SHIGA BANK REPORT2021

INTEGRATED REPORTANNUAL REPORT 2021 Year ended March 31, 2021

CSR Charter (Management Principles)

Announced
the Bank’s motto
The Bank’s motto
Be tough on ourselves,kind to others and serve
society.

Instituted in April 2007
The Shiga Bank has its own motto of “Be tough on ourselves,kind to others and serve society,” which forms the starting
point for corporate social responsibility (CSR). As a member ofsociety, the Bank will work for mutual prosperity with society.
The Bank’s motto carries on the “Sampo yoshi” philosophy, amanagement philosophy embraced by Merchants in the Omi
region of central Japan, which means to bring happiness to
three sides: being good for the seller, the buyer, and society.

Mutual prosperity with theregional
As a bank that advances hand-in-hand withsociety, in order to win customer confidence
and meet customer expectations, we maintaina sound and enterprising bank and work for thedevelopment of regional communities.

Mutual prosperity with all
employees
Respecting the human rights and individualityof each and every executive and regular
employee, we will build a satisfying workplace,and turn our bank into “Clean Bank Shigagin.”

Harmonious coexistencewith the environment
The social mission of our company, which
is headquartered next to Lake Biwa, isenvironmental management. We are committed
to protection of the global environment andthe building of a sustainable society.

SHIGA BANK REPORT 2021

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CONTENTS
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President Shojiro Takahashi
SPECIAL FEATURE

12

Actively Using Digital Technology to Create Sustainability in the Region- Toward a Sustainability Design Company

ABOUT SHIGA BANK

14Strengths of Shiga Bank

15

Looking Back on Shiga Bank’s History

16

Financial Highlights

18

ESG Highlights

20

External Evaluation and Support for External Initiatives

22

CHALLENGES FOR VALUE CREATION

23

Value Creation Story

24

Risks and Opportunities

26

Sustainability Vision (Long-term Vision)

28

The 7th Medium-Term Business Plan30

Dialogue - Domestic and International Conditions and the Role of Finance in 32
Decarbonization
Thinking about Co-creation with Local Communities for a Carbon-neutral SocietyInterlocutor: Yukari Takamura, Professor, The University of Tokyo Institute for
Future Initiatives
Measures for Climate Change/Global Warming
36
Principles for Responsible Banking

CHALLENGES FOR FUTURE INNOVATION

38
43

Turning SDGs into Business

44

Increasing the Productivity of the Regional Communities

48

Evolving into a Problem-solution Type Financial Information 52
Services Provider
Shifting to a Sustainable Earnings Structure
58
Mindset-Work Reforms (Mindset Reform and Work Style Reform) 60

POWER THAT SUPPORTS VALUE CREATION

63

Corporate Governance64

Directors and Executive Officers

68

Messages from Outside Director

70

TSUBASA Alliance

72

Stakeholder Communication

73

Risk Management

74

Enhancing Legal Compliance78

FINANCIAL SECTION

80

Shiga Bank’s Disclosure Policy
1. Basic views
Based on our social responsibility and public mission as a regional financial
institution, we aim to ensure highly transparent disclosure. We shall ensure timely,
due, continuous, fair and accurate disclosure of information, to foster understanding
and appropriate evaluation of Bank operations by all of our stakeholders, including
our customers, shareholders, investors and regional communities.
2. Information to be disclosed
The Bank will disclose management information in accordance with laws andregulations such as the Banking Act and the Financial Instruments and Exchange Act,as well as the Rules on Timely Disclosure of Corporate Information by Issuers of Listed
Securities established by the Tokyo Stock Exchange (hereinafter referred to as the“Timely Disclosure Rules”).
In addition, we will disclose information that is deemed useful to our stakeholders ina fair and timely manner to the greatest extent possible, even if the information does
not fall under the category of material facts specified by laws and regulations or theTimely Disclosure Rules.
3. Methods of information disclosure
Information required to be disclosed under laws and regulations as well as the Timely
Disclosure Rules will be disclosed in a timely and appropriate manner in accordancewith such rules and regulations, and will also be posted on the Bank’s website.
For other voluntarily disclosed information, we will strive to disclose information thatis fair and useful in an appropriate manner.
4. Information disclosure procedures and systems
The Bank has established the “Rules on Management-related Information Disclosure”
and has designated the General Planning Department as the department responsiblefor disclosure of management-related information in order to develop and enhance
procedures and systems for timely and appropriate information disclosure.
In addition, to maintain the appropriateness of the information, we consult with audit
firms and other experts as necessary, and periodically verify the appropriateness andeffectiveness of the information.
5. Forward-looking statements
The information on the Bank’s website and in the Integrated Report contains
statements regarding the financial position of and future forecasts concerning
the Bank and other Group companies. These forward-looking statements do notguarantee that future performance will be achieved as stated. They are affected bycertain risks and uncertainties and may not necessarily be consistent with actual
results due to changes in the business environment in the future.

