2  

The amount of assets of subsidiaries that are not included in the scope of the leverage ratio on a consolidated basis (-)

        —         —    
  1c   7  

The amount of assets of subsidiaries that are included in the scope of the leverage ratio on a consolidated basis (except those included in the total assets reported in the consolidated balance sheet)

        —         —    
  1d   3  

The amount of assets that are deducted from the total assets reported in the consolidated balance sheet (except adjustment items) (-)

        26,362,159       26,140,197  
2       7  

The amount of adjustment items pertaining to Tier1 capital (-)

        1,296,500       1,685,871  
3        

Total on-balance sheet exposures

      (a )      172,849,950       177,202,231  

Exposures related to derivative transactions

      (2 )     
4        

Replacement cost associated with derivatives transactions, etc.

        2,454,674       2,655,175  
5        

Add-on amount associated with derivatives transactions, etc.

        5,615,193       6,524,621  
     

The amount of receivables arising from providing cash margin in relation to derivatives transactions, etc.

        1,038,620       858,877  
6        

The amount of receivables arising from providing cash margin, provided where deducted from the consolidated balance sheet pursuant to the operative accounting framework

        204,188       263,112  
7        

The amount of deductions of receivables (out of those arising from providing cash variation margin) (-)

        —         —    
8        

The amount of client-cleared trade exposures for which a bank holding company acting as a clearing member is not obliged to make any indemnification (-)

        /       /  
9        

Adjusted effective notional amount of written credit derivatives

        1,882,691       1,319,146  
10      

The amount of deductions from effective notional amount of written credit derivatives (-)

        1,705,729       1,207,805  
11     4  

Total exposures related to derivative transactions

      (b )      9,489,638       10,413,128  

Exposures related to repo transactions

      (3 )     
12      

The amount of assets related to repo transactions, etc

        12,317,829       12,431,400  
13      

The amount of deductions from the assets above (line 12) (-)

        5,179,456       4,196,150  
14      

The exposures for counterparty credit risk for repo transactions, etc

        385,734       521,728  
15      

The exposures for agent repo transactions

        /       /  
16     5  

Total exposures related to repo transactions, etc.

      (c )      7,524,107       8,756,979  

Exposures related to off-balance sheet transactions

      (4 )     
17      

Notional amount of off-balance sheet transactions

        49,117,932       50,668,428  
18      

The amount of adjustments for conversion in relation to off-balance sheet transactions (-)

        31,579,950       32,762,942  
19     6  

Total exposures related to off-balance sheet transactions

      (d )      17,537,982       17,905,485  

Leverage ratio on a consolidated basis

      (5 )     
20      

The amount of capital (Tier1 capital)

      (e )      8,211,522       9,192,244  
21     8  

Total exposures ((a)+(b)+(c)+(d))

      (f )      207,401,679       214,277,824  
22      

Leverage ratio on a consolidated basis ((e)/(f))

        3.95 %      4.28 % 

 

39

Table of Contents

∎ Indicators for Assessing Global Systemically Important Banks (G-SIBs)

(Billions of yen)

  Item  

No.

   

Description

   

As of March 31,

2017

   

As of March 31,

2018

1

   

Total exposures

(= a + b + c + d):

a.   On-balance sheet assets (other than assets specifically identified below b., c. and contra-account of guarantees)

b.  Sum of counterparty exposure of derivatives contracts, capped notional amount of written credit derivatives and potential future exposure of derivatives contracts

c.   Adjusted gross value of securities financing transactions (SFTs) and counterparty exposure of SFTs

d.  Gross notional amount of off-balance sheet items (other than derivatives contracts and SFTs )

    208,698.1    215,963.6

2

   

Intra-financial system assets

(= a + b + c + d):

a.   Funds deposited with or lent to other financial institutions and undrawn committed lines extended to other financial institutions

b.  Holdings of securities issued by other financial institutions (Note 1)

c.   Net positive current exposure of SFTs with other financial institutions

d.  Over-the-counter (OTC) derivatives with other financial institutions that have a net positive fair value

    12,248.4    12,910.4

3

   

Intra-financial system liabilities(=a + b + c):

a.   Deposits due to, and loans and undrawn committed lines obtained from, other financial institutions

b.  Net negative current exposure of SFTs with other financial institutions

c.   OTC derivatives with other financial institutions that have a net negative fair value

    20,482.5    22,558.2

4

    Securities outstanding(Note 1)    24,386.5    24,854.2

5

    Assets under custody    144,337.5    140,047.3

6

    Notional amount of OTC derivatives    916,188.1    1,168,293.9

7

    Held-for-trading(HFT) securities and available-for-sale(AFS) securities , excluding HFT and AFS securities that meet the definition of Level 1 assets and Level 2 assets with haircuts (Note 2)    9,728.9    10,838.3

8

    Level 3 assets (Note 3)    1,774.5    1,901.4

9

    Cross-jurisdictional claims    44,852.9    45,183.0

10

    Cross-jurisdictional liabilities    30,741.5    31,932.9
        

  Item  

No.

   

Description

   

For the fiscal

year ended

March 31, 2017

   

For the fiscal

year ended

March 31, 2018

11

    Payments (settled through the BOJ-NET, the Japanese Banks’ Payment Clearing Network and other similar settlement systems, excluding intragroup payments)    5,820,573.6    5,991,927.8

12

   

Underwritten transactions in debt and equity markets (Note 4)

    14,159.9    16,938.1

 

Notes:     

   

1.

    Securities refer to secured debt securities, senior unsecured debt securities, subordinated debt securities, commercial paper, certificate of deposits, and common equities.

2.

    Level 1 and Level 2 assets with haircuts are defined in the Basel III Liquidity Coverage Ratio (LCR).

3.

    The amount is calculated in accordance with the U.S.GAAP.

4.

    This refers to underwriting of securities defined in article 2 paragraph 8 item 6 of the Financial Instruments and Exchange Act.

 

40

Table of Contents

Disclosure of Information for the Fiscal Year Ended on March 31, 2017 According to the Relevant Old FSA Notice

Among the information disclosed for the fiscal year ended March 31, 2017, according to the relevant Old FSA Notice, see the following for the items which are different from those disclosed according to the New FSA Notice.

∎ Risk-based Capital

(1) Required capital by portfolio classification

 

     (Billions of yen)  
     As of March 31, 2017  
     EAD      Required capital  

Credit risk

      207,375.9        5,078.5  
  

 

 

     

 

 

  

Internal ratings-based approach

      189,852.0        4,600.4  

Corporate (except specialized lending)

      71,777.8        2,468.9  

Corporate (specialized lending)

      3,630.9        225.4  

Sovereign

      80,002.7        81.0  

Bank

      5,902.0        113.6  

Retail

      12,235.5        486.3  

Residential mortgage

      9,388.0        312.2  

Qualifying revolving loan

      629.2        48.8  

Other retail

      2,218.2        125.1  

Equities

      4,973.3        691.4  

PD/LGD approach

      4,180.1        485.4  

Market-based approach (simple risk weight method)

      793.1        205.9  

Market-based approach (internal models approach)

      —          —    

Regarded-method exposure

      1,744.0        268.4  

Purchase receivables

      3,297.5        102.5  

Securitizations

      4,009.5        26.3  

Others

      2,278.3        136.3  
  

 

 

     

 

 

  

Standardized approach

      17,523.9        280.6  

Sovereign

      12,638.5        12.2  

Bank

      1,930.1        36.7  

Corporate

      2,354.5        177.3  

Residential mortgage

      —          —    

Securitizations

      14.4        2.1  

Others

      586.1        52.0  
  

 

 

     

 

 

  

CVA risk

      n.a.        181.7  
  

 

 

     

 

 

  

Central counterparty-related

      n.a.        15.6  
  

 

 

     

 

 

  

Market risk

      n.a.        182.6  
  

 

 

     

 

 

  

Standardized approach

      n.a.        103.6  

Interest rate risk

      n.a.        39.0  

Equities risk

      n.a.        34.2  

Foreign exchange risk

      n.a.        6.9  

Commodities risk

      n.a.        23.4  

Option transactions

      n.a.        —    
  

 

 

     

 

 

  

Internal models approach

      n.a.        78.9  
  

 

 

     

 

 

  

Operational risk

      n.a.        269.9  

Advanced measurement approach

      n.a.        223.4  

Basic indicator approach

      n.a.        46.5  
  

 

 

     

 

 

  

Total required capital (consolidated)

      n.a.        4,937.3  
  

 

 

     

 

 

  

 

Note:

   EAD calculated using the standardized approach for credit risk represents the amount before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs.

 

41

Table of Contents

∎ Credit Risk

(2) Credit Risk Exposures, etc.

The amounts associated with regarded-method exposures and securitization exposures are excluded. The outstanding balance is based on exposure at default.

Status of Credit Risk Exposure

(A) Breakdown by Geographical Area

 

     (Billions of yen)  
     As of March 31, 2017  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Derivatives      Others      Total  

Domestic

      68,581.7        19,414.3        954.6        38,424.0        127,374.7  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Overseas

      37,218.6        10,014.2        1,635.9        7,854.8        56,723.7  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Asia

      8,907.9        2,145.6        472.7        1,865.2        13,391.6  

Central and South America

      2,978.7        56.3        85.1        456.3        3,576.6  

North America

      14,644.8        6,304.6        339.6        4,420.9        25,710.0  

Eastern Europe

      289.1        —          0.2        4.6        294.0  

Western Europe

      6,597.0        882.1        581.5        722.7        8,783.4  

Other areas

      3,800.9        625.3        156.5        384.9        4,967.7  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      105,800.4        29,428.5        2,590.5        46,278.8        184,098.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Exempt portion

      n.a.        n.a.        n.a.        n.a.        17,509.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

  

1.

   Exempt portion represents the amount before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs, calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit risk-weighted assets.

2.

   Exposure to non-Japanese residents is included in “Overseas.”

3.

   “Others” include cash, deposits, call loans, other debt purchased, money held in trust, foreign exchange assets, other assets, etc.

(B) Breakdown by Industry

 

     (Billions of yen)  
     As of March 31, 2017  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Derivatives      Others      Total  

Manufacturing

      20,272.4        2,299.9        424.1        742.9        23,739.5  

Construction

      1,349.2        215.0        7.6        70.6        1,642.4  

Real estate

      8,608.9        570.4        83.5        19.7        9,282.6  

Service industries

      5,018.6        397.7        77.4        68.0        5,561.9  

Wholesale and retail

      8,532.7        738.9        92.3        994.4        10,358.5  

Finance and insurance

      12,095.5        3,034.3        896.8        2,144.1        18,170.9  

Individuals

      11,071.5        —          0.8        9.4        11,081.8  

Other industries

      25,759.5        8,846.0        1,002.5        8,360.3        43,968.5  

Japanese Government; Bank of Japan

      13,091.8        13,325.9        5.1        33,868.8        60,291.8  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      105,800.4        29,428.5        2,590.5        46,278.8        184,098.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Exempt portion

      n.a.        n.a        n.a.        n.a        17,509.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

  

1.

   Exempt portion represents the amount before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs, calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit risk-weighted assets.

2.

   “Others” include cash, deposits, call loans, other debt purchased, money held in trust, foreign exchange assets, other assets, etc.

(C) Breakdown by Residual Contractual Maturity

 

     (Billions of yen)  
     As of March 31, 2017  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Derivatives      Others      Total  

Less than one year

      28,002.1        7,317.2        378.8        5,819.6        41,518.0  

From one year to less than three years

      18,999.1        7,689.9        980.2        676.6        28,346.1  

From three years to less than five years

      19,035.9        1,879.4        451.7        17.8        21,384.9  

Five years or more

      27,912.4        7,705.1        759.0        11.9        36,388.5  

Other than above

      11,850.6        4,836.7        20.5        39,752.7        56,460.7  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      105,800.4        29,428.5        2,590.5        46,278.8        184,098.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Exempt portion

      n.a.        n.a.        n.a.        n.a.        17,509.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

  

1.

   Exempt portion represents the amount before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs, calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit risk-weighted assets.

2.

   “Others” include cash, deposits, call loans, other debt purchased, money held in trust, foreign exchange assets, other assets, etc.

 

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Table of Contents

Status of Exposure Past Due Three Months or More or in Default

(D) Breakdown by Geographical Area

 

     (Billions of yen)  
     As of March 31, 2017  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Derivatives      Others      Total  

Domestic

      973.8        90.6        2.9        10.5            1,078.1  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Overseas

      244.6        2.9        7.8        3.3        258.8  

Asia

      54.2        0.0        1.8        1.1        57.2  

Central and South America

      98.5        0.0               2.8                 0.0        101.3  

North America

      30.1        2.9        0.1        1.4        34.7  

Eastern Europe

      0.6        —          0.0        —          0.7  

Western Europe

      47.3        0.0        2.9        0.5        50.8  

Other areas

      13.7        —          0.0        0.1        13.9  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

          1,218.5               93.6        10.8        13.9        1,336.9  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Exempt portion

      n.a.        n.a.        n.a.        n.a.        3.6  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

   

1.

    Exempt portion represents the amount before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs, calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit risk-weighted assets.

2.

    Exposure to non-Japanese residents is included in “Overseas.”

3.

    “Others” include deposits, call loans, other debt purchased, money held in trust, foreign exchange assets, other assets, etc.

(E) Breakdown by Industry

 

     (Billions of yen)  
     As of March 31, 2017  
     Loans, commitments and
other non-derivative
off-balance-sheet exposures		      Securities      Derivatives      Others      Total  

Manufacturing

      548.4        87.5        2.9        4.8        643.8  

Construction

      13.2        0.0        0.0        0.0        13.3  

Real estate

      59.0        0.3        0.1        0.2        59.6  

Service industries

      84.1        0.4        0.9        0.9        86.4  

Wholesale and retail

      176.1        2.2        0.3        4.1        182.8  

Finance and insurance

      11.1        2.6        0.0        1.8        15.6  

Individuals

      94.6        —          —          1.1        95.7  

Other industries

      231.8        0.3        6.4        0.7        239.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

          1,218.5               93.6             10.8               13.9            1,336.9  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Exempt portion

      n.a.        n.a.        n.a.        n.a.        3.6  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:

   

1.

    Exempt portion represents the amount before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs, calculated using the standardized approach for business units and asset classes that are immaterial for the purpose of calculating credit risk-weighted assets.

2.

    “Others” include deposits, call loans, other debt purchased, money held in trust, foreign exchange assets, other assets, etc.

Status of Reserves for Possible Losses on Loans

The amounts associated with regarded-method exposure and securitization exposure are excluded.

(F) Fiscal Year-end Balances of Reserves for Possible Losses on Loans and Changes during the Fiscal Year (after Partial Direct Write-offs)

 

     (Billions of yen)  
     As of, or for
the fiscal year ended,
March 31, 2017		  

General reserve for possible losses on loans

   

Beginning balance

      304.8  

Increase during the fiscal year

      344.7  

Decrease during the fiscal year

      304.8  

Ending balance

      344.7  
  

 

 

  

Specific reserve for possible losses on loans

   

Beginning balance

      154.6  

Increase during the fiscal year

      164.4  

Decrease during the fiscal year

      154.6  

Ending balance

      164.4  
  

 

 

  

Reserve for possible losses on loans to restructuring countries

   

Beginning balance

      0.0  

Increase during the fiscal year

      0.0  

Decrease during the fiscal year

      0.0  

Ending balance

      0.0  
  

 

 

  

Total

   

Beginning balance

      459.5  

Increase during the fiscal year

      509.1  

Decrease during the fiscal year

      459.5  

Ending balance

      509.1  
  

 

 

  

 

Note:

  General reserve for possible losses on loans in the above table represents the amount recorded in our consolidated balance sheet, and the amounts associated with regarded-method exposure and securitization exposure are not excluded.