Editorial Policy
Shiga Bank has compiled the integrated report SHIGA BANK ANNUAL REPORT 2021.
This report links financial information to non-financial information, such as theManagement Principles, environmental, social and governance (ESG) information
by reference to the “International Integrated Reporting Framework” proposed by theInternational Integrated Reporting Council (IIRC) and “The Guidance for Collaborative
Value Creation” by the Ministry of Economy, Trade and Industry. It serves as anintegrated review of measures for creation of sustainable value for the Bank andin regional communities. This report serves also as disclosure materials (briefing
documents of status of operations and assets) pursuant to Article 21 of the Banking
Act. The reader is recommended, when using thisdocument for disclosure purposes, to refer also to thematerial section and “Financial Data, Basel III, Column 3
of SHIGA BANK ANNUAL REPORT 2021” (both viewable
on our website (https://www.shigagin.com). (Japanese
only)
The management team of the Bank confirms that
this combined report has been duly disclosed inaccordance with the Disclosure Policy of the Bank.

Cautionary Statement with Respect to Forward-Looking Statements
This material contains statements regarding future earnings forecasts and targets,
etc. relating to the Bank. These statements are based on information available
at the time of compilation of these materials and forecasts or certain conditions(assumptions) that could affect business performance. They are not guarantees of
future performance of the Bank, and involve various risks and uncertainties.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATIONTOP MESSAGE

Shojiro Takahashi,
President, Shiga Bank

Striving to achieve a decarbonized society
The society in which we live and structure of the economy
are undergoing dramatic changes. For over a year now
the novel coronavirus pandemic has enveloped theworld. With restrictions on social and economic activities
put in place worldwide to prevent the spread of thevirus, the real economy has deteriorated rapidly and thetrend of transformation has dramatically accelerated. In
Japan, the switch to remote methods is moving forwardin people’s activities, lifestyles, and businesses, anddigitalization of society and the economy is progressing.
Digital transformation (DX), i.e., using digital technology toreconstruct corporate management and business processes,
has accelerated structural changes even further.
Companies face an environment with a wide range ofissues—from the advent of digital society, to the pandemic
and geopolitical risks—and the transition to a decarbonizedsociety is another pressing matter. Financial institutions
are involved in all aspects of the economy, so the risk ofclimate change that will lead to extensive natural disasters

will require them to take appropriate action as well. Society
and the economy will not be able to recover after the
pandemic without decarbonization, in other words reducing
greenhouse gas emissions to virtually zero. Hopes are highfor technological innovations in new energy sources suchas hydrogen and renewable energy like solar and wind. And
the new trend of green transformation (GX), which seeks totransform business from an environmental perspective, ispoised to greatly change society and the economy along withdigitalization.
In order to take action based on identifying risks andopportunities with a focus on the transformation into a
decarbonized society, last September we announced that
we would strive to achieve sustainability for the Shiga Bank
Group and regional communities through digital technology
by formulating a Sustainability Policy and implementing
organizational reforms. Below I will explain the Group’s
initiatives to co-create a sustainable society with the regional
community.

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Co-creating a sustainable society
Society can maintain stability when the earth’s environment
is sustainable, and companies can continue when society
is stable. Companies are kept moving by society and keepsociety moving. A company cannot exist on its own. And
because companies are connected with so many external
parties, they have a social responsibility. In order to beable to fulfill that responsibility, they must have a soundbusiness. Companies must differentiate themselves fromrivals, build competitive advantage, improve capabilities that
underpin their business day by day, and switch to a style ofmanagement that strives to achieve a sustainable society,environment, and economy. From this point on corporate
management will need to pursue a business portfolio that
ensures that “the more the company grows the closer wecome to achieving a sustainable society.” The Shiga Bank
wants to spread a style of management that takes on that
responsibility and will be passed on to the next generation
together with the regional community we are a part of.

Establishing a sustainable system
We formulated a Sustainability Policy to establish afoundation for steering the Bank in the future (see Page
12). The policy consists of five items: 1) Identification

4of materiality areas and solutions to local problems
through business activities, 2) Corporate managementthat emphasizes the social impact of business activities,3) Establishment of a business model that contributes tothe conservation and restoration of the environment, 4)
Respecting human rights and building a relationship of trustwith communities, and 5) Developing talent that can think
and act independently and establishing a work environmentthat facilitates this.
Besides formulating this policy, we also revised ourEnvironmental Policy to put greater consideration into
initiatives for climate risk response and biodiversity
preservation. The entire Shiga Bank Group is firmly
committed to the following five points and is engaging
in environmental management under the mindset of“protecting the global environment through the circulationof money”: 1) Environmental conservation through businessactivities, 2) Initiatives to mitigate environmental impact, 3)
Compliance with relevant environmental laws, 4) Governanceand management systems, and 5) Full participation andinformation disclosure.
We also established a Sustainability Strategy Office in
the General Planning Department and changed the CSR
Committee into the Sustainability Committee in order toTOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANK

discuss and deliberate future courses of action and otherissues. It will cross-organizationally deliberate on policies
and initiatives to contribute to the regional economy andthe realization of a sustainable society, share the results
throughout the entire Group, and translate that into action.

Leveraging digital technology
The pandemic has brought a variety of business issues to theforefront, but I do not think there will be much of a future
for Japan unless we confront and resolve the country’s delay
in digitalization. Digitalization is essential for companies,
local public agencies, and other organizations to increase
operational efficiency and productivity, improve sales
capabilities, and enhance customer response. Last October
we established the Digital Promotion Office in the Business
Promotion Department, and assigned a Digital Promotion
Supporter, Digital Promotion Leader, and Digital Promotion
Officer to each branch and area. We also enhanced oursystem to support digitalization of customers and business
partners. The Shiga Bank will accelerate initiatives to promote
regional digitalization by focusing efforts on IT consulting
for customers and local governments, in which different
departments and staff members of the Bank work together
to provide advice starting by interviewing them on issues.

Promoting ESG finance
Combining E (Environment), S (Social), and G (Governance)
produces a new type of economic rationality that isn’t
based only on immediate profit and efficiency. It helps
businesses advance to the next growth stage and provides
opportunities to generate sustainable value. The essenceof ESG is to consider externalities in business. Companies
must think about how to generate profit while incorporatingthese externalities in their business. Transitioning to a
decarbonized society will require companies to becomesustainable companies.
In order to drive ESG finance efforts, we established ateam of ESG finance specialists in the Business Promotion
Department. Last August we became the first regionalbank to offer sustainability linked loan (SLL) products,
and in September we made our first loan to a quarrying
company in Shiga Prefecture. SLL is a type of loan in which
a company sets SDG- and ESG-related targets, and the levelof achievement of those targets is linked to the terms andconditions of the loan such as interest. SLLs are mainly used

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

by major corporations, but we offer plans with low initialcosts (with loan amounts starting at ¥50 million) and morechoices in assessment and rating agencies to make it easierfor our SME customers to use them. This last fiscal year we
executed a total of six loans to customers including a major
shipping company in Tokyo.
The SLL product developed out of our SDG consulting
service, in which we provide advice to SME customers thatview SDGs as opportunities for growth on matters such as
leveraging SDGs to improve corporate value and setting
KPIs (key performance indicators). As of the end of March
2021 we have been contracted for a total 90 SDG consulting
projects.
We have also underwritten a private placement typegreen bond (GB) issued by a tourism company that runsa ski slope in Shiga Prefecture. The GB was used for funds
to construct a hydroelectric generator, contributing to the
spread of clean energy using the local resource of water.
The Bank has also built up knowledge and experiencein ESG finance through other means besides independent
initiatives. For example, we actively practice positive impact
finance endorsed by major banks.