 

43

Table of Contents

(G) Specific Reserve for Possible Losses on Loans by Geographical Area and Industry

 

     (Billions of yen)  
     As of March 31, 2016      As of March 31, 2017                  Change              

Domestic

      96.2        105.0        8.7  

Manufacturing

      27.2        36.4        9.2  

Construction

      3.1        0.8        (2.3 ) 

Real estate

      2.3        1.9        (0.3 ) 

Service industries

      11.5        12.6        1.1  

Wholesale and retail

      28.8        33.4        4.5  

Finance and insurance

      0.6        0.5        (0.0 ) 

Individuals

      17.3        14.1        (3.2 ) 

Other industries

      5.0        4.8        (0.1 ) 
  

 

 

     

 

 

     

 

 

  

Overseas

      49.1        49.2        0.0  
  

 

 

     

 

 

     

 

 

  

Exempt portion

      9.3        10.1        0.8  
  

 

 

     

 

 

     

 

 

  

Total

      154.6        164.4        9.7  
  

 

 

     

 

 

     

 

 

  

 

Note:

   Exempt portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for purposes of calculating credit risk-weighted assets.

(H) Write-offs of Loans by Industry

 

     (Billions of yen)  
     For the fiscal year ended
March 31, 2017		  

Manufacturing

      0.9  

Construction

      0.3  

Real estate

      0.2  

Service industries

      2.3  

Wholesale and retail

      3.1  

Finance and insurance

      —    

Individuals

      4.4  

Other industries

      4.2  
  

 

 

  

Exempt portion

      0.1  
  

 

 

  

Total

      15.8   
  

 

 

  

 

Notes:   
1.    The above table represents the breakdown of losses on write-offs of loans recorded in our consolidated statement of income after excluding the amounts associated with regarded-method exposure and securitization exposure.
2.    Exempt portion represents the amount calculated using the standardized approach for business units and asset classes that are immaterial for purposes of calculating credit risk-weighted assets.
3.    “Other industries” include overseas and non-Japanese resident portions.

Status of Exposure to which the Standardized Approach is Applied

(I) Exposure by Risk Weight Category after Applying Credit Risk Mitigation

 

     (Billions of yen)  
     As of March 31, 2017  
                                    

Risk weight

    On-balance
sheet		      Off-balance
sheet		      Total             With external
rating		  
                                    
0%      10,729.6        1,522.4        12,252.1           50.0  
10%      179.8        —          179.8           —    
20%      1,337.2        511.1        1,848.4           63.5  
35%      —          —          —             —    
50%      42.4        55.8        98.3           22.0  
100%      1,894.8        1,186.8        3,081.6           122.9  
150%      0.0        —          0.0           —    
250%      48.9        —          48.9           —    
350%      —          —          —             —    
625%      —          0.0        0.0           —    
937.5%      —          0.0        0.0           —    
1,250%      —          0.0        0.0           —    
  

 

 

     

 

 

     

 

 

        

 

 

  

Total

      14,233.1        3,276.3        17,509.4           258.4  
  

 

 

     

 

 

     

 

 

        

 

 

  

 

Notes:   
1.    The amounts in the above table are before the deduction of specific reserve for possible losses on loans, reserve for possible losses on loans to restructuring countries and partial direct write-offs.
2.    Off-balance-sheet exposure shows credit equivalent amount.

(J) Amount of Exposure to which a Risk Weight of 1,250% is Applied

 

     (Billions of yen)  
     As of March 31, 2017  

Amount of exposure to which a risk weight of 1,250% is applied

      0.2  

 

44

Table of Contents

Status of Exposure to which the Internal Ratings-based Approach is Applied

(K) Specialized Lending Exposure under Supervisory Slotting Criteria by Risk Weight Category

 

     (Billions of yen)  

Risk weight

    As of March 31, 2017  

50%

      0.0  

70%

      13.4  

90%

      3.8  

95%

      87.6  

115%

      4.5  

120%

      8.0  

140%

      15.2  

250%

      17.0  

Default

      15.5  
  

 

 

  

Total

      165.6  
  

 

 

  

(L) Equity Exposure under Simple Risk Weight Method of Market-based Approach by Risk Weight Category

 

     (Billions of yen)  

Risk weight

    As of March 31, 2017  

300%

      737.5  

400%

      55.6  
  

 

 

  

Total

      793.1  
  

 

 

  

 

Note:

    Of the equity exposure under the simple risk weight method, a risk weight of 300% is applied for listed equities and 400% for unlisted equities.

(M) Portfolio by Asset Class and Ratings Segment (Corporate, etc.)

 

    (Billions of yen, except percentages)  
    As of March 31, 2017  
    PD
(EAD
weighted
average)
(%)		     LGD
(EAD
weighted
average)
(%)		     EL
default
(EAD
weighted
average)
(%)		     Risk
weight
(EAD
weighted
average)
(%)		     EAD                       Amount of
undrawn
commitments		     Weighted
average of
credit
conversion
factor (%)		  
                                 
                  On-balance
sheet		     Off-balance
sheet		      

Corporate

     1.76       36.17       n.a.       36.73       78,222.1         56,571.6       21,650.4       22,184.7       74.99  

Investment grade zone

     0.09       37.82       n.a.       26.08       55,538.0         37,788.8       17,749.1       18,464.6       74.99  

Non-investment grade zone

     1.49       31.95       n.a.       64.06       21,680.0         17,927.0       3,752.9       3,563.4       75.00  

Default

     100.00       35.87       33.22       35.12       1,004.0         855.7       148.2       156.6       75.00  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

  

Sovereign

     0.01       37.96       n.a.       1.27       80,314.2         67,492.6       12,821.5       816.3       75.00  

Investment grade zone

     0.00       37.96       n.a.       1.16       80,165.1         67,353.7       12,811.4       806.8       75.00  

Non-investment grade zone

     0.94       37.82       n.a.       63.75       149.0         138.8       10.1       9.4       75.00  

Default

     100.00       28.51       25.45       40.51       0.0         0.0       —         —         —    
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

  

Bank

     0.16       37.28       n.a.       23.23       5,921.5         4,231.3       1,690.2       734.3       75.00  

Investment grade zone

     0.08       37.30       n.a.       19.41       5,337.6         3,764.5       1,573.0       643.6       75.00  

Non-investment grade zone

     0.59       36.96       n.a.       58.25       582.4         465.3       117.1       90.6       75.00  

Default

     100.00       96.75       94.52       29.55       1.4         1.4       —         —         —    
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

  

Equity exposure under PD/LGD approach

     2.28       90.00       n.a.       145.16       4,180.1         4,064.4       115.7       —         —    

Investment grade zone

     0.07       90.00       n.a.       112.90       3,788.9         3,673.2       115.7       —         —    

Non-investment grade zone

     1.10       90.00       n.a.       240.10       301.9         301.9       —         —         —    

Default

     100.00       90.00       n.a.       1,192.50       89.3         89.3       —         —         —    
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

  

Total

     0.88       38.40       n.a.       22.06       168,638.0         132,360.1       36,277.9       23,735.3       74.99  

Investment grade zone

     0.04       39.24       n.a.       14.31       144,829.7         112,580.3       32,249.4       19,915.1       74.99  

Non-investment grade zone

     1.46       32.89       n.a.       66.25       22,713.3         18,833.1       3,880.2       3,663.5       75.00  

Default

     100.00       40.37       33.31       129.54       1,094.9         946.6       148.2       156.6       75.00  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

  

 

Notes:     

1.

    Investment grade zone includes obligor ratings A1 through B2, non-investment grade zone includes C1 through E2 (excluding E2R), and default includes E2R through H1.

2.

    “Corporate” does not include specialized lending exposure under supervisory slotting criteria.

3.

    Each asset class includes purchased receivables.

4.

    The commitments that can be terminated at any time without condition or terminated automatically are not included in the amount of undrawn commitments and weighted average of credit conversion factor.

5.

    Regarding equity exposure under the PD/LGD approach, we recognize the risk-weighted assets by multiplying 1,250% by the expected loss (“EL”).

 

45

Table of Contents

(N) Portfolio by Asset Class and Ratings Segment (Retail)

 

     (Billions of yen, except percentages)  
     As of March 31, 2017  
    

PD

(EAD

weighted

average)

     

LGD

(EAD

weighted

average)

     

EL

default

(EAD

weighted

average)

     

Risk

weight

(EAD

weighted

average)

      EAD
(Billions
of yen)		                          

Amount of

undrawn

     

Weighted

average of

credit

conversion

  
                     On-balance      Off-balance        
     (%)      (%)      (%)      (%)                sheet      sheet      commitments      factor (%)  

Residential mortgage

      1.61        41.29        n.a.        32.98        9,388.0           9,258.2        129.8        9.1        75.00  

Non-default

      0.76        41.24        n.a.        32.92        9,307.8           9,179.6        128.2        9.1        75.00  

Default

      100.00        47.30        44.25        40.27        80.2           78.6        1.5        —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

        

 

 

     

 

 

     

 

 

     

 

 

  

Qualifying revolving loan (retail)

      3.25        76.82        n.a.        66.05        629.2           414.9        214.2        1,715.6          12.49  

Non-default

      3.14        76.83        n.a.        66.05        628.4           414.4        214.0        1,714.1          12.49  

Default

      100.00        71.62        66.53        67.40        0.7           0.5        0.1        1.5        12.84  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

        

 

 

     

 

 

     

 

 

     

 

 

  

Other retail

      4.50        49.02        n.a.        46.43        2,218.2           2,204.2        14.0        16.4        65.02  

Non-default

      1.66        49.12        n.a.        46.56        2,154.0           2,143.4        10.5        12.7        56.80  

Default

      100.00        45.71        42.54        41.92        64.2           60.7        3.4        3.6        93.64  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

        

 

 

     

 

 

     

 

 

     

 

 

  

Total

      2.22        44.52        n.a.             37.12          12,235.5             11,877.4             358.0          1,741.2        13.31  

Non-default

      1.04        44.49        n.a.        37.07        12,090.3           11,737.5        352.8        1,736.0        13.14  

Default

      100.00        46.72        43.61        41.14        145.2           139.9        5.2        5.2        69.86  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

        

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:   

1.

    Each asset class includes purchased receivables.

2.

    The commitments that can be terminated at any time without condition or terminated automatically are not included in the amount of undrawn commitments and weighted average of credit conversion factor.

(O) Actual Losses by Asset Class

 

     (Billions of yen)  
     For the period from April 1, 2016
through March 31, 2017		  
     Actual losses  

Corporate

      (2.8 ) 

Sovereign

      0  

Bank

      (0.2 ) 

Residential mortgage

      (0.6 ) 

Qualifying revolving loan (retail)

      0.5  

Other retail

      (1.6 ) 
  

 

 

  

Total

      (4.9 ) 
  

 

 

  

 

Note:   
   Actual losses are the sum of the net increase (decrease) in the amount of partial direct write-offs, specific reserve for possible losses on loans and general reserve for possible losses on loans (for claims against special attention obligors or below), etc., as well as tax-qualified direct write-offs, losses from sales of non-performing loans, losses from debt forgiveness and losses from debt-equity swaps during the relevant period. Equity exposure under the PD/LGD approach is not included in the amount of actual losses.

(P) Comparison of Estimated and Actual Losses by Asset Class

 

     (Billions of yen)  
     For the period from April 1, 2007
through March 31, 2008		     For the period from April 1, 2008
through March 31, 2009		  
    

Estimated losses

(expected losses as of

March 31, 2007)

    

Actual
losses

    

Estimated losses

(expected losses as of

March 31, 2008)

    

Actual
losses

  
                

After

deduction

of reserves

                  

After

deduction

of reserves

    

Corporate

      1,086.0           217.0       74.6       1,121.0           350.0       345.3  

Sovereign

      5.4           (7.0 )      0.0       1.3           (11.1 )      0.0  

Bank

      6.4           2.6       (2.6 )      2.9           2.5       28.6   

Residential mortgage

      78.2           6.8       5.1       86.6           22.7       17.2  

Qualifying revolving loan (retail)

      7.2           2.3       (0.1 )      7.9           3.2       2.1  

Other retail

      52.9           8.8       (2.8 )      51.9           16.4       3.8  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

Total

      1,236.5           230.5         74.1       1,271.8           383.9       397.3  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

 

46

Table of Contents
     (Billions of yen)  
     For the period from April 1, 2009
through March 31, 2010		     For the period from April 1, 2010
through March 31, 2011		  
     Estimated losses
(expected losses as of
March 31, 2009)		     Actual
losses		     Estimated losses
(expected losses as of
March 31, 2010)		     Actual
losses		  
                 After
deduction
of reserves		                   After
deduction
of reserves		    

Corporate

      1,313.1           473.3       166.5       1,296.9           454.0       22.9  

Sovereign

      1.7           (10.8 )      0.3       1.5           (11.4 )      0.2  

Bank

      35.5           6.5       1.0       38.4           8.3       (0.4 ) 

Residential mortgage

      95.8           24.8       33.2       122.6           31.1       31.5  

Qualifying revolving loan (retail)

      10.3           3.8       0.2       10.2           3.5       1.4  

Other retail

      51.3           15.6       4.3       51.2           15.0       23.1  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

Total

      1,508.0           513.3       205.8       1,521.1           500.6         78.7  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  
     (Billions of yen)  
     For the period from April 1, 2011
through March 31, 2012		     For the period from April 1, 2012
through March 31, 2013		  
     Estimated losses
(expected losses as of
March 31, 2011)		     Actual
losses		     Estimated losses
(expected losses as of
March 31, 2012)		     Actual
losses		  
                 After
deduction
of reserves		                   After
deduction
of reserves		    

Corporate

      989.6           373.2       29.2       828.0           272.6       75.6  

Sovereign

      1.3           (11.7 )      0.2       3.1           (10.2 )      0.2  

Bank

      31.9           4.1       (1.4 )      18.4           6.3       (5.0 ) 

Residential mortgage

      150.4           43.2       (2.9 )      134.8           41.6       (9.2 ) 

Qualifying revolving loan (retail)

      12.2           4.2       (0.7 )      10.8           3.7       0.3  

Other retail

      74.7           24.1       5.2       73.5           24.2       0.2  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

Total

      1,260.3           437.2         29.5       1,068.8           338.4         62.1  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  
     (Billions of yen)  
     For the period from April 1, 2013
through March 31, 2014		     For the period from April 1, 2014
through March 31, 2015		  
     Estimated losses
(expected losses as of
March 31, 2013)		     Actual
losses		     Estimated losses
(expected losses as of
March 31, 2014)		     Actual
losses		  
                 After
deduction
of reserves		                   After
deduction
of reserves		    

Corporate

      785.1           246.9       (41.2 )      596.0           195.5       128.1  

Sovereign

      1.7           (11.9 )      (13.5 )      1.5           1.5       0.0  

Bank

      12.5           6.4       (1.2 )      10.3           5.6       (1.2 ) 

Residential mortgage

      123.7           50.5       (3.2 )      104.8           46.1       (0.7 ) 

Qualifying revolving loan (retail)

      11.2           3.9       0.4       11.5           3.8       2.2  

Other retail

      69.1           26.2           1.4       61.9           23.8       5.1  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

Total

      1,003.5           322.3       (57.4 )        786.3           276.6       133.6  
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

 

     (Billions of yen)  
     For the period from April 1, 2015
through March 31, 2016		     For the period from April 1, 2016
through March 31, 2017		  
     Estimated losses
(expected losses as of
March 31, 2015)		     Actual
losses		     Estimated losses
(expected losses as of
March 31, 2016)		     Actual
losses		  
                 After
deduction
of reserves		                   After
deduction
of reserves		    

Corporate

      607.1           128.9       24.8       483.4           117.6       (2.8 ) 

Sovereign

      1.6           1.5        0       1.8           1.7              0  

Bank

      7.3           3.9       (0.5 )      5.5           3.6        (0.2 ) 

Residential mortgage

      80.4           31.2       (6.0 )      71.5           34.2       (0.6 ) 

Qualifying revolving loan (retail)

      12.3           2.4       0.4       13.6           3.3       0.5  

Other retail

      54.3           15.1       (1.2 )      47.8           16.5       (1.6 ) 
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

Total

         763.2           183.3         17.4          623.8           177.2       (4.9 ) 
  

 

 

        

 

 

    

 

 

    

 

 

        

 

 

    

 

 

  

 

Notes:  

1.