Collaborating with regional communities
Fighting global warming is the most important issue insustainability, but it will take more than the efforts of one
company to achieve a decarbonized society. Shiga Bank
developed a system in partnership with the Shiga prefectural
government to tackle this very issue, which launched thisMarch.
Surrounding Lack Biwa, Shiga Prefecture has a highawareness of environmental issues. In January 2020
it announced the kickoff of the “Shiga CO2 Net Zero”
Movement. The movement is a joint initiative by citizens,businesses, and government to strive to achieve net zero CO2emissions within the prefecture by 2050, and is endorsedby the Shiga Bank Group. In alignment with the initiative, inMarch we started offering the “Shigagin” Sustainability Linked
Loan “Shiga Net-zero CO2 Emissions” Plan and executed thefirst loan to a customer in the prefecture.
Not many SMEs engage in corporate decarbonization
yet, but I believe that encouraging companies toaddress implementation of carbon tax and engage indecarbonization efforts that include the entire supply chain
as quickly as possible is important also in terms of boostingregional earning power.

SHIGA BANK REPORT 2021

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Supporting new businessEconomic activities are energized by ambitious companies.
In July 2020, the Bank established the Shigagin Regional
Revitalization SD Fund (see Page 52) with Quantum Leaps
Capital Partners and Shigagin Lease & Capital Co., Ltd. forcompanies striving to grow based on innovative businessmodels. Last December we made our first investment in acompany from Hyogo Prefecture that provides support for
remote medical care. We also invested in a fund that utilizes
research results of Kyoto University and Osaka University toencourage the creation of new businesses with potential forfurther growth.

Review of 7th Medium-Term Business Plan and pandemic response
While the above explanation focused on initiatives of the last
fiscal year, now I would like to present a progress report on
earnings for the fiscal year ended March 31, 2021, which was
the second year of the 7th Medium-Term Business Plan (ending
March 31, 2024). The Bank posted net income attributable toowners of parent of ¥11.4 billion, down ¥0.9 billion year-onyear. Deposits (the average balance of deposits during theperiod including negotiable certificates of deposits) increasedby ¥345.7 billion year-on-year to ¥5,277.2 billion and loans (theaverage balance of loans and bills discounted during the period)
increased by ¥194.5 billion year-on-year to ¥3,994.7 billion, bothon a non-consolidated basis. The capital ratio (consolidated) was
17.19%, and the total of risk-monitored loans was ¥71.4 billion,
accounting for 1.78% of total loans and bills discounted.
We expect a net income (consolidated) of ¥13.8 billion in
the fiscal year ending March 31, 2022.

Results of fiscal year ended March 31, 2021 and forecast of fiscal year ending March 31, 2022
Non-consolidated
Results of fiscal year
ended March 31,
2021(in million yen)

Consolidated

Forecast of fiscal year Compared to fiscal year
ending March 31,
ended March 31,
2022
2021

Results of fiscal year
ended March 31,
2021

Forecast of fiscal year Compared to fiscal year
ending March 31,
ended March 31,
2022
2021

Ordinary profit

10,37521,50011,125

11,07022,50011,430Net income

11,331

13,5002,169

11,44813,8002,352

Note: Consolidated data indicates net income attributable to owners of parent

The Bank strives to ensure transparency and soundness ofcorporate management. Furthermore, we continuously
pay stable dividends to shareholders and make every
effort to provide as much shareholder return as possible bymaking preparations to address an ever-increasing adverse
environment and invest for the future, enhancing internal
reserves, and strengthening financial health.
We are also taking on challenge to achieve five Sustainable
Development Targets (“SD targets,” see Pages 30 - 31) in five
years as part of the 7th Medium-Term Business Plan. Sometargets have already been achieved in the second year,
and we greatly increased four of them: “Investment andfinancing to promote sustainable development,” “Support
for value improvement of regional customers,” “Reduction ingreenhouse gas emissions,” and “Activities for promotion andimprovement of SDGs and financial literacy, training of nextgeneration workforce.” The new targets reflect our revised
understanding and commitment to address sustainable
development in response to strengthened regulations on
6greenhouse gases worldwide and the rapidly changing
circumstances surrounding decarbonization.
As the pandemic has impacted customers in manyindustries, the Bank has focused efforts on providing support
through fund-raising and other means. Currently we aretransitioning to the stage of business support and revitalization
support, and working to stabilize the regional economy byincreasing the sophistication of business assessments we havedeveloped over the years and providing attentive service. We
also increased personnel in the Corporate Business Support
Office of the Credit Supervision Department and expanded
support eligibility, and invested in the Kinki Central Area
Recovery Support Fund as a measure to assist recovery fromthe pandemic. Furthermore, we waived the loan modification
fee for customers with home loans until the end of March
2022. It is unclear when the pandemic will be completely
under control, but the Shiga Bank Group will provide evenmore solid support than before with due consideration to thesafety and security of our customers and business partners.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
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VALUE CREATION