   Estimated losses after deduction of reserve are the amount after deductions of partial direct write-offs, specific reserves for possible losses on loans and general reserves for possible losses on loans (for claims against special attention obligors or below), etc., as of the beginning of each period. Equity exposure under the PD/LGD approach is not included in the amount of estimated losses.

2.

   Actual losses are the sum of the net increase (decrease) in the amount of partial direct write-offs, specific reserves for possible losses on loans and general reserves for possible losses on loans (for claims against special attention obligors or below), etc., as well as tax-qualified direct write-offs, losses from sales of non-performing loans, losses from debt forgiveness and losses from debt-equity swaps during the relevant period. Equity exposure under the PD/LGD approach is not included in the amount of actual losses.

 

47

Table of Contents

∎ Methods for Credit Risk Mitigation

(3) Credit Risk Mitigation by Portfolio Classification

The amounts of exposure to which the method of credit risk mitigation through collateral and guarantees is applied are as follows:

 

     (Billions of yen)  
     As of March 31, 2017  
     Financial
collateral		      Other
collateral		      Guarantees      Credit
derivatives		      Total  

Internal ratings-based approach

      806.3        5,045.9        8,429.4        11.7        14,293.4  

Corporate

      740.9        4,670.6        7,412.7        11.7        12,836.0  

Sovereign

      8.5        8.3        369.9        —          386.8  

Bank

      33.3        99.6        82.3        —          215.3  

Retail

      23.4        267.2        564.4        —          855.1  

Residential mortgage

      —          —          122.5        —          122.5  

Qualifying revolving loan

      —          —          0.1        —          0.1  

Other retail

      23.4        267.2        441.7        —          732.4  

Others

      —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Standardized approach

      124.5        n.a.        163.4        —          287.9  

Sovereign

      100.0        n.a.        163.4        —          263.4  

Bank

      14.0        n.a.        —          —          14.0  

Corporate

      10.5        n.a.        —          —          10.5  

Residential mortgage

      —          n.a.        —          —          —    

Securitizations

      —          n.a.        —          —          —    

Others

      —          n.a.        —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      930.8        5,045.9        8,592.9        11.7        14,581.4  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

∎ Counterparty Risk in Derivatives Transactions and Long-settlement Transactions

(4) Status of Counterparty Risk in Derivatives Transactions and Long-settlement Transactions

(A) Status of Derivatives Transactions and Long-settlement Transactions

Derivative Transactions

 

         (Billions of yen)  
         As of March 31, 2017  
         Gross
replacement
cost		      Gross
add-on		      Credit
equivalent
amount		  

Current exposure method

           

Foreign exchange-related transactions

        139.7        95.7        235.4  

Interest rate-related transactions

        156.5        61.8        218.3  

Gold-related transactions

        —          —          —    

Equity-related transactions

        36.6        130.4        167.0  

Transactions related to precious metals (other than gold)

        33.1        73.7        106.8  

Other commodity-related transactions

        527.4        1,160.5        1,688.0  

Credit derivatives transactions

        2.4        8.1        10.6  

Subtotal

  

(A)

      895.9        1,530.4        2,426.4  

Netting benefits by close-out netting settlement contracts

  

(B)

      n.a.        n.a.        1,154.2  

Subtotal

  

(C)=(A)+(B)

      n.a.        n.a.        1,272.1  

Effect of credit risk mitigation by collateral

  

(D)

      n.a.        n.a.        298.6  
    

 

 

     

 

 

     

 

 

  

Total

  

(C)+(D)

      n.a.        n.a.        973.5  
    

 

 

     

 

 

     

 

 

  
Standardized method                      Credit
equivalent
amount		  

Total

              16.3  
          

 

 

  

Expected positive exposure method

           
          

 

 

  

Total

              2,386.1  
          

 

 

  

Long-settlement Transactions

 

     (Billions of yen)  
     As of March 31, 2017  
     Gross
replacement
cost		      Gross
add-on		      Credit
equivalent
amount		  

Long-settlement transactions

      26.8        5.9        32.8  

 

Notes:

   

1.

    The current exposure method is used as the method to calculate credit equivalent amounts.

2.

    Neither the “netting benefits by close-out netting settlement contracts” nor the “effect of credit risk mitigation by collateral” applies to long-settlement transactions.

(B) Amounts of Credit Risk Mitigation by Type

 

     (Billions of yen)  
     As of March 31, 2017  

Financial collateral

      23.7  

Other collateral

      31.1  

Guarantees, others

      11.7  
  

 

 

  

Total

      66.7  
  

 

 

  

(C) Notional Amount of Credit Derivatives Subject to Credit Equivalent Amount Calculations

 

          (Billions of yen)  
          As of March 31, 2017  
          Notional amount  

Credit derivatives type:

      

Credit default swap

    Protection bought      1,708.2  
   Protection sold      1,803.0  
     

 

 

  

Total return swap

    Protection bought      —    
   Protection sold      —    
     

 

 

  

Total

    Protection bought      1,708.2  
   Protection sold      1,803.0  
     

 

 

  

 

Note: Credit derivatives used for credit risk mitigation are as follows:

 

     (Billions of yen)  
     As of March 31, 2017  

Credit derivatives used for credit risk mitigation

      20.0  

 

48

Table of Contents

∎ Securitization Exposures

(5) Quantitative Disclosure Items for Securitization Exposures

Securitization Exposures as Originator (for Calculation of Credit Risk-weighted Assets)

(A) Information by Type of Underlying Assets

 

     (Billions of yen)  
     As of, or for the fiscal year ended, March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Corporate      Real
estate		      Securitization
products		      Total  

Traditional securitizations

                        

Amount of underlying assets (a)

      —          48.1        —          —          —          —          —          48.1  

Default exposure

      —          0.2        —          —          —          —          —          0.2  

Losses during the fiscal year

      —          —          —          —          —          —          —          —    

Amount of exposures securitized during the fiscal year

      —          —          —          —          —          —          —          —    

Gains and losses recognized on sales during the fiscal year

      —          —          —          —          —          —          —          —    

Securitization subject to early amortization treatment

      —          —          —          —          —          —          —          —    

Synthetic securitizations

                        

Amount of underlying assets (b)

      —          —          —          —          280.9        —          —          280.9  

Default exposure

      —          —          —          —          —          —          —          —    

Losses during the fiscal year

      —          —          —          —          —          —          —          —    

Amount of exposures securitized during the fiscal year

      —          —          —          —          277.4        —          —          277.4  

Total amount of underlying assets (a)+(b)

      —          48.1        —          —          280.9        —          —          329.1  

 

Notes:

   

    1.

    Items that refer to “during the fiscal year” show amounts accumulated during the fiscal year ended March 31, and 2017.

    2.

    “Amount of underlying assets” and “Losses during the fiscal year” include those related to, in addition to exposure originated by us, exposure to assets originated by other financial institutions if they are contained in the same securitization program.

    3.

    Classification based on type of underlying assets is conducted according to the principal underlying asset type for each transaction.

    4.

    “Credit cards” include shopping credit receivables, card loans, etc.

    5.

    The effects of risk mitigation, in the context of calculating capital adequacy ratio, of transfers (hedges) of risk through synthetic securitization transactions are reflected in “Required capital” of “(B) Information of securitization exposure retained or purchased.”

 

49

Table of Contents

–Exposure Intended to be Securitized–

 

     (Billions of yen)  
     As of March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Corporate      Real
estate		      Securitization
products		      Total  

Exposure intended to be securitized

      —          —          —          —          —          —          —          —    

 

(B) Information of Securitization Exposure Retained or Purchased

 

–Exposure by Type of Underlying Asset–

 

 

 

     (Billions of yen)  
     As of March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Corporate      Real
estate		      Securitization
products		      Total  

On-balance sheet

      —          0        —          —          280.9        —          —          280.9  

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Off-balance sheet

      —          —          —          —          —          —          —          —    

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Total

      —          0        —          —          280.9        —          —          280.9  

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Exposure on securitizations to which a risk weight of 1,250% is applied

      —          0        —          —          0.6        —          —          0.6  

Exposure whose underlying assets are overseas assets

      —          —          —          —          —          —          —          —    

 

Notes:     

1.

    Classification based on type of underlying asset is conducted according to the principal underlying asset type for each transaction.

2.

    “Credit cards” include shopping credit receivables, card loans, etc.

3.

    “Exposure whose underlying assets are overseas assets” is classified based on the principal underlying asset type for each transaction.

4.

    “Exposure on resecuritizations” as of March 31, 2017 is classified following Article 1, Paragraph 2-2 of the FSA Notice No. 20 (hereinafter the same).

–Exposure by Risk Weight Category–

 

     (Billions of yen)  
     As of March 31, 2017  
                                                                

Risk weight

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 20%

      267.4             —          —               —          267.4             —    

Up to 50%

      —               —          —               —          —               —    

Up to 100%

      —               —          —               —          —               —    

Up to 250%

      1.7             —          —               —          1.7             —    

Up to 650%

      —               —          —               —          —               —    

Less than 1,250%

      11.1             —          —               —          11.1             —    

1,250%

      0.6             —          —               —          0.6             —    
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  

Total

      280.9             —          —             —          280.9           —    
  

 

 

          

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

 

–Amount of Required Capital by Risk Weight Category–

 

 

     (Billions of yen)  
     As of March 31, 2017  
                                                                

Risk weight

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 20%

      1.5           —          —             —          1.5           —    
Up to 50%      —             —          —             —          —             —    

Up to 100%

      —             —          —             —          —             —    

Up to 250%

      —             —          —             —          —             —    

Up to 650%

      —             —          —             —          —             —    

Less than 1,250%

      0.2           —          —             —          0.2           —    

1,250%

      0.7             —          —               —          0.7             —    
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  

Total

          2.6             —          —               —              2.6             —    
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  

 

50

Table of Contents

–Credit Risk Mitigation against Exposure on Resecuritizations–

 

     (Billions of yen)  

Risk weight

    As of March 31, 2017  
        

Up to 20%

      —    

Up to 50%

      —    

Up to 100%

      —    

Up to 250%

      —    

Up to 650%

      —    

Over 650%

      —    
  

 

 

  

Total

      —    
  

 

 

  

 

Note:

The above table shows the exposure on resecuritizations based on the risk weight after taking into consideration the effect of method to mitigate credit risk.

–Capital Increase Due to Securitization Transactions–

 

     (Billions of yen)  
     As of March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Corporate      Real
estate		      Securitization
products		      Total  

Capital increase due to securitization transactions

      —          —          —          —          —          —          —          —    

 

Securitization Exposure as Sponsor of Securitization Programs (ABCP/ABL) (for Calculation of Credit Risk-weighted Assets)

 

(C) Information by Type of Underlying Assets

 

  
     (Billions of yen)  
     As of, or for the fiscal year ended, March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Account
and note
receivables		      Real
estate		      Others      Total  

Amount of underlying assets

      43.3        —          74.4        31.9        307.5        —          43.3        500.6  

Default exposure

      —          —          —          —          4.9        —          —          4.9  

Estimated loss amount related to underlying assets during the fiscal year

      1.6        —          0.8        0.5        5.8        —          0.7        9.6  

Amount of exposures securitized during the fiscal year

      394.0        —          814.3        753.7        2,512.4        —          680.3        5,154.9  

 

Notes:     

1.

    Items that refer to “during the fiscal year” show amounts accumulated during the fiscal year ended March 31, 2017.

2.

    Securitization exposure that is acquired in securitization of customer’s claims other than as sponsor (in the form of asset-backed securities, trust beneficiary rights and other transferable instruments) is categorized as securitization exposure as investor.

3.

    The amount of default exposure is the amount of the underlying assets recognized as default in the calculation of capital adequacy ratio.

4.

    Estimated loss amount related to underlying assets is based on the amount of the underlying assets as of the relevant date and the following parameters that are used in the calculation of capital adequacy ratio:
  

•   parameters used in the calculation of required capital for an underlying asset when applying the supervisory formula (e.g., PD); and

  

•   with respect to underlying assets classified as securitization exposure, the conservative application of risk weights used in the ratings-based approach.

5.

    Classification based on type of underlying assets is conducted according to the principal underlying asset type for each transaction. Transactions that are difficult to classify are included under “Others.”

6.

    “Credit cards” include shopping credit receivables, card loans, etc.

(D) Information of Securitization Exposure Retained or Purchased

–Exposure by Type of Underlying Asset–

 

     (Billions of yen)  
     As of March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Account
and note
receivables		      Real
estate		            Others            Total  

On-balance sheet

      17.8        —          62.7        30.1        296.3        —          43.3        450.6  

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Off-balance sheet

      136.3        —          0.1        —          54.0        —          27.6        218.2  

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Total

      154.2        —            62.9          30.1           350.4        —            71.0           668.8  

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Exposure on securitizations to which a risk weight of 1,250% is applied

      —          —          —          —          —          —          —          —    

Exposure whose underlying assets are overseas assets

      98.2        —          —          18.0        153.0        —          58.3        327.7  

 

Notes:

   

1.

    Securitization exposure retained or purchased includes unused portions of securitization programs that are subject to allocation of required capital.

2.

    Classification based on type of underlying assets is conducted according to the principal underlying asset type for each transaction. Transactions that are difficult to classify are included under “Others.”

3.

    Credit cards” include shopping credit receivables, card loans, etc.

4.

    The classification of transactions of which the underlying assets are overseas assets is conducted according to the principal underlying assets of each transaction.

5.

    “Exposure on resecuritizations” as of March 31, 2017 is classified following Article 1, Paragraph 2-2 of the FSA Notice No. 20 (hereinafter the same).

 

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Table of Contents

–Exposure by Risk Weight Category–

 

     (Billions of yen)  
     As of March 31, 2017  
                                                                

Risk weight

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 20%

         434.9           —          218.2           —             653.1           —    

Up to 50%

      14.0           —          —             —          14.0           —    

Up to 100%

      1.6           —          —             —          1.6           —    

Up to 250%

      —             —          —             —          —             —    

Up to 650%

      —             —          —             —          —             —    

Less than 1,250%

      —             —          —             —          —             —    

1,250%

      —             —          —             —          —             —    
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

Total

      450.6           —          218.2           —          668.8           —    
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

 

–Amount of Required Capital by Risk Weight Category–

 

  
     (Billions of yen)  
     As of March 31, 2017  
                                                                

Risk weight

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 20%

             2.7           —              1.4           —                 4.1           —    

Up to 50%

      0.2           —          —             —          0.2           —    

Up to 100%

      0.1           —          —             —          0.1           —    

Up to 250%

      —             —          —             —          —             —    

Up to 650%

      —             —          —             —          —             —    

Less than 1,250%

      —             —          —             —          —             —    

1,250%

      —             —          —             —          —             —    
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

Total

      3.1           —          1.4           —          4.5           —    
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

–Credit Risk Mitigation against Exposure on Resecuritizations–

 

     (Billions of yen)  

Risk weight

    As of March 31, 2017  
        

Up to 20%

      —    

Up to 50%

      —    

Up to 100%

      —    

Up to 250%

      —    

Up to 650%

      —    

Over 650%

      —    
  

 

 

  

Total

      —    
  

 

 

  

 

Note:

  The above table shows the exposure on resecuritizations based on the risk weight after taking into consideration the effect of method to mitigate credit risk.