Status of initiatives to address identified issues
In our 2020 integrated report, we identified three issues
we must overcome: “reorganize our branch network andstreamline branch operations,” “promotion of digitalization,”and “build a value-added network.” Allow me to explain thestatus of initiatives to address these issues.
The first issue, “reorganize our branch network andstreamline branch operations,” is progressing according to
the 7th Medium-Term Business Plan. We have carried out
efficient reallocation of personnel through measures such as
integrating branches within branches and grouping multiple
branches in the vicinity into one block. These measures have
led to improving productivity of the Bank as a whole.
I discussed the second issue, “promotion of digitalization,”above, but we will continue to view this as a priority issue andstrengthen initiatives to address it even further.
In regard to the third issue, “build a value-added network,”
last November we held the SDGs Business Succession and
M&A Conference 2020 in partnership with Nihon M&A
Center Inc. The conference was live streamed and reacheda large number of viewers across a wide area (see Page 55).

The fact that it was streamed from our own Shiga Prefectureand not a major city is a prime example of maximizing theconvenience of digitalization. The event was very productive,
with highlights such as participants seeking to be listed on theTokyo Pro Market asking for advice.
In addition, last fiscal year two more banks, Bank of The
Ryukyus and the Gunma Bank, joined the TSUBASA Allianceof which we are a member, expanding the network ofpartnerships between regional banks not based on businessintegrations while maintaining the independence of members.
The Alliance cooperates in a wide range of fields including
FinTech and jointly arranged syndicated loans, and we willcontinue to consider new products and services that leverage
the advantages of the partnership.
We also utilize services of multiple FinTech companies, andwill continue working to enhance convenience for customers
and improve the corporate value of our business partners bypartnering with more companies and banks to expand our
network and provide added value.

Evolution into a problem-solution type financial information services provider
We worked to boost our consulting capabilities in order to
evolve into a problem-solution type financial information
services provider, and joint initiatives between headquarters
and branches led to an increase of balance of assets undercustody. Last April the Bank began offering trust services,

further expanding the scope of consulting. And we willcontinue to focus efforts on our M&A and IT consulting
business in response to customer needs for support in areas
such as addressing longer lifespans, business succession,
recovery from the pandemic, and facilitating digitalization.

SHIGA BANK REPORT 2021

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Flexsus Project to support sustainable systems
With an eye towards a digital society of the next generation,
we are moving forward with the Flexsus Project (see Page 49)— a project to build a new core system to mitigate futurerisks in bank management — and plan to launch in January
2024. We will migrate from our current mainframe to an
open system that enables flexible and agile response. The
new system will be highly flexible and easily connectable toexternal systems, enabling digitalization to be achieved bothinternally and for customers and the regional community
quickly and at low cost.

Such an immense system upgrade would be difficult
without people that have expert knowledge in the innerworkings of the current system, so we aim to upgrade thesystem while such experts remain and pass their knowledge
and skills on to the younger generation. We made the decision
to migrate to the new system based on the realization that,looking 10 to 20 years ahead, we could not afford to delay
upgrading. Investments will need to be made until the new
system goes online, but we are working to improve theoverhead ratio to reduce system development costs as muchas possible once it is online.