Securitization Exposure as Investor(for Calculation of Credit Risk-weighted Assets)

(E) Information of Securitization Exposure Retained or Ourchased

–Exposure by Type of Underlying Asset–

 

     (Billions of yen)  
     As of March 31, 2017  
     Credit
cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Corporate      Real
estate		      Others      Total  

On-balance sheet

      145.0        818.9        725.6        333.5        425.4        6.5        195.3        2,650.4  

Exposure on resecuritizations

      —          0.0        —          —          —          —          —          0.0  

Off-balance sheet

      32.0        —          97.2        130.1        161.6        0.1        2.3        423.6  

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Total

      177.1        818.9        822.8        463.7        587.1        6.6        197.6        3,074.1  

Exposure on resecuritizations

      —          0.0        —          —          —          —          —          0.0  

Exposure on securitizations to
which a risk weight of 1,250% is applied

      —          0.0        —          —          —          0.2        —          0.2  

Exposure whose underlying assets are overseas assets

      161.3        0.0        819.9        462.8        587.1        0.1        163.3        2,194.8  

 

Notes:

   

1.

    Classification based on type of underlying assets is conducted according to the principal underlying asset type for each transaction. Transactions that are difficult to classify are included under “Others.”

2.

    “Credit cards” include shopping credit receivables, card loans, etc.

3.

    The classification of transactions of which the underlying assets are overseas assets is conducted according to the principal underlying assets of each transaction.

4.

    “Exposure on resecuritizations” as of March 31, 2017 is classified following Article 1, Paragraph 2-2 of the FSA Notice No. 20 (hereinafter the same).

–Exposure by Risk Weight Category–

 

     (Billions of yen)  
     As of March 31, 2017  
                                                                

Risk weight

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 20%

      2,593.7           0.0        421.1           —          3,014.9           0.0  

Up to 50%

      44.8           —          —             —          44.8           —    

Up to 100%

      8.3           —          1.7           —          10.1           —    

Up to 250%

      —             —          —             —          —             —    

Up to 650%

      3.3           —          0.5           —          3.9           —    

Less than 1,250%

      —             —          —             —          —             —    

1,250%

      0.0           —          0.1           —          0.2           —    
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

Total

      2,650.4           0.0        423.6           —          3,074.1           0.0  
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

 

52

Table of Contents

–Amount of Required Capital by Risk Weight Category–

 

     (Billions of yen)  
     As of March 31, 2017  
                          

Risk weight

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 20%

      14.9           0.0        3.3           —          18.2           0.0  

Up to 50%

      0.9           —          —             —          0.9           —    

Up to 100%

      0.6           —          0.1           —          0.8           —    

Up to 250%

      —             —          —             —          —             —    

Up to 650%

      0.9           —          0.1           —          1.1           —    

Less than 1,250%

      —             —          —             —          —             —    

1,250%

      0.0           —          0.1           —          0.2           —    
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

Total

           17.5           0.0            3.7           —               21.3           0.0  
  

 

 

        

 

 

     

 

 

        

 

 

     

 

 

        

 

 

  

–Credit Risk Mitigation against Exposure on Resecuritizations–

 

     (Billions of yen)  

Risk weight

    As of March 31, 2017  
        

Up to 20%

      —    

Up to 50%

      —    

Up to 100%

      —    

Up to 250%

      —    

Up to 650%

      —    

Over 650%

      —    
  

 

 

  

Total

      —    
  

 

 

  

 

Note:

   
   The above table shows the exposure on resecuritizations based on the risk weight after taking into consideration the effect of method to mitigate credit risk.

Securitization Exposure as Originator (for Calculation of Market Risk Equivalent Amounts)

(F) Information by Type of Underlying Assets

None as of March 31, 2017

(G) Information of Securitization Exposure Retained or Purchased

None as of March 31, 2017

Securitization Exposure as Sponsor of Securitization Programs (ABCP/ABL) (for Calculation of Market Risk Equivalent Amounts)

(H) Information by Type of Underlying Assets

None as of March 31, 2017

(I) Information of Securitization Exposure Retained or Purchased

None as of March 31, 2017

Securitization Exposure as Investor (for Calculation of Market Risk Equivalent Amounts)

(J) Information of Securitization Exposure Retained or Purchased

–Exposure by Type of Underlying Asset–

 

     (Billions of yen)  
     As of March 31, 2017  
     Credit
Cards		      Residential
mortgage
loans		      Auto
loans		      Lease
payment
receivables		      Corporate      Real
estate		      Others      Total  

On-balance sheet

      0.0        3.7        13.8        0.6        0.0        3.0        7.0        28.4  

Exposure on resecuritizations

      —          —          —          —          —          —          0.0        0.0  

Off-balance sheet

      —          —          —          —          —          —          —          —    

Exposure on resecuritizations

      —          —          —          —          —          —          —          —    

Total

      0.0        3.7        13.8        0.6        0.0        3.0        7.0        28.4  

Exposure on resecuritizations

      —          —          —          —          —          —          0.0        0.0  

Exposure on securitizations to which a risk weight of 100% is applied

      —          3.6        0.4        —          0.0        —          0.3        4.4  

Exposure whose underlying assets are overseas assets

      —          3.5        13.8        0.6        0.0        3.0        7.0        28.2  

 

Notes:

   

1.

    Classification based on type of underlying assets is conducted according to the principal underlying asset type for each transaction. Transactions that are difficult to classify are included under “Others.”

2.

    “Credit cards” include shopping credit receivables, card loans, etc.

3.

    The classification of transactions of which the underlying assets are overseas assets is conducted according to the principal underlying assets of each transaction.

4.

    “Exposure on resecuritizations” are classified following Article 1, Paragraph 2-2 of the FSA Notice No. 20 (hereinafter the same).

 

53

Table of Contents

–Exposure by Risk Capital Charge Category–

 

     (Billions of yen)  
     As of March 31, 2017  
        

Risk capital charge

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 1.6%

      20.5             —          —               —          20.5             —    

Up to 4%

      —               —          —               —          —               —    

Up to 8%

      2.4             —          —               —          2.4             —    

Up to 20%

      —               —          —               —          —               —    

Up to 52%

      1.0             —          —               —          1.0             —    

Less than 100%

      —               —          —               —          —               —    

100%

      4.4             0.0        —               —          4.4             0.0  
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  

Total

      28.4             0.0        —               —          28.4             0.0  
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  
–Amount of Required Capital by Risk Capital Charge Category–  
     (Billions of yen)  
     As of March 31, 2017  
        

Risk capital charge

    On-balance
sheet		             Exposure on
resecuritizations		      Off-balance
sheet		             Exposure on
resecuritizations		      Total             Exposure on
resecuritizations		  
                                                                

Up to 1.6%

      0.3             —          —               —          0.3             —    

Up to 4%

      —               —          —               —          —               —    

Up to 8%

      0.1             —          —               —          0.1             —    

Up to 20%

      —               —          —               —          —               —    

Up to 52%

      0.2             —          —               —          0.2             —    

Less than 100%

      —               —          —               —          —               —    

100%

      4.4             0.0        —               —          4.4             0.0  
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  

Total

             5.2             0.0           —               —                 5.2             0.0  
  

 

 

          

 

 

     

 

 

          

 

 

     

 

 

          

 

 

  

–Subject to Comprehensive Risk Measure–

 

     (Billions of yen)  
     As of March 31, 2017  
     Securitization      Resecuritiation  

Total amount of securitization exposure

      —          —    

Total amount of required capital

      —          —    

 

54

Table of Contents

∎ Market Risk

(A) Market risk (VAR) and stressed VAR associated with trading activities for the fiscal year as of March 31, 2017.

The following table shows VAR (Value At Risk) figures of our trading activities:

 

     (Billions of yen)  
     For the fiscal year
ended March 31,
2017		  

End of period

      1.9  

Maximum

      4.8  

Minimum

      1.7  

Average

      2.7  

The number of cases where assumptive losses exceeded VAR during the period

         0  

 

Notes:     

1.

    Amount of market risk (VAR) is calculated based on the internal model.

2.

    The multiplication factor for the calculation of market risk equivalent is determined by the number of cases where assumptive losses exceeded VAR before 250 business days prior to the end of period.

3.

    Our group companies which conduct trading activities are Mizuho Bank, Mizuho Trust & Banking and Mizuho Securities, etc.

VAR method:

 

VAR:

    historical simulation method;

Quantitative standard:

    1. confidence interval: one-tailed 99.0%;
   2. holding period: 1 day; and
   3. historical observation period of three years (801 business days)

The following table shows stressed VAR figures of our trading activities:

 

     (Billions of yen)  
     For the fiscal year
ended March 31,
2017		  

End of period

      5.3  

Maximum

      8.9  

Minimum

      2.8  

Average

      5.2  

Stressed VAR method:

 

Stressed VAR:

    historical simulation method;

Quantitative standard:

    1. confidence interval: one-tailed 99.0%;
   2. holding period: 1 day; and
   3. historical observation period of one year of significant financial stress (265 business days)

Stressed VAR

The stressed VAR measurement is based on a continuous 12-month period of significant financial stress.

(B) Outlier criteria

The following table shows results of calculations under the outlier framework based on previous outlier criteria:

 

     (Billions of yen)  
     Amount of loss      Broadly-defined
capital		      Loss ratio
to capital		  

As of March 31, 2016

      516.6        9,638.6        5.3%  

As of March 31, 2017

      361.2        10,050.9        3.5%  

Interest rate shock scenario under stress conditions in outlier criteria

For the interest rate shock scenario used in connection with the calculations under the outlier framework, we generate annual rate fluctuation data for five years derived from daily raw historical interest rate data of the past six years and then apply the actual fluctuation data at a 99.0% confidence level to the shock scenario.

 

55

Table of Contents

∎Equity Exposures in Banking Book

(6) Status of Equity Exposures in Banking Book

(A) Amounts Stated in Consolidated Balance Sheet

 

     (Billions of yen)  
     As of March 31, 2017  
     Consolidated
balance sheet
amount		      Fair value  

Exposure of listed stock, etc.

      3,857.0        4,031.5  

Other equity exposure

      400.3        n.a.  
  

 

 

     

 

 

  

Total

      4,257.4        n.a.  
  

 

 

     

 

 

  

 

Note: The above figures include only Japanese and foreign stocks.

(B) Gains and Losses on Sales Related to Equity Exposure

 

   

(Billions of yen)

   

For the Fiscal year ended March 31, 2017

   

Gains and losses

on sales

            
       

Gains on sales

  

Losses on sales

Sale of equity exposure

   261.1     295.8   34.7

 

Note: The above figures represent gains and losses on sales of stocks in our consolidated statement of income.

(C) Gains and Losses from Write-offs Related to Equity Exposure

 

     (Billions of yen)  
     For the Fiscal year ended March 31, 2017  
     Gains and losses from write-offs  

Write-offs of equity exposure

      (4.8 ) 

 

Note:The above figures represent gains and losses on devaluation of stocks in our consolidated statement of income.

(D) Unrealized Gains and Losses Recognized in the Consolidated Balance Sheet and not Recognized in the Consolidated Statement of Income

 

   

(Billions of yen)

   

As of March 31, 2017

   

Net unrealized
gains

            
       

Unrealized
gains

  

Unrealized
losses

Equity exposure

   1,971.2     2,017.1   45.9

 

Note: The above figures include only Japanese and foreign stocks.

(E) Unrealized Gains and Losses not Recognized in the Consolidated Balance Sheet or in the Consolidated Statement of Income

 

   

(Billions of yen)

   

As of March 31, 2017

   

Net

            
       

Unrealized
gains

  

Unrealized
losses

Equity exposure

              174.5        182.8     8.3

 

Note: The above figures include only Japanese and foreign stocks.

(F) Equities Exposure by Portfolio Classification

 

     (Billions of yen)  
     As of March 31, 2017  

PD/LGD approach

      4,180.1  

Market-based approach (simple risk weight method)

      793.1  

Market-based approach (internal models approach)

      —    
  

 

 

  

Total

      4,973.3  
  

 

 

  

 

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Table of Contents

Status of Sound Management of Liquidity Risk

∎ Liquidity Coverage Ratio

The information disclosed herein is in accordance with “Matters Separately Prescribed by the Commissioner of the Financial Services Agency Regarding Status of Sound Management of Liquidity Risk , etc. pursuant to Article 19-2, Paragraph 1, Item 5, Sub-item (e) , etc. of the Ordinance for Enforcement of the Banking Law (the FSA Notice No. 7 of 2015).

 

        (In million yen, the number of data)  
Item           For the three months ended
December 31, 2017		     For the three months ended
March 31, 2018		  
                                 

High-Quality Liquid Assets

   (1)     /       /  
1  

Total high-quality liquid assets (HQLA)

       63,459,113       60,159,630  

Cash Outflows

   (2)    

 TOTAL
UNWEIGHTED

VALUE

  
 

 

    

 TOTAL
WEIGHTED

VALUE

  
 

 

    

 TOTAL
UNWEIGHTED

VALUE

  
 

 

    

 TOTAL
WEIGHTED

VALUE

  
 

 

2  

Cash outflows related to unsecured retail funding

       45,597,491       3,638,206       46,184,608       3,682,339  
3  

of which, Stable deposits

       13,200,574       396,017       13,410,643       402,319  
4  

of which, Less stable deposits

       32,396,917       3,242,188       32,773,964       3,280,020  
5  

Cash outflows related to unsecured wholesale funding

       78,558,012       49,864,317       77,563,913       49,329,388  
6  

of which, Qualifying operational deposits

       0       0       0       0  
7  

of which, Cash outflows related to unsecured wholesale funding other than qualifying operational deposits and debt securities

       73,002,116       44,308,421       71,364,662       43,130,137  
8  

of which, Debt securities

       5,555,895       5,555,895       6,199,250       6,199,250  
9  

Cash outflows related to secured funding, etc

       /       1,129,409       /       1,068,454  
10  

Cash outflows related to derivative transactions, etc. funding programs, credit and liquidity facilities

       24,764,396       7,077,369       24,249,235       7,064,688  
11  

of which, Cash outflows related to derivative transactions, etc

       2,368,843       2,368,843       2,315,235       2,315,235  
12  

of which, Cash outflows related to funding programs

       23,706       23,706       21,922       21,922  
13  

of which, Cash outflows related to credit and liquidity facilities

       22,371,846       4,684,819       21,912,077       4,727,530  
14  

Cash outflows related to contractual funding obligations, etc.

       6,562,416       1,936,205       7,040,197       2,333,910  
15  

Cash outflows related to contingencies

       78,261,200       695,462       77,792,015       696,424  
16  

Total cash outflows

       /       64,340,971       /       64,175,205  

Cash Inflows

   (3)    

 TOTAL
UNWEIGHTED

VALUE

  
 

 

  

 

 

 

 

 

TOTAL
WEIGHTED

VALUE

 

 

 
 

 

    

 TOTAL
UNWEIGHTED

VALUE

  
 

 

    

 TOTAL
WEIGHTED

VALUE

  
 

 

17  

Cash inflows related to secured lending, etc.

       10,283,301       737,035       10,554,062       836,532  
18  

Cash inflows related to collections of loans, etc

       14,205,103       10,755,503       14,863,687       11,012,718  
19  

Other cash inflows

       7,092,196       2,040,250       7,515,036       2,246,878  
20  

Total cash inflows

       31,580,601       13,532,789       32,932,786       14,096,129  

Consolidated liquidity coverage ratio

   (4)     /         /    
21  

Total HQLA allowed to be included in the calculation

       /       63,459,113       /       60,159,630  
22  

Net cash outflows

       /       50,808,181       /       50,079,075  
23  

Consolidated liquidity coverage ratio (LCR)

       /       124.8 %       /       120.1 %  
24  

The number of data used to calculate the average value

       62         59    

 

Notes:

 

  1. Item from 1 to 23 are quarterly average using data points as shown in item 24. From the fourth quarter of the fiscal year ended March 31, 2017, the average daily value is disclosed.

 

  2. We do not apply the “exception regarding qualifying operational deposits” in Article 28 of the Notice No. 62 with respect to item 6.

 

  3. The numbers in item 11 include the amount of additional collateral required due to market valuation changes on derivatives transactions estimated by the “historical look-back approach” instead of “scenario approach” in Article 37 of the Notice No. 62.