Improving effectiveness of governance
The Corporate Governance Code of Japan establishes
principles for action of listed companies. This year it wasrevised. Companies that move to the Prime Market now are
expected disclose information such as the status of initiatives
in accordance with the Task Force on Climate-related Financial
Disclosures (TCFD), an international framework on disclosure
related to climate change. The Bank announced its supportof the TCFD in July 2018, making us the first regional bankin Japan to do so, and we have been disclosing the status of
our initiatives since the 2020 integrated report. We have been
selected for the “TCFD Scenario Analysis Support Project” by

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the Ministry of the Environment and preparations are moving
forward. An explanation of the current status is provided laterin this report (see Page 36).
The Bank is also engaging in other efforts in line withthe revision. For example, we are working to enhance thefunctions of the board of directors and engage in moreconstructive dialogue with our shareholders. We are also
working to achieve sustainable growth for the Bank andregional communities and improve corporate value overthe mid- to long-term by increasing the effectiveness ofgovernance.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
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Our purpose is “to bring happiness to people in regional communities”
As society undergoes changes due to the pandemic, there
is urgent need to address several issues that have beenaround since even before it began. In order to address
Japan’s declining birthrate and increasing aged population,
digitalization needs to move forward, but we must also
engage in initiatives such as expanding services for theelderly who do not use digital technology and ensuringsmooth business succession. Through our efforts to achievegreen transformation, we have realized the importance ofrecognizing the speed in which modern issues change. Whenthe speed of change continues to accelerate and somethingchanges past a certain point, there is a risk that before you
know it a major change has occurred and the world has
been transformed. But it is difficult to predict the direction ofincreasingly complex changes and decisions need to be madebased on determining the current circumstances at a faster
pace.
Whether such changes move in a positive or negative
direction depends on the ability of those of us living in thepresent to act. As a guideline for such actions, the Shiga
Bank Group laid out its vision — to become a Sustainability
Design Company — in the Medium-Term Business Plan. Ourcommitment is to go beyond the framework of a “Bank” andbecome a “Company” that is indispensable to the region by
designing the sustainable development of our customers
and regional communities. This is a necessary evolution toachieve our purpose, “to bring happiness to people in regional
communities through the circulation of money.” And at theheart of this purpose lies our motto: “Be tough on ourselves,kind to others and service society.”
The Shiga Bank Group will work to co-create a sustainable
society with regional communities based on these guidelines.
Thank you for your continued understanding and support.

July 2021

Shojiro Takahashi, President, Shiga BankSHIGA BANK REPORT 2021

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To bring happiness to people
in regional communities
Happiness means different things to different people.
Let the Shiga Bank Group help you“define the future and realize your dream.”

Living in harmony with the region, the Shiga Bank Group will facilitate
the circulation of money to bring happiness to people in regional communities.

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SHIGA BANK REPORT 2021

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Close Up FEATURES
Actively Using Digital Technology toCreate Sustainability in the Region- Toward a Sustainability Design Company

Establishment of Sustainable Strategy Office andDigital Promotion Office
Shiga Bank regards each person’s happiness as being linked to their regional community. In the Sustainability Vision(Long-term Vision) under the 7th Medium-Term Business Plan, implementation of which started in April 2019 and ends in
March 2024, we set out to create “a society where everyone can define their future and live happily” as a goal for regional
communities. To live happily, we must first be able to define our future. To do so, we must be able to have hope that our
individual ideas will be respected and that we will be able to live our own lives. It is also important to feel that we want tolive here in the future, as our regional community, economy, and human relationships are stable.
To create such a society with the regional communities, we announced in September 2020 that we would strengthen
our efforts for sustainability. We established the Sustainable Strategy Office in the General Planning Department todefine our Sustainability Policy, compile information, and formulate measures across the organization. We will aim to bea sustainable organization and contribute to the development of the regional communities. One of the key initiatives isthe digitalization of the regional communities. We have set up the Digital Promotion Office in the Business Promotion
Department to work with our customers, business partners, local governments, and other members of the communities.