 

  4. There are no material components that necessitate detailed explanation of “cash outflows from other contracts” in Article 59 of the Notice No. 62 within item 14, “cash outflows from other contingent funding obligations” in Article 52 of the Notice No. 62 within item 15, “cash inflows from other contracts” in Article 72 of the Notice No. 62 within item 19.

 

  5. Monthly data or quarterly data is used for some of the data, etc., concerning our consolidated subsidiaries.

 

    2016     2017     2018  
    Apr-Jun         Jul-Sep         Oct-Dec         Jan-Mar         Apr-Jun         Jul-Sep         Oct-Dec         Jan-Mar    

Consolidated LCR (quartely average)

     135.1 %      137.4 %      135.3 %      129.4 %      129.7 %      126.1 %      124.8 %      120.1 % 

 

57

Table of Contents

Our Consolidated LCR surpasses the final regulatory standard (100%) and remains stable, with no change affecting funding conditions.

LCR disclosed herein does not differ much from the level we expected beforehand, and we do not expect our Consolidated LCR in

the future to deviate significantly from the current level.

There are no significant changes in the composition, such as currency composition or type composition, and geographic distribution of the HQLA allowed to be included in the calculation.

In addition, there is no significant currency mismatch which might affect our funding conditions between total amount of the HQLA allowed to be included in the calculation and net cash outflow regarding significant currencies.

∎ Status of Major Liquid Assets

 

(Billions of yen)

  

Item

   As of March 31, 2017     As of March 31, 2018  
             

Cash and Due from Banks (including Due from Central Banks)

     47,129.5       47,725.3  

Trading Securities

     4,800.4       5,188.4  

Securities

     31,761.8       33,618.9  

Bonds Held to Maturity

     3,815.6       2,515.8  

Other Securities

     27,946.2       31,103.1  

Japanese Stocks

     3,542.0       3,582.2  

Japanese Bonds

     13,245.1       16,535.6  

Japanese Government Bonds

     10,264.3       13,332.0  

Japanese Local Government Bonds

     284.4       239.3  

Japanese Corporate Bonds

     2,696.3       2,964.1  

Other

     11,159.0       10,985.2  

Foreign Bonds

     8,955.4       8,329.1  

Other

     2,203.5       2,656.1  
 

 

 

    

 

 

  

Total

     83,691.8       86,532.7  
 

 

 

    

 

 

  

Portion pledged as collateral

     (14,398.5 )      (11,660.9 ) 
 

 

 

    

 

 

  

Total after the deduction above

     69,293.3       74,871.7  
 

 

 

    

 

 

  

 

Notes:     

1.

    All securities included in the above table have fair value.

2.

    Portion pledged as collateral mainly consists of securities and others collateralized for borrowed money, foreign and domestic exchange transactions or derivatives transactions, or substituted for margins for futures transactions.

3.

    Figures in the above table do not represent high quality liquid assets under the Basel III regulatory regime.

∎ Status of Major Funding

 

(Billions of yen)

  
     As of March 31, 2017  

Types of Financial Instruments

    Within 1 year      1-3 years      3-5 years      5-7 years      7-10 years      Over 10 years  
                                           

Deposits

      115,871.8        3,334.2        696.7        73.1        60.5        9.0  

Negotiable Certificates of Deposit

      10,421.6        150.6        60.1        —          —          —    

Call Money and Bills Sold

      1,255.2        —          —          —          —          —    

Borrowed Money

      604.6        3,095.1        1,542.0        338.6        377.8        305.0  

Commercial Paper

      226.3        —          —          —          —          —    

Issued Bonds

      1,414.8        1,486.1        1,331.4        564.0        1,401.0        588.9  

Due to Trust Account

      4,784.1        —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      134,578.5        8,066.0        3,630.2        975.8        1,839.2        902.9  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(Billions of yen)

  
     As of March 31, 2018  

Types of Financial Instruments

    Within 1 year      1-3 years      3-5 years      5-7 years      7-10 years      Over 10 years  
                                           

Deposits

      121,278.4        2,974.1        691.7        86.9        41.3        8.5  

Negotiable Certificates of Deposit

      11,021.7        357.7        4.0        —          —          —    

Call Money and Bills Sold

      2,105.2        —          —          —          —          —    

Borrowed Money

      2,221.5        1,541.5        309.4        260.2        303.8        259.5  

Commercial Paper

      362.1        —          —          —          —          —    

Issued Bonds

      740.9        1,145.7        1,883.4        626.6        1,375.9        532.9  

Due to Trust Account

      4,733.1        —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

      142,463.2        6,019.2        2,888.7        973.9        1,721.0        801.0  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Notes:   

1.

    Regarding Deposits, Demand deposits are included in “Within 1 year”

2.

    Borrowed money or issued bonds with open ended, 44.0 billion, 779.0 billion, respectively, at March 31, 2017, and 0.0 billion, 1,239.0 billion, respectively, at March 31, 2018, are excluded.

 

58

Table of Contents

Compensation of Directors, Corporate Auditors and Employees

∎ Compensation of Directors, Corporate Auditors and Employees

(1) Qualitative Disclosure

(A) State of the Organizational System Relating to Compensation of “Subject Directors, Corporate Auditors and Employees” of Mizuho Group

 

1. Scope of “Subject directors, corporate auditors and employees”

“Subject directors, etc.” and “Subject employees, etc.” subject to disclosure as provided for in the FSA Notice (collectively, “Subject directors, corporate auditors and employees”) are as follows:

 

  (1) Scope of “Subject directors, etc.”

“Subject directors, etc.” are directors and executive officers as defined in the Companies Act of Mizuho Financial Group, Inc. (“MHFG”). Outside directors auditors are excluded.

 

  (2) Scope of “Subject employees, etc.”

“Subject employees, etc.” who are subject to disclosure are executive officers (as defined in our internal regulations), specialist officers and employees of MHFG and directors, corporate auditors and employees of its “Major consolidated subsidiaries”, who are “persons who receive large amounts of compensation” and “materially affect the operation of business or the state of assets of Mizuho group or its major consolidated subsidiaries.”

 

  (a) Scope of “Major consolidated subsidiaries”

A “Major consolidated subsidiary” is a consolidated subsidiary, etc., (i) whose total assets as a percentage of consolidated total assets exceeds 2% of a bank holding company or bank and (ii) who materially affects the management of our group. Specifically, those are Mizuho Bank, Ltd. (“MHBK”), Mizuho Bank (USA) and other subsidiaries who conduct banking business similar to a branch of MHBK, Mizuho Trust & Banking Co., Ltd. (“MHTB”), Mizuho Securities Co., Ltd. (“MHSC”), Trust & Custody Services Bank, Ltd., Mizuho Securities USA Inc. and Mizuho International Plc.

 

  (b) Scope of “Persons who receive large amounts of compensation”

A “Person who receives large amounts of compensation” refers to a person who receives compensation that exceeds the base amount from MHFG or its “Major consolidated subsidiaries.” The base amount at MHFG has been set at ¥50 million. Such base amount has been set based on the average amounts of the compensation of directors, executive officers (as defined in the Companies Act) and corporate auditors of MHFG, MHBK and MHTB for the last three fiscal years (excluding persons who resigned or retired during each of such fiscal years), taking into account fluctuations in amounts of compensation over past fiscal years. The preceding base amount has been adopted as the common base in order to unify the selection criteria of persons who receive large amounts of compensation at each of the companies in this paragraph.

 

  (c) Scope of “Persons who materially affect the operation of business or the state of assets of Mizuho group”

A “Person who materially affects the operation of business or the state of assets of Mizuho group” means a person who exerts significant influence on the operation of the business of MHFG or a “Major consolidated subsidiary” through his or her work in conducting transactions or management, or who materially affects the state of assets by incurring losses on transactions. Specifically, it includes executive officers (as defined in our internal regulations) and specialist officers of MHFG and directors, corporate auditors, executive officers (as defined in our internal regulations), specialist officers and market department employees of “Major consolidated subsidiaries.”

 

2. Decisions on compensation of “Subject directors, corporate auditors and employees” and the name, composition and duties of the committee to supervise business execution and other major organizations relating to payment of compensation and other compensation, etc.

 

  (1) State of maintaining and ensuring the Compensation Committee, etc.

MHFG is a Company with Three Committees, and has established the Compensation Committee as a statutory committee.

The chairman of the statutory Compensation Committee shall be an outside director, and in principle its members shall be appointed from among the outside directors (or at least non-executive directors) in order to ensure objectivity and transparency in director and executive officer compensation. As of March 2018, all four members of the Compensation Committee, including the chairman, were outside directors. The Compensation Committee shall determine the basic policy and compensation system for directors and executive officers of MHFG, MHBK, MHTB and MHSC, determine the compensation for each individual director and executive officer (as defined in the Companies Act) of MHFG, and exercise approval rights in MHFG for compensation for each individual director of MHBK, MHTB and MHSC.

In addition, the president of each of MHBK, MHTB and MHSC determines the amount of compensation for each of its executive officers and specialist officers.

 

  (2) Decisions on compensation of “Subject employees, etc.”

Matters relating to executive officers (as defined in our internal regulations) and specialist officers of MHFG and directors, executive officers (as defined in our internal regulations) and specialist officers of MHBK, MHTB and MHSC are as set out in (1) State of maintaining and ensuring the Compensation Committee, etc.. With regard to the compensation of directors of MHBK, MHTB and MHSC, it is determined through approval by the Compensation Committee, pursuant to each statutory procedure for directors who are Audit & Supervisory Committee Members and for directors who are not Audit & Supervisory Committee Members, and set within the scope of the total amount of compensation of directors resolved at the ordinary general meeting of shareholders.

With regard to the compensation of corporate auditors of MHBK, MHTB and MHSC, it is determined pursuant to consultation among corporate auditors, including outside corporate auditors, and set within the scope of the total amount of compensation of corporate auditors resolved at the ordinary general meeting of shareholders. The compensation of subject employees, etc., is decided and paid in accordance with the salary and bonus system established by MHFG and the “Major consolidated subsidiaries.” Such system is designed and put into writing by the human resources departments of MHFG and the “Major consolidated subsidiaries” which are independent of departments furthering business. In terms of the compensation of overseas employees, each overseas office or operation determines its own compensation policy based on local laws and regulations as well as employment relationships.

 

3. Total amount of compensation paid to members of the compensation committee and number of meetings held by the Compensation Committee

 

         

Number of meetings held

(April 2017 – March 2018)

     
   Compensation Committee (MHFG)    9   

Note: The total amount of compensation is not set out above as it is not possible to separately calculate the amounts that are paid as consideration for the execution of duties by the compensation committee.

 

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(B) Evaluating the Appropriateness of the Design and Operation of the System Relating to Compensation of “Subject Directors, Corporate Auditors and Employees” of Mizuho Group

 

1. Policies relating to compensation

 

  (1) Policies relating to compensation of “Subject directors, etc.”

MHFG set out the “Mizuho Financial Group Compensation Policy” concerning the determination of compensation for each individual director, executive officer and specialist officer (“Officers, etc.”) of MHFG as well as MHBK, MHTB and MHSC (the “Three Core Companies”).

 

  a. Philosophy and objectives

Executive compensation for MHFG and the Three Core Companies pursuant to such policy is determined based on appropriate governance and control, and aims to function as incentive and compensation for each Officer, etc., to exercise their designated function to the fullest in our efforts to realize management that contributes to value creation for various stakeholders and improve corporate value through continuous and stable corporate growth based on our basic management policies under our Corporate Identity.

 

  b. Basic Policy

The basic policy with respect to the determination concerning the individual compensation of Officers, etc., of MHFG and the Three Core Companies is set forth below:

 

  (i) The executive compensation shall be determined based on appropriate governance and control, and function as an appropriate incentive in order to realize management that contributes to value creation for various stakeholders and improve corporate value through continuous and stable corporate growth based on our basic management policies under our Corporate Philosophy.

 

  (ii) The executive compensation shall be based on the function and responsibility assigned to and the performance of each Officer, etc.

 

  (iii) The executive compensation shall contribute to suppressing excessive risk-taking, improving corporate value and creating value for various stakeholders not only in the short-term, but also over the medium- to long-term.

 

  (iv) The executive compensation shall reflect the management environment and business performance of our group.

 

  (v) The executive compensation shall enable compensation for securing expert personnel such as professionals with a competitive edge in the market.

 

  (vi) The compensation system and standards shall be timely and appropriately reevaluated and set at a competitive and appropriate standard based on such factors as the economic and social conditions and survey data with respect to management compensation provided by external specialized organizations.

 

  (vii) Regulations and guidelines, etc., concerning executive compensation, both in Japan and overseas, shall be complied with.

 

  c. Compensation System

 

  I. Compensation for Officers, etc., shall, in principle, consist of a “Basic Salary,” “Performance Payment” and “Stock Compensation.”

 

  (i) “Basic Salaries” shall factor in the function and responsibility of each Officer, etc., in addition to the standard amount for each position and payment will be made monthly in cash.

 

  (ii) “Performance Payments” shall be made as a monetary incentive for Officers, etc., to achieve the annual budget and as compensation for their achievement. The payment thereof shall reflect our company-wide results of operations, the results of organizations (our in-house companies and units, etc.) that each Officer, etc., is in charge of and the performance or each Officer, etc., in addition to the standard amount for each position. A system shall be adopted which, based on resolution by the Compensation Committee, etc., enables certain amount of deferred payments of the performance payments over three years, as well as a decrease or forfeiture of the deferred amount depending on performance, etc., of the company or the individual.

 

  (iii) “Stock Compensation” shall be paid in the form of shares of common stock of MHFG consisting of “Stock Compensation I” and “Stock Compensation II,” (together “Stock Compensation I and II”) acquired from the stock market through a trust with an aim to align the interests of Officers, etc., with those of the shareholders and increase the incentive to enhance corporate value.

 

  (a) “Stock Compensation I” shall be paid at the time of retirement of each Officer, etc., in the form of shares of common stock of MHFG calculated based on each position. A system shall be adopted which enables a decrease or forfeiture of the amount by resolution of the Compensation Committee, etc., depending on performance of the company or the individual.

 

  (b) “Stock Compensation II” shall be paid in accordance with our company-wide results of operations, the results of organizations (our in-house companies and units, etc.) that each Officer, etc., is in charge of and the performance of each Officer, etc., in addition to the standard amount for each position. A system shall be adopted which enables the entire amount of deferred payments over three years, as well as a decrease or forfeiture of the deferred amount by resolution of the Compensation Committee, etc., depending on performance of the company or the individual.

 

  II. Within the Officers, etc., the compensation system for the executive officers as defined in the Companies Act, the directors, the executive officers as defined in our internal regulations and the specialist officers responsible for business execution (the “Officers Responsible for Business Execution”) shall be separate from the compensation system for the directors responsible for management supervision (“Non-Executive Officers Responsible for Management Supervision”).

 

  (i) The basic compensation system for “Officers Responsible for Business Execution” shall be a “Basic Salary,” “Performance Payment” and “Stock Compensation I and II.”

 

  (a) The composition of the compensation shall, in principle, be 50%, 17.5% and 32.5% for “Basic Salary,” “Performance Payment” and “Stock Compensation I and II” respectively.

 

  (b) “The upper limit of “Performance Payment” and “Stock Compensation II” shall be decided* in accordance with the our annual results of operations taking into account the traits of business activities of MHFG as a Financial Services Group. The payment to each officer shall reflect the performance of each officer and the results of organizations (our in-house companies and units, etc.) that each Officer, etc., is in charge of, and be, in principle, within the range of 0% to 150% of the standard amount for each position.

 

  * The amount of funds for “Performance Payment” and “Stock Compensation II” is decided for each fiscal year by multiplying the standard amount for each position in a respective year with the total number of officers in that year and a coefficient based on the result from the fiscal year’s results of operations. The evaluation metric for this coefficient is decided by setting metrics based on our Consolidated Gross Profits, and using such evaluation metrics for the reference year and the current fiscal year (provided that, for Mizuho Securities Co., Ltd., the system is linked to Ordinary Profits, which is a metric that is equivalent to Consolidated Gross Profits based on the traits of business activities and financial structure of securities companies).

 

  (ii) The compensation for Non-Executive Officers Responsible for Management Supervision, in principle, shall be in the form of fixed compensation from the perspective of ensuring the effectiveness of the supervisory function. The compensation system shall consist of “Basic Salaries” and “Stock Compensation” and the composition shall, in principle, be 85% and 15% for “Basic Salaries” and “Stock Compensation,” respectively.

 

  III. There are cases where compensation for some personnel, including those officers recruited locally in countries other than Japan, may be designed individually in compliance with local compensation regulations while taking into consideration local compensation practices and the responsibilities, business characteristics and market value, etc., of each respective officer.

For cases where compensation is designed individually, payment of compensation is also made in accordance with the performance of the company or the individual. Payment of compensation is designed to avoid excessive risk-taking through a system which enables certain amount or a portion of deferred payments and non-monetary payments such as stock, as well as a decrease or forfeiture of the deferred amount depending on the performance, etc., of the company or the individual.

 

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  d. Compensation Determination Process

 

  I. The Compensation Committee shall determine the determination policy of executive compensation for MHFG and the Three Core Companies and the executive compensation system including the compensation system set out in “Compensation System” in order to effectively secure the transparency and objectivity of compensation, etc., for individual Officers, etc. In addition, the Compensation Committee shall determine the compensation for each individual director and executive officer, as defined in the Companies Act, of MHFG and approve at MHFG the compensation of each individual director of the Three Core Companies.

 

  II. The President & CEO, pursuant to this policy and regulations and detailed rules, etc., shall determine the compensation for each executive officer, as defined in our internal regulations, and specialist officer of MHFG and approve at the MHFG the compensation of each individual executive officer and specialist officer of the Three Core Companies.

 

  III. The Compensation Committee will verify the validity of the compensation system and standards based on economic and social conditions and survey data with respect to management compensation provided by external specialized organizations.

 

  IV. All members of the Compensation Committee shall be appointed from among outside directors (or at least non-executive directors) and the Chairman thereof shall be an outside director.

 

  V. The Compensation Committee may have officers who are not members of the committee (including officers of the Three Core Companies) such as the President & CEO and external experts, etc., attend its meetings and provide their opinion in order to facilitate adequate and appropriate discussions and determinations.

 

  (2) Policies relating to compensation of “Subject employees, etc.”

The policies relating to compensation for executive officers (as defined in our internal regulations) and specialist officers of MHFG and directors, executive officers (as defined in our internal regulations) and specialist officers of MHBK, MHTB and MHSC are also the same as the policies described in (1) Policies relating to compensation of “Subject directors, etc.” above. The compensation of corporate auditors is determined pursuant to consultation among corporate auditors, including outside corporate auditors, and set within the scope of the total amount of compensation of corporate auditors resolved at the ordinary general meeting of shareholders. Compensation for other employees, etc., is determined in accordance with their duties and responsibilities. Some bonuses that are linked to performance are determined after comprehensively evaluating the employee’s contribution to business, including any qualitative contributions to the organization, in a manner that does not place an excessive emphasis on results.

 

2. The effect of the overall level of compensation, etc., on equity capital

The Compensation Committee of MHFG receives reports on the amount of compensation paid to directors, executive officers (as defined in the Companies Act), executive officers (as defined in our internal regulations) and specialist officers of MHFG, MHBK, MHTB and MHSC in the previous fiscal year and confirms that there is no material effect on the Mizuho group’s performance or the adequacy of equity capital.

(C) Compatibility between System for Compensation of “Subject Directors, Corporate Auditors and Employees” of Mizuho Group and Risk Management and matters Relating to Linking Compensation with Performance

 

1. Compatibility between system for compensation of “Subject directors, corporate auditors and employees” and risk management

The compensation of employees in risk management department, compliance department and internal audit department is decided in accordance with the salary and bonus system, and specific payment amounts are conclusively determined in accordance with employee performance evaluations made by the relevant department and the human resources department, independent from departments furthering business.

Each employee of the risk management department, the compliance department and the internal audit department sets their own objectives in the employee performance evaluations, subject to the approval of their superiors. The degree to which the objectives are achieved is evaluated by taking into account the degree of the employee’s contribution to the establishment of a system for risk management, compliance and internal audit.

 

2. Linking compensation of “Subject directors, corporate auditors and employees” with performance

The performance payments and performance-based stock compensation for “Officers Responsible for Business Execution” are made or paid based on the standard amount set for each position, with which each officer’s performance shall be reflected, and determined in accord with a performance evaluation, etc., against the annual business plan. A certain amount of the performance payments and the entire amount of the performance-based stock compensation shall be made or paid in deferred payments over three years, and a decrease or forfeiture of the deferred amount may be made depending on the performance, etc., of the company and such officer. It should be noted that certain “Subject directors, corporate auditors and employees” have entered into compensation-related contracts. Stock compensation for “Non-Executive Officers Responsible for Management Supervision” shall be made in accordance with the standard amount set for each position, and the payment level shall not change based on the performance of each officer. The entire amount of the stock compensation shall be paid in deferred payments over three years, and a decrease or forfeiture of the deferred amount may be made depending on the performance, etc., of the company.

 

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(2) Quantitative Disclosure Items

(A) REM1 : Compensation Assigned to the Relevant Fiscal Year

 

               (Millions of yen, except people)  
               a      b  

No.

              “Subject
directors, etc.”		      “Subject
employees, etc.”		  

 

1

    Fixed compensation    Number of “Subject directors, etc.” and “Subject employees, etc.”      22        378  
2       Fixed compensation amount (3+5+7)      976        13,530  
3      

Cash compensation amount

      937        12,381  
4      

Of which, deffered amount

      —          —    
5      

Stock compensation amount or stock-based type compensation amount

      37        16  
6      

Of which, deffered amount

      37        16  
7      

Other compensation amount

      1        1,132  
8      

Of which, deffered amount

      —          —    
9    Variable compensation    Number of “Subject directors, etc.” and “Subject employees, etc.”      20        375  
10       Variable compensation amount (11+13+15)      490        14,962  
11      

Cash compensation amount

      246        13,638  
12      

Of which, deffered amount

      6        4,031  
13      

Stock compensation amount or stock-based type compensation amount

      244        1,307  
14      

Of which, deffered amount

      244        995  
15      

Other compensation amount

      —          17  
16      

Of which, deffered amount

      —          —    
17    Retirement benefits    Number of “Subject directors, etc.” and “Subject employees, etc.”      —          2  
18       Retirement benefits amount      —          8  
19      

Of which, deffered amount

      —          —    
20    Other compensation    Number of “Subject directors, etc.” and “Subject employees, etc.”      —          171  
21       Other compensation amount      —          897  
22      

Of which, deffered amount

      —          —    
23    Comensation amount (2+10+18+21)      1,467        29,399  

 

Notes:

 

   1. Amounts of compensation of “Subject directors, etc.” include amounts of compensation received for duties performed as a director or executive officer of a “Major consolidated subsidiary.”

 

   2. The number of employees is the actual number of persons (a) for the compensation for the fiscal year ended March 31, 2018 and (b) for the compensation for the fiscal year ended March 31, 2017 for the payments made or anticipated payments for which the amount became clear during the fiscal year ended March 31, 2018 are stated.

 

   3. The stated amount is the total amount for the fiscal year ended March 31, 2018 and the fiscal year ended March 31, 2017.

 

   4. No. 7, “Fixed compensation,” “Other compensation amount,” includes condolence money insurance premiums and Group life insurance premium subsidies, both based on the decision of our Compensation Committee.

 

   5. No. 11, “Variable compensation” “Cash compensation amount,” includes the recorded performance payment for the fiscal year ended March 31, 2017 for directors, executive officers (as defined in the Companies Act), executive officers (as defined in our internal regulations) and specialist officers of MHFG, MHBK, MHTB and MHSC. For portions that exceed a certain amount, we plan to defer payment over the three-year period from the fiscal year ending March 31, 2019.

 

   6. No. 13, “Variable compensation” “Stock compensation amount or stock-based type compensation amount” includes the amount obtained by multiplying the stock compensation and performance-based stock compensation ownership points (with one point to be converted into one share of MHFG stock) granted to the directors, executive officers (as defined in the Companies Act), executive officers (as defined in our internal regulations) and specialist officers of MHFG, MHBK, MHTB and MHSC for the fiscal year ended March 31, 2017 by the book value of MHFG’s shares (196.9447 yen per share). For stock compensation and performance-based stock compensation for the fiscal year ended March 31, 2017, we plan to defer payment over the three-year period from the fiscal year ending March 31, 2019.

 

   7. Because the amounts of the stock compensation, performance payment and performance-based-type stock compensation for the directors, executive officers (as defined in the Companies Act), executive officers (as defined in our internal regulations) and specialist officers of MHFG, MHBK, MHTB and MHSC for the fiscal year ended March 31, 2017 have not been determined at this time, they are not included in the above compensation. However, we have recorded the required reserves for accounting purposes.

 

   8. The exercise periods for the stock compensation-type stock options (stock acquisition rights) are as set out below. Under the stock option agreements, exercise of the options is postponed, even during the exercise period, until the time of retirement of the director or employee. [The exercise periods for stock options have been omitted from the table]

(B) REM2 : Special Compensation

 

     (Millions of yen, except people)  
     a      b      c      d      e      f  
     Bonus guarantees      Lump sum payments
at the time of recruitment		      Additional retirement
benefits		  
       People          JPY          Peopl          JPY          Peopl          JPY    

“Subject directors, etc.”

      —          —          —          —          —          —    

“Subject employees, etc.”

      1        127        3        36        19        813  

(C) REM3 : Deferred Compensation

 

          (Millions of yen)  
          a      b      c      d      e  
          Deferred
compensation
amount		      Of which, the
deferred
compensation
amount
subject to
adjustment
or variation		      Regarding
compensation
after
allocation,
variable
amounts
adjusted but
not linked to
variations for
the relevant
fiscal year		      Regarding
compensation
after
allocation,
variable
amounts
adjusted and
linked to
variations for
the relevant
fiscal year		      Amount of
deferred
compensation
paid in the
relavent
fiscal year		  

“Subject directors, etc.”

   

Cash compensation amount

      10        10        —          —          —    
  

Stock compensation amount or stock-based type compensation amount

      773        444        —          103        162  
  

Other compensation amount

      —          —          —          —          —    

“Subject employees, etc.”

   

Cash compensation amount

      6,745        1,938        126        —          2,697  
  

Stock compensation amount or stock-based type compensation amount

      2,440        1,333        —          157        566  
  

Other compensation amount

      0        —          —          —          —    

Total amount

         9,969        3,727        126        260        3,429  

(D) Other Relevant Matters Relating to Our System of Compensation for “Subject Directors, Corporate Auditors and Employees” of Mizuho Group

Not applicable, other than those covered in the above.

 

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Our Internal Control Systems

Amid the growing diversity and complexity of banking operations, financial institutions are exposed to various risks, including credit, market, operations, information technology, legal, settlement and other risks. We recognize the conducting of operations tailored to the risks and managing such risks as a key issue relating to overall management. In order to implement our business strategy while maintaining our financial stability, we maintain comprehensive risk management and control measures. Mizuho Financial Group maintains basic policies for risk management established by our Board of Directors that are applicable to the entire Mizuho group. These policies clearly define the kinds of risks to be managed, set forth the organizational structure and provide for the human resources training necessary for appropriate levels of risk management. The policies also provide for audits to measure the effectiveness and suitability of the risk management structure. In line with these basic policies, we maintain various measures to strengthen and enhance the sophistication of our risk management system.

All yen figures and percentages in this item are truncated. Accordingly, the total of each column of figures may not be equal to the total of the individual items.

Overview of Risk Management

Risk Management Structure

Each of our subsidiaries adopts appropriate risk management measures for its business based on the size and nature of its risk exposures, while Mizuho Financial Group controls risk management for the Mizuho group as a whole. At Mizuho Financial Group, the Risk Management Committee, which is one of the Business Policy Committees of Mizuho Financial Group, chaired by the Group Chief Risk Officer, provides integrated monitoring and management of the overall risk for the Mizuho group. The Group Chief Risk Officer reports the risk management situation to the Board of Directors, the Risk Committee and the Executive Management Committee, etc., on a regular basis and as needed. Mizuho Financial Group regularly receives reports and applications concerning the risk management situation from our principal banking subsidiaries and other core group companies and gives them appropriate instructions concerning risk management. Our principal banking subsidiaries and other core group companies each maintain their own systems for managing various types of risk, receiving reports on the status of risk at their respective subsidiaries, and gives them appropriate instructions concerning risk management as necessary.

Basic Approach

We classify the risks arising from the group’s businesses into different types of risk such as credit risk, market risk, liquidity risk and operational risk according to their risk factors, and manage each type of risk depending on its characteristics. Furthermore, each group entity manages such risks according to the characteristics of its business operations (i.e., management of risks associated with settlement and trust businesses, etc.). In addition to managing each type of risk individually, we have established a comprehensive risk management structure to identify and evaluate overall risk and to keep risk within limits that are managerially acceptable. In line with the basic policies relating to overall risk management laid down by Mizuho Financial Group, companies within the Mizuho group identify risk broadly and take a proactive and sophisticated approach to risk management.

Risk Capital Allocation

We endeavor to obtain a clear grasp of the group’s risk exposure and have implemented measures to control such risks within the group’s financial base in accordance with the risk capital allocation framework. More specifically, we allocate risk capital to our principal banking subsidiaries, including their respective subsidiaries, and other core group companies to control risk within the limits set for each company. We also control risk within managerially acceptable limits by working to ensure that the overall risk we hold on a consolidated basis does not exceed our financial strength. To ensure the ongoing financial soundness of Mizuho Financial Group, our principal banking subsidiaries and other core group companies, we regularly monitor the manner in which risk capital is being used in order to obtain a proper grasp of the risk profile within this framework. Reports are also submitted to the Board of Directors and other committees of each company. Risk capital is allocated to Mizuho Bank, Mizuho Trust & Banking, Mizuho Securities and Mizuho Americas by risk category, and is further allocated within their respective business units based on established frameworks.

Stress Testing

For the purpose of verifying the appropriateness of the Mizuho group’s risk appetite and the adequacy of its business plans, we carry out stress testing on our entire portfolio by measuring and assessing the impacts on our capital ratio and financial performance of the stress events assumed in the main and risk scenarios set by the group. Stress testing is carried out to confirm that the required capital ratio and financial performance can be secured on the occurrence of any of the assumed stress events. When our capital ratio or financial performance falls below the required level, we will consider and carry out a revision of our risk appetite and business plans. We also calculate the impacts of assumed stress events on risk volumes, including interest rate risk related to our banking book that is not covered by regulatory capital, to confirm whether the risk volumes balance with the group’s capital when a risk event occurs. The calculated risk volumes are used for assessing the group’s internal capital adequacy. Risk scenarios are set considering the current and projected economic conditions, as well as vulnerabilities in the group’s business and financial structure. Moreover, we have established a robust risk management framework under which stress testing is respectively carried out for each risk category, including market risk. Through such stress testing, we deepen our understanding of the distinctive features of our businesses and portfolios, and proactively determine action to be taken if a stress event happens. In this way, we are committed to enhancing our risk management capabilities on a continued basis.

 

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Credit Risk Management

We define credit risk as the Mizuho group’s exposure to the risk of losses that may be incurred due to a decline in, or total loss of, the value of assets (including off-balance-sheet instruments), as a result of deterioration in obligors’ financial position. Mizuho Financial Group has established the methods and structures necessary for grasping and managing credit risk. Mizuho Financial Group manages credit risk for the Mizuho group as a whole. Specifically, Mizuho Financial Group establishes the group’s fundamental credit risk policy to manage major group companies, and monitors and manages the credit risks of the group as a whole.