Contributing to the co-creation ofsustainable regional communities
The Bank has identified 16 items as the Materiality (priority issues,see page 27), including “declining birthrate, aging population, anddepopulation,” “business succession,” “efficient use of local resources,”“decarbonization and renewable energy,” “work style reform,” and“human resource development.” We support the creation of problemsolving businesses. We also manage our businesses by focusing on
the social impact of our business activities. Local financial institutions
are also the infrastructure of society, contributing to the growth of thelocal society and economy, and creating a virtuous cycle of money. In
addition, we have long been promoting environmental management

Promoting the digitalization of theregional communitiess
The digitalization of society and economy, which has been alongstanding challenge, has been accelerated by COVID-19.
Digitalization, which can improve productivity and transformbusiness models, is an urgent task for large companies and central
government agencies and for SMEs and local governments in rural
areas that are suffering from a shortage of human resources. We havebeen promoting the Flexsus Project (see page 49) to transform ourcore systems and have set up the Digital Promotion Office in the

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that is highly compatible with the SDGs. We focus on SDGs consulting
and sustainability-linked loans that are easily accessible to small andmedium-sized business partners. We also launched a loan plan tosupport the decarbonization efforts of local companies in cooperation
with Shiga Prefecture (see page 45).
In conjunction with the establishment of the Sustainability Policy,
we have also revised our Environmental Policy for the first time in ten
years. Our priority is to protect the global environment through ourbusiness activities, with a strong awareness of the need to respond tothe climate crisis and preserve biodiversity. Based on the Sustainability
Policy and the Environmental Policy, we will contribute to the cocreation of sustainable regional communities.

Business Promotion Department to establish a sales structure. We havebeen developing IT business support that solves business partners’
management issues from a digital perspective in cooperation withFinTech companies (see page 51). In November 2020, we co-hosted theSDGs Business Succession and M&A Conference 2020 with Nihon M&A
Center Inc., which was streamed live. We were able to greatly enhance
our ability to disseminate information from Shiga Prefecture (see page55). We will continue to focus on improving the digital environment
inside and outside the Bank and further promote digitalization to
support local sustainability.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
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Shiga Bank’s Sustainability Policy
We aim to enhance our corporate value by following our CSR Charter (management philosophy) based on our
motto “Be tough on ourselves, kind to others and serve society,” and to contribute to realizing a sustainable
society through co-creation with regional communities.

1. Identifying materiality (priority issues) and solving local issues through business activities
Identify materiality that will lead to sustainable development and prosperity for both Shiga Bank and regional
communities and develop and provide products and services that help solve social issues. Also, promote thedigitalization of regional communities and support the creation of problem-solving businesses to realize asustainable society.

2. Management focusing on the social impact of business activities
Strive to reduce the negative impact of our business activities on people and the environment while continuously
expanding the positive impact. Place particular emphasis on the social impact of financial intermediation andcreate a virtuous cycle of money toward a sustainable society through dialogue with our customers.

3. E stablishing a business model that contributes to the conservation and revitalization of
the global environment
Understand that the prosperity of regional communities, which is the foundation of our existence, is basedon the benefits of nature, including Lake Biwa, and the sustainability of the global environment. Establish abusiness model that contributes to realizing a decarbonized society, the construction of a circular economy,
and the conservation of biodiversity.

4. Respecting human rights and building relationships of trust with society
Respect human rights and conduct honest and fair corporate activities based on high ethical standards. Also,build a strong relationship of trust by complying with laws and regulations, disclosing information fairly andaccurately to stakeholders, engaging in two-way dialogue, and responding sincerely to the expectations andrequests of society.

5. Developing human resources who can think and act on their own and improving theworkplace environment
Strive to develop human resources who can think and act independently, making the SDGs and regionalsocial issues their own business. Aim to create a work environment for respecting diverse personalities andwork styles, enhancing work-life balance, and having each employee fully demonstrate their abilities.
Instituted on October 1, 2020

Specific Activities of the Digital Promotion OfficeBusinesscustomers

Localgovernment
customers

Improvement of wallet functions andpromotion of cashless payment
Enhancement of asset management services

IT business support
Collaboration with Cybozu, Inc.
Shigagin BigAdvance

Sharing of issues and vision
Improvement of efficiency inpayment administration

Security enhancement and next-generation systems

Individual
customers

Sustainability and DX
Raising the level of digitalization and consulting services

Digital promotion

TSUBASA and FinTech alliance
Computerization of various transactions
Ecosystem with local businesses
Wide range of IT support and IT consulting services
DX support for customers
Use of RPA and AI
Business computerization
Information collaboration and data utilization

Promoting the digitalization of
the regional communities

SHIGA BANK REPORT 2021

13

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Strengths of Shiga Bank

Spirit of “Sampo yoshi”
and value-added network

Pioneering ESG
regional financing

Shiga BankABOUT SHIGA BANK
15Strengths of Shiga Bank

16

Looking Back on Shiga Bank’s History

18

Financial Highlights

20

ESG Highlights

22

External Evaluation and Support for External Initiatives

Based on the frontier spirit
inherited from merchants in
the Omi region of central Japanand the spirit of “Sampo yoshi,”the Bank has been expanding
its value-added network
throughout Asia and Japanand pursuing problem-solvingoriented businesses.