Credit Risk Management Structure

Credit Risk Management of the Mizuho Group

Our Board of Directors determines the Mizuho group’s basic matters pertaining to credit risk management. In addition, the Risk Management Committee broadly discusses and coordinates matters relating to basic policies and operations in connection with credit risk management and matters relating to credit risk monitoring for the Mizuho group. Under the control of the Group Chief Risk Officer of Mizuho Financial Group, the Credit Risk Management Department and the Risk Management Department jointly monitor, analyze and submit suggestions concerning credit risk and formulate and execute plans in connection with basic matters pertaining to credit risk management.

Credit Risk Management at Our Principal Banking Subsidiaries and Other Core Group Companies

Our principal banking subsidiaries and other core group companies manage their credit risk according to the scale and nature of their exposures in line with basic policies set forth by Mizuho Financial Group. The Board of Directors of each company determines key matters pertaining to credit risk management.

The Balance Sheet & Risk Management Committee and the Credit Committee, each of which is a Business Policy Committee of our principal banking subsidiaries, are responsible for discussing and coordinating overall management of their individual credit portfolios and transaction policies towards obligors. The respective Chief Risk Officers of our principal banking subsidiaries are responsible for matters relating to planning and implementing credit risk management. The credit risk management departments of our principal banking subsidiaries are in charge of planning and administering credit risk management and conducting credit risk measuring and monitoring. The departments regularly present reports regarding their risk management situation to Mizuho Financial Group. The credit departments of our principal banking subsidiaries determine policies and approve/disapprove individual transactions in terms of credit review, credit management and collection from customers in accordance with the lines of authority set forth respectively by our principal banking subsidiaries. In addition, our principal banking subsidiaries have established internal audit groups that are independent of the business departments in order to ensure appropriate credit risk management.

 

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Method of Credit Risk Management

We have adopted two different but mutually complementary approaches to credit risk management. The first approach is “individual credit management,” in which we manage the process for each individual transaction and individual obligor from execution until collection, based on our assessment of the credit quality of the customer. Through this process, we curb losses in the case of a credit event. The second is “credit portfolio management,” in which we utilize statistical methods to assess the potential for losses related to credit risk. Through this process, we identify credit risks and respond appropriately.

Individual Credit Management

Credit Codes

The basic code of conduct for all of our officers and employees engaged in the credit business is set forth in our credit code. Seeking to fulfill the bank’s mission and social responsibilities, our basic policy for credit business is determined in light of fundamental principles focusing on public welfare, safety, growth and profitability.

Internal Rating System

One of the most important elements of the risk management infrastructure of our principal banking subsidiaries is the use of an internal rating system that consists of credit ratings and pool allocations. Credit ratings consist of obligor ratings which represent the level of credit risk of the obligor, and transaction ratings which represent the possibility of ultimately incurring losses related to each individual claim by taking into consideration the nature of any collateral or guarantee and the seniority of the claim. In principle, obligor ratings apply to all obligors and are subject to regular reviews at least once a year to reflect promptly the fiscal period end financial results of the obligors, as well as special reviews as required whenever a obligor’s credit standing changes. This enables our principal banking subsidiaries to monitor both individual obligors and the status of the overall portfolio in a timely fashion. Because we consider obligor ratings to be an initial phase of the self-assessment process regarding the quality of our loans and off-balance-sheet instruments, such obligor ratings are closely linked to the obligor classifications and are an integral part of the process for determining the provision for loan losses and charge-offs in our self-assessment of loans and off-balance-sheet instruments.

To assign obligor ratings, we have a quantitative evaluation system (rating model) in place to enable proper assessment of an obligor’s credit standing. The system gives a quantitative rating to an obligor based on obligor-specific characteristics such as type of business (corporation or individual) and geography (in Japan or outside Japan). We categorize our rating models for companies in Japan into those for large companies and those for small and medium-sized companies. The former consist of 13 models according to industry-specific factors, while the latter consist of three models. For companies outside Japan, we utilize nine models.

These were developed by the Credit Risk Management Department based on a statistical methodology and approved by the Chief Risk Officer.

Pool allocations are applied to small claims that are less than a specified amount by pooling customers and claims with similar risk characteristics and assessing and managing the risk for each such pool. Our principal banking subsidiaries efficiently manage credit risk and credit screening by dispersing a sufficient number of small claims within each pool. Our principal banking subsidiaries generally review the appropriateness and effectiveness of our approach to obligor ratings and pool allocations once a year in accordance with predetermined procedures, which is audited by the Internal Audit Group.

Mizuho Financial Group defines a Restructured Loan as a loan extended to a Customer with Special Attention when the following conditions are met: we are aiming for business reconstruction or financial support; and lending conditions were amended favorably to the customer such as allowing interest rate reduction, postponement of principal repayment/interest payment, debt forgiveness, etc.

An overdue loan is defined as a loan for a Customer with Special Attention of which the loan principal or interest is overdue for three months or more following the contractual payment date.

Self-assessment, Provision for Loan Losses and Off-Balance-Sheet Instruments and Charge-Offs

We conduct self-assessment of assets to ascertain the status of assets both as an integral part of credit risk management and in preparation for appropriate accounting treatment, including provision for loan losses and off-balance-sheet instruments and charge-offs. During the process of self-assessment, obligors are categorized into certain groups taking into consideration their financial condition and their ability to make payments, and credit ratings are assigned to all obligors, in principle, to reflect the extent of their credit risks. The related assets are then categorized into certain classes based on the risk of impairment. This process allows us to identify and control the actual quality of assets and determine the appropriate accounting treatment, including provision for loan losses and off-balance-sheet instruments and charge-offs. Specifically, the credit risk management department of each of our principal subsidiaries is responsible for the overall control of the self-assessment of assets of the respective banking subsidiaries, cooperating with the administrative departments specified for each type of asset, including loan portfolios and securities, in executing and managing self-assessments. In our assessment of the probability of obligor bankruptcy, we deem an obligor that is rated as being insolvent or lower as being bankrupt.

Credit Review

Prevention of new impaired loans through routine credit management is important in maintaining the quality of our overall loan assets. Credit review involves analysis and screening of each potential transaction within the relevant business department. In case the screening exceeds the authority of the department, the credit department in charge at headquarters carries out the review. The credit group has specialist departments for different industries, business sizes and regions, carries out timely and specialized examinations based on the characteristics of the customer and its market, and provides appropriate advice to the business department. In addition, in the case of obligors with low credit ratings and high downside risks, the business department and credit department jointly clarify their credit policy and in appropriate cases assist the obligors at an early stage in working towards credit soundness.

 

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Credit Portfolio Management

Risk Measurement

We use statistical methodologies that involve a risk measurement system (enterprise value corporate valuation model, holding period of one year) to manage the possibility of losses by measuring the expected average loss for a one-year risk horizon (“Expected Loss”) and the maximum loss within a certain confidence interval (“credit VAR”). The difference between expected loss and credit VAR is measured as the credit risk amount (“Unexpected Loss”). The risk measurement system covers the following account items reported by each Mizuho Financial Group company: credit transactions including loans and discounts; securities; customer’s liabilities for acceptances and guarantees; deposits and foreign exchange; derivatives including swaps and options; off-balance sheet items including commitments; and other assets involving credit risk.

In establishing transaction spread guidelines for credit transactions, we aim to ensure an appropriate return from the transaction in light of the level of risk by utilizing credit cost data as a reference. Also, we monitor our credit portfolio from various perspectives and set guidelines noted below so that losses incurred through a hypothetical realization of the full credit VAR would be within the amount of risk capital and loan loss reserves.

Risk Control Methods

Our principal banking subsidiaries recognize two types of risk arising from allowing unexpected loss to become too large. One type is “credit concentration risk,” which stems from granting excessive credit to certain individual counterparties or corporate groups. The other type is “chain-reaction default risk,” which arises from granting excessive credit to certain areas, industrial sectors and other groupings. Our principal banking subsidiaries manage these risks in line with our specific guidelines for each. Our principal banking subsidiaries also set the credit limit based on verification of status of capital adequacy. In cases where the limit is exceeded, our principal banking subsidiaries will formulate a handling policy and/or action plan. In addition to the above, our principal banking subsidiaries monitor total credit exposure, credit exposure per rating, credit concentration per individual company, corporate group, geography, country and business sector to make a periodical report to the Balance Sheet & Risk Management Committee and the Credit Committee.

The following diagram shows our risk management structure:

 

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Market Risk Management

We define market risk as the risk of losses incurred by the group due to fluctuations in interest rates, stock prices and foreign exchange rates. Market risk includes market liquidity risk; i.e., the risk that we will suffer a loss due to market disruptions or other disorders that prevent us from conducting transactions in the market or require us to pay significantly higher prices than normal to conduct transactions. Mizuho Financial Group manages market risk for the Mizuho group as a whole. Specifically, Mizuho Financial Group establishes the fundamental risk management policy for the entire group, manages the market risk of our principal banking subsidiaries and other core group companies and monitors how the group’s market risk is being managed as a whole.

Market Risk Management Structure

Our Board of Directors determines basic matters pertaining to market risk management policies. The Risk Management Committee of Mizuho Financial Group broadly discusses and coordinates matters relating to basic policies in connection with market risk management, market risk operations and market risk monitoring. The Chief Risk Officer of Mizuho Financial Group is responsible for matters relating to market risk management planning and operations.

The Risk Management Department of Mizuho Financial Group is responsible for monitoring market risk, reporting and analysing, making proposals, setting limits and guidelines, and formulating and implementing plans relating to market risk management.

As for the situation of market risk, the Risk Management Department submits reports to the President and Group CEO on a daily basis and to the Board of Directors on a regular basis. For the purpose of managing the market risk of our principal banking subsidiaries and other core group companies, the Department regularly receives reports from each of them to properly identify and manage their market risk. These subsidiaries and core group companies, which account for most of the Mizuho group’s exposure to market risk, establish their basic policies based on ours, and their Boards of Directors determine important matters relating to market risk management.

Market Risk Management Method

To manage market risk, we set limits that correspond to risk capital allocations according to the risk profile of each of our principal banking subsidiaries and other core group companies and thereby prevent the overall market risk we hold from exceeding our financial strength represented by capital, etc. The amount of risk capital allocated to market risk corresponds to value-at-risk (the “VAR”) and additional costs that may arise in order to close relevant positions.

Setting Limits

When the said limits are set, various factors are taken into account, including business strategies, historical limit usage ratios, risk-bearing capacity (profits, equity capital and risk management framework), profit targets and the market liquidity of the products involved. The limits are discussed and coordinated by the Risk Management Committee, discussed further by the Executive Management Committee and then determined by the President & Group CEO. For trading and banking activities, we set limits for VAR and for losses. For banking activities, we set position limits based on interest rate sensitivity (10 BPV) as needed. An excess over any of these limits is immediately reported and addressed according to a pre-determined procedure.

Monitoring

To provide a system of mutual checks and balances in market operations, we have established middle offices specializing in risk management that are independent of front offices which engage in market transactions and of back offices which are responsible for book entries and settlements. When VAR is not adequate to control risk, the middle offices manage risk using additional risk indices, carry out stress testing and set stop loss limits as needed. We monitor market liquidity risk for individual financial products in the market while taking turnover and other factors into consideration.

Value-at-Risk

We use the VAR method, supplemented with stress testing, as our principal tool to measure market risk. The VAR method measures the maximum possible loss that could be incurred due to market movements within a certain time period (or holding period) and degree of probability (or confidence interval).

Trading Activities

VAR related to our trading activities is based on the following:

 

  •   historical simulation method;

 

  •   confidence interval: one-tailed 99.0%;

 

  •   holding period of one day; and

 

  •   historical observation period of three years.

The following tables show the VAR related to our trading activities by risk category for the fiscal years ended March 31, 2016, 2017 and 2018 and as of March 31, 2016, 2017 and 2018:

 

                                                                                       
     Fiscal year ended March 31, 2016      As of
March 31, 2016		  

Risk category

    Daily average      Maximum      Minimum     
     (in billions of yen)  

Interest rate

    ¥ 1.8      ¥ 3.7      ¥ 0.6      ¥ 1.1  

Foreign exchange

      0.9        2.3        0.2           0.3   

Equities

      0.6        2.5        0.1        0.3  

Commodities

          0.0            0.0            0.0        0.0  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    ¥ 2.9      ¥ 4.5      ¥ 1.8      ¥ 2.0  
  

 

 

     

 

 

     

 

 

     

 

 

  
     Fiscal year ended March 31, 2017      As of
March 31, 2017		  

Risk category

    Daily average      Maximum      Minimum     
     (in billions of yen)  

Interest rate

    ¥ 2.0      ¥ 3.6      ¥ 1.0      ¥ 1.0  

Foreign exchange

      0.5        1.6        0.1        0.1  

Equities

      0.4        3.2        0.1        0.9  

Commodities

      0.0        0.0        0.0         0.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    ¥ 3.3      ¥ 5.8      ¥ 2.3      ¥ 2.6  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

                                                                                       
     Fiscal year ended March 31, 2018      As of
March 31, 2018		  

Risk category

    Daily average      Maximum      Minimum     
     (in billions of yen)  

Interest rate

    ¥ 1.7      ¥ 2.5      ¥ 1.0      ¥ 2.2  

Foreign exchange

      0.4        1.2        0.1        0.1  

Equities

      0.6        2.4        0.3        0.5  

Commodities

          0.0            0.0            0.0           0.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    ¥ 3.0      ¥ 6.2      ¥ 2.2      ¥  3.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

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The following graph shows VAR figures of our trading activities for the fiscal year ended March 31, 2018:

 

LOGO

The following table shows VAR figures of our trading activities for the fiscal years indicated:

 

                                                                                       
     Fiscal years ended March 31,  
            2016                  2017                2018                  Change         
     (in billions of yen)  

As of fiscal year end

    ¥ 2.0      ¥ 2.6      ¥ 3.0      ¥ 0.4  

Maximum

          4.5            5.8            6.2           0.3   

Minimum

      1.8        2.3        2.2        (0.1 ) 

Average

      2.9        3.3        3.0        (0.3 ) 

Non-trading Activities

The VAR related to our banking activities is based on the same conditions as those of trading activities, but the holding period is one month. In addition, as for risk management of banking activities, it is important to properly measure interest rate risk so that we calculate interest risk using appropriate methods such as recognizing demand deposits as “core deposits.”

The following graph shows the VAR related to our banking activities excluding our cross-shareholdings portfolio for the year ended March 31, 2018:

 

LOGO

 

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The following table shows the VAR figures relating to our banking activities for the fiscal years indicated:

 

                                                                                       
     Fiscal years ended March 31,  
            2016                  2017                2018                  Change         
     (in billions of yen)  

As of fiscal year end

    ¥ 321.5      ¥ 292.7      ¥ 268.4      ¥  (24.3 ) 

Maximum

      360.6        397.5        307.2        (90.2 ) 

Minimum

      190.0        247.4        210.8        (36.6 ) 

Average

       284.9         331.0         267.8        (63.2 ) 

VAR is a commonly used market risk management technique. However, VAR models have the following shortcomings:

 

  •   By its nature as a statistical approach, VAR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, particularly potential future events that are extreme in nature.

 

  •   VAR may underestimate the probability of extreme market movements.

 

  •   The use of a 99.0% confidence level does not take account of, nor makes any statement about, any losses that might occur beyond this confidence level.

 

  •   VAR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses.

Cross-shareholdings Portfolio Management Activities

We take the market risk management approach with use of VAR and risk indices for cross-shareholdings portfolio management activities to properly manage stock price risk. Specifically, we monitor VAR measurements and the state of risk capital on a daily basis. Moreover, in order to control stock price risk, we are working on the reduction in cross-shareholdings through careful negotiations with counterparties.

Back Testing

In order to evaluate the effectiveness of market risk measurements calculated using the VAR method, we carry out regular back tests to compare VAR with assumptive profits and losses. Assumptive profits and losses accounts for general market risk. The graph below shows daily VAR of trading activities for the fiscal year ended March 31, 2018 and the corresponding paired distribution of profits and losses. We had zero case where losses exceeded VAR during the period. In addition, we conduct evaluations of the assumptions related to the VAR models. Based on the number of times losses exceeded VAR through back testing and the results of the evaluation of the model assumptions, we will make adjustments to the models as appropriate. Changes to fundamental portions of the VAR models are subject to the approval of our Group Chief Risk Officer.

 

LOGO

 

Note:    We conduct our back testing and assess the number of cases where losses exceed VAR based on a 250 business day year. The expected average number of instances where one-day trading losses exceeded VAR at the 99% confidence level is 2.5.

Stress Testing

Because the VAR method is based on statistical assumptions, we conduct stress testing to simulate the levels of losses that could be incurred in cases where the market moves suddenly to levels that exceed these assumptions. The stress testing methods we use include the calculation of losses under scenarios in which stresses are applied to interest rate risk and stock price risk based on current and projected economic conditions, historical market events, etc.

 

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Liquidity Risk Management

We define liquidity risk as the risk of losses arising from funding difficulties due to a deterioration in our financial position that makes it difficult for us to raise necessary funds or that forces us to raise funds at significantly higher interest rates than usual. Mizuho Financial Group manages liquidity risk for the Mizuho group as a whole. Specifically, Mizuho Financial Group establishes the fundamental liquidity risk management policy for the entire group, manages the liquidity risk of our principal banking subsidiaries and other core group companies and monitors how the group’s liquidity risk is being managed as a whole.

Liquidity Risk Management Structure

Our Board of Directors determines basic matters pertaining to liquidity risk management policies. The Risk Management Committee of Mizuho Financial Group broadly discusses and coordinates matters relating to basic policies in connection with liquidity risk management, operations, monitoring and proposes responses to emergencies such as sudden market changes. The Group Chief Risk Officer of Mizuho Financial Group is responsible for matters relating to liquidity risk management planning and operations. The Risk Management Department of Mizuho Financial Group is responsible for monitoring liquidity risk, reporting and analysing, making proposals, and formulating and implementing plans relating to liquidity risk management. In addition, the Group Chief Financial Officer of Mizuho Financial Group is additionally responsible for matters relating to planning and running cash flow management operations, and the Financial Planning Department is responsible for monitoring and adjusting cash flow management situation and for planning and implementing cash flow management to maintain appropriate funding liquidity. Reports on the liquidity risk management are submitted to the Risk Management Committee and the Balance Sheet Management Committee (each of which is a Business Policy Committee), the Executive Management Committee and the President & Group CEO on a regular basis.

Our principal banking subsidiaries and other core group companies also establish their basic policies on liquidity risk management to properly identify and manage liquidity risk.

Liquidity Risk Management Method

We manage liquidity risk with the use of “Liquidity Risk Management Indicators” and “Liquidity Categorization.” The former is determined for the purpose of managing limits on funds raised in the market considering our fund raising capabilities, and the latter is determined based on our funding conditions. We also carry out liquidity stress testing to verify the sufficiency of liquidity reserve assets and the effectiveness of countermeasures against a possible outflow of funds during a stress event. The results of stress testing are used for cash flow management operations.

Liquidity Risk Management Indicators

Limits on funds raised in the market are set based on a number of time horizons taking into account characteristics and strategies of each of our principal banking subsidiaries and other core group companies. Such limits are discussed and coordinated by the Risk Management Committee, discussed further by the Executive Management Committee and determined by the President & Group CEO. An excess over any of these limits is immediately reported and addressed according to a pre-determined procedure.

Liquidity Categorization

We have established a group-wide framework of liquidity risk stages such as “Normal,” “Anxious” and “Crisis,” which reflects funding conditions. In addition, we set Early Warning Indicators (“EWIs”) and monitor on a daily basis to manage funding conditions. As EWIs, we select stock prices, credit ratings, amount of liquidity reserve assets such as Japanese government bonds, our funding situations and others.

Liquidity Stress Testing

We carry out stress testing regularly based on market-wide factors, idiosyncratic factors of the group and a combination of both types of factors to verify the sufficiency of liquidity reserve assets and the effectiveness of our liquidity contingency funding plans. Furthermore, we utilize stress testing for evaluating the appropriateness of our annual funding plan.

 

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Operational Risk Management

We define operational risk as the risk of loss that we may incur resulting from inadequate or failed internal processes, people and systems or from external events. We control operational risk management for the Mizuho group as a whole. Considering that operational risk includes information technology risk, operations risk, legal risk, human resources risk, tangible asset risk, regulatory change risk and reputational risk, we have separately determined the fundamental risk management policies for these different types of risk. We manage the operational risk associated with our principal banking subsidiaries and other core group companies while monitoring the state of group-wide operational risk.

Operational Risk Management Structure

Our Board of Directors determines basic matters pertaining to operational risk management policies. The Risk Management Committee of Mizuho Financial Group broadly discusses and coordinates matters relating to basic policies in connection with operational risk management, operational risk operations and operational risk monitoring. The Group Chief Risk Officer of Mizuho Financial Group is responsible for matters relating to operational risk management planning and operations. The Risk Management Department of Mizuho Financial Group is responsible for monitoring market risk, reporting and analysing, making proposals, setting limits and guidelines, and formulating and implementing plans relating to operational risk management.

Our principal banking subsidiaries and core group companies establish their basic policies on operational risk management, and their Boards of Directors determine important matters relating to operational risk management.

Operational Risk Management Method

To manage operational risk, we set common rules for data gathering to develop various databases shared by the group and measure operational risk as operational VAR on a regular basis, taking into account possible future loss events and changes in the business environment and internal management.

We have established and are strengthening management methods and systems to appropriately identify, assess, measure, monitor and control the operational risks that arise from the growing sophistication and diversification of financial operations and developments relating to information technology by utilizing control self-assessments and improving measurement methods.

Definition of Risks and Risk Management Methods

As shown in the table below, we have defined each component of operational risk, and we apply appropriate risk management methods in accordance with the scale and nature of each risk.

 

    

Definition

   

Principal Risk Management Methods

Information Technology Risk

    Information technology risk (“IT risk”) shall refer to the risk that problems (e.g. malfunctions, disruptions, etc.) with the computer systems or improper use of the computers in these systems, which cause disruptions of the services provided to customers, or have significant impact on settlement systems, etc., will result in losses for customers, and the incurrence of losses (tangible or intangible) by our group companies.   

•  Identify and evaluate the risk by setting specific standards that need to be complied with and implementing measures tailored based on evaluation results to reduce the risk.

•  Ensure ongoing project management in systems development and quality control.

•  Strengthen security to prevent information leaks.

•  Strengthen capabilities for rapidly and effectively dealing with cyberattacks.

•  Improve effectiveness of emergency responses by improving backup systems and holding drills.

Operations Risk

    Risk that customers may suffer service disruptions, as well as the risk that customers or the group may incur losses because senior executives or employees fail to fulfill their tasks properly, cause accidents or otherwise act improperly.   

•  Establish clearly defined procedures for handling operations.

•  Periodically check the status of operational processes.

•  Conduct training and development programs by headquarters.

•  Introduce information technology, office automation and centralization for operations.

•  Improve the effectiveness of emergency responses by holding drills.

Legal Risk

    Risk that the group may incur losses due to violation of laws and regulations, breach of contract, entering into improper contracts or other legal factors.   

•  Review and confirm legal issues, including the legality of material decisions, agreements and external documents, etc.

•  Collect and distribute legal information and conduct internal training programs.

•  Analyze and manage issues related to lawsuits.

Human Resources Risk

    Risk that the group may incur losses due to drain or loss of personnel, deterioration of morale, inadequate development of human resources, inappropriate working schedule, inappropriate working and safety environment, inequality or inequity in human resource management or discriminatory conduct.   

•  Conduct employee satisfaction surveys.

•  Understand the status of working hours.

•  Understand the status of vacation days taken by personnel.

•  Understand the status of voluntary resignations.

•  Understand the status of the stress check system.

Tangible Asset Risk

    Risk that the group may incur losses from damage to tangible assets or a decline in the quality of working environment as a result of disasters, criminal actions or defects in asset maintenance.   

•  Manage the planning and implementation of construction projects related to the repair and replacement of facilities.

•  Identify and evaluate the status of damage to tangible assets caused by natural disasters, etc., and respond appropriately to such damage.

Regulatory Change Risk

    Risk that the group may incur losses due to changes in various regulations or systems, such as those related to law, taxation and accounting.   

•  Understand important changes in regulations or systems that have significant influence on our business operations or financial condition in a timely and accurate manner.

•  Analyze degree of influence of regulatory changes and establish countermeasures.

•  Continuously monitor our regulatory change risk management mentioned above.

Reputational Risk

    Risk that the group may incur losses due to damage to our credibility or the value of the “Mizuho” brand when market participants or others learn about, or the media reports on, various adverse events, including actual materialization of risks or false rumors.   

•  Establish framework to identify and manage, on an integrated basis, information that may have a serious impact on group management and respond to such risk in a manner appropriate to its scale and nature.

•  Swiftly identify rumors and devise appropriate responses depending on the urgency and possible impact of the situation to minimize possible losses.

We also recognize and manage “Information Security Risk” and “Compliance Risk,” which constitute a combination of more than one of the above components of operational risk, as operational risk.

 

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Measurement of operational risk equivalent

Implementation of the AMA/Advanced Measurement Approach (“AMA”)

We have adopted the AMA for the calculation of operational risk equivalent in association with capital adequacy ratios based on Basel Regulation. However, we use the Basic Indicator Approach for entities that are deemed to be less important in the measurement of operational risk equivalent. Entities within our group that use the AMA include the following: Mizuho Financial Group; Mizuho Bank., Ltd., Mizuho Trust & Banking Co., Ltd.; Mizuho Securities; Mizuho Information & Research Institute Corporation Inc.; Trust & Custody Services Bank Ltd.; Mizuho Operation Service, Ltd.; Mizuho Credit Guarantee Co., Ltd.; Mizuho Business Service Co., Ltd.; Mizuho Trust Operations Co., Ltd.; Mizuho Trust Systems Co., Ltd.; Mizuho Trust Business Operations Co., Ltd.; Mizuho Trust Retail Support Co., Ltd.; Mizuho Bank Europe N.V.; and Mizuho International plc.

The measurement results under the AMA are used not only as the operational risk equivalent in the calculation of capital adequacy ratios based on Basel Regulation, but also as operational VAR for internal risk management purposes for implementing action plans to reduce operational risk, etc.

Outline of the AMA

 

  •   Outline of measurement system

We have established the model by taking account of four elements: internal loss data; external loss data; scenario analysis and business environment; and internal control factors (BEICFs). We calculate the operational risk amount by estimating the maximum loss, using a 99.9th percentile one-tailed confidence interval and a one-year holding period, etc., as operational risk equivalent, employing both internal loss data (i.e., actually experienced operational loss events) and scenario data to reflect unexperienced potential future loss events in the measurement.

In the measurement of operational risk equivalent as of March 31, 2018, we did not exclude expected losses and also did not recognize the risk mitigating impact of insurance. In addition, we did not take into account the events related to credit risk in measuring operational risk equivalent.

 

  •   Outline of measurement model

Operational risk equivalent is calculated as a simple sum of those risk amounts related to the seven loss event types defined in the FSA’s Capital Adequacy Notice, large-scale natural disasters and litigation. In the measurement of operational risk equivalent as of March 31, 2018, we did not reflect the correlation effects among operational risk related to each of the seven loss event types.

 

  •   Operational risk by loss event type

Loss Distribution (Compound Poisson Distribution) Approach (LDA) is adopted for the calculation of operational risk. LDA is based on the assumption that Poisson Distribution applies to the occurrence frequency of operational risk events, and loss severity is expressed through a separate distribution. Operational risk is calculated for each of the seven loss event types employing both internal loss data, based on our actual experience as operational loss events and scenario data. Scenario data, expressed as numerical values of occurrence frequency and loss severity, reflects external loss data and BEICFs, in order to estimate unexperienced potential future loss events (of low frequency and high severity).

“Frequency Distribution” and “Severity Distribution” are estimated employing the above mentioned internal loss data and scenario data, and Monte-Carlo simulations are then applied to these distributions to measure operational risk. The detailed steps of creation of scenario data are explained later in “Scenario Analysis.”

 

  •   Estimation of “Frequency Distribution” and “Loss Severity Distribution”

“Frequency Distribution” is estimated by applying information on occurrence frequency of both internal loss data and scenario data to Poisson Distribution. “Loss Severity Distribution” is generated as the result of combining, through a statistical approach (Extreme Value Theory), of the actual distribution for the low severity distribution portion created by internal loss data and another loss distribution (Log-normal Distribution or Generalized Pareto Distribution) for the high severity distribution portion created by scenario data.

 

  •   Operational risk of large-scale natural disasters

Monte-Carlo simulation is applied to the datasets expressed as a combination of the probability of occurrence of large-scale natural disasters and the probable loss amount in case of such occurrence, as opposed to estimating “Frequency Distribution” and “Loss Severity Distribution.”

 

  •   Operational risk of litigation

Each litigation is converted into data according to the profile of the individual litigation to which Monte-Carlo simulation is applied, as opposed to estimating “Frequency Distribution” and “Loss Severity Distribution.” In the measurement process, we assume that final decisions will be made on all litigation within one year.

 

  •   Verification

We confirm the appropriateness of the measurement model by verifying it, in principle, semi-annually.

 

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Scenario Analysis

 

  •   Outline of scenario analysis

In the process of scenario analysis, scenario data is created as numerical values of occurrence frequency and loss severity reflecting external loss data and BEICFs, in order to estimate unexperienced potential future operational risk events (of low frequency and high severity).

As for external loss data, we refer to data publicly reported by domestic and overseas media, and such data are reflected in the estimation of occurrence frequency and loss severity distribution in the process of scenario analysis. In addition, BEICFs are utilized as indices to adjust occurrence frequency and loss severity distribution in the process of scenario analysis.

We categorize scenario analysis into four approaches in accordance with the characteristics of each loss event type and risk management structures.

 

Approach

   

Loss event type(s) to be applied

A    Internal fraud / External fraud / Clients, products and business practices / Execution, delivery and process management
B    Employment practices and workplace safety
C    Damage to [physical/tangible] assets
D    Business disruption and system failure

At Mizuho Financial Group, loss event types to which Approach A is applied account for a considerable amount of operational risk. The detailed process of Approach A is explained below as a typical example of scenario analysis.

 

  •   Setting units for scenario analysis

In order to ensure completeness and sufficiency, we set units that are commonly applied across group entities that adopt AMA (the “Group Entities”) by referencing and categorizing risk scenarios recognized through control self-assessment, internal loss data of the Group Entities and external loss data, etc. Then each of the Group Entities selects the unit on which scenario analysis is conducted from the units established on a group-wide basis in accordance with its business activities and operational risk profile.

 

  •   Estimation of occurrence frequency

Basic occurrence frequency (once a year) is calculated for each scenario analysis unit. If a certain scenario analysis unit has relevant internal loss data of a pre-determined threshold amount or above, its basic occurrence frequency is calculated based on such data, and if not, the basic occurrence frequency (the occurrence frequency per year of losses at or above a pre-determined threshold) is calculated with reference to the situation of occurrence of internal loss data of less than the threshold amount and/or external loss data. The basic occurrence frequency is then adjusted within a pre-determined range for the purpose of reflecting the most recent BEICFs to determine the final occurrence frequency.

 

  •   Estimation of loss severity distribution

In order to estimate loss severity distribution, we use a pre-determined series of severity ranges. Basic loss severity distribution is calculated for each scenario analysis unit as an occurrence ratio (in percentile figures) of loss at each severity range when losses at or above a pre-determined threshold occurred, with reference to transaction amount data, external loss data, etc. Then the basic severity distribution is adjusted, if necessary, from the viewpoint of statistical data processing to determine the final loss severity distribution.

 

  •   Creation of scenario data

For each scenario analysis unit, scenario data is generated as a series of combinations of occurrence frequency per year at each severity range, based on the final occurrence frequency and the final loss severity distribution.

 

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