The Bank has always been aleader in ESG regional financing,with its original environmental
rating loan launched in 2005
and the Sustainability Link Loan
introduced in 2020.

SolidcapitalRichmarketSecuring a high level of capitalratio of 17.19%, the Bank hasdeveloped a sound financialbase, which is essential forassuming the risks of the local
economy.

Shiga Prefecture, which has longprospered as a transportationhub, is now home to manymother factories and R&D
centers of global companies.

Advanced risk
management system

Dominant
market share
With a 48.92% share of loans
and a 46.42% share of deposits
in Shiga Prefecture, the Bank
enjoys overwhelming support
from regional communities.

14

The Bank has employed theFoundation Internal Ratings
Based-Approach (FIRB) since2007 and also practices
advanced risk management
through our Risk Appetite
Framework.

Transparent engagementwith customers

Human resources withstrong financial knowledge

The Bank discloses thecredit ratings used in credit
management to customers. We
are committed to increasing
our corporate value throughtransparent engagement(two-way dialogue).

More than one in ten employeesof the Bank have obtained FP(Financial Planning) Level 1
certification. We have equipped
many employees with strong
financial knowledge to meet
asset formation and asset
succession needs.

SHIGA BANK REPORT 2021

15

ABOUT SHIGA BANK

Looking Back on Shiga Bank’s History
The philosophy of the Shiga BankCSR Charter, the Bank’s motto which carries on the “Sampo yoshi” philosophy
The Shiga Bank was born in 1933 through the merger of the 133rd
National Bank (Hyakusanjusan Bank), which prided itself on “soundmanagement,” and the Hachiman Bank, which emphasized a culture of“enterprise.” Since then we have forged ahead with fulfilling our missionof helping business partners and regional communities to flourish.
The “Sampo yoshi” management philosophy, embraced by merchantsin the Omi region of central Japan, was upheld through our motto of“being tough on ourselves, kind to others and serving society.” The Bankhas made this motto and the “CSR Charter (Management Principles)”the starting point for our activities.

Measures to modernize the Bank’s management
For the development of the regional communities
We believe that the ultimate role of the management of a bank is to“take on risk.” For us, this means the risk assumed for the developmentof the regional communities. To contribute to the development ofregional communities, the Bank is pioneering measures to modernize
its management through adoption of an “In-house corporate credit
ratings system,” “Pricing system,” and Basel II’s Foundation Internal
Ratings Base-Approach (FIRB).
August 1984	Established the “Shigagin Welfare Fund,”a social welfare corporation
October 1933 Established the Shiga Bank, Ltd.

S eptember 1987	Published the first issue of “Current State of Shigagin,” a

October 1938 Opened Kyoto Branchdisclosure magazine (renamed “SHIGA BANK REPORT” in 1998)
October 1987	Listed stocks on the Tokyo Stock Exchange (the First Section)

March 1941 Opened Osaka Branch

March 1988

Opened the New York Representative Office

July 1946

July 1988

Completed the current Head Office building

May 1989

Opened the Hong Kong Representative OfficeOpened Tokyo Branch
May 1951 Commenced foreign exchange businessJ anuary 1966 Announced theBank’s mottoO ctober 1977 Listed stocks on
the Osaka Securities Exchange (the Second Section)and the Kyoto Stock Exchange(moved to the First Section of the Osaka

1980

Securities Exchange in March 1979)1970
1930 1940

1950

1960
The 5th Medium-Term Business Plan
From April 2013

Evolution of management plans
16

March 2016

Basic vision
A bank journeying into the future together with its customers and region
Main theme
Awareness-raising and behavioral improvement for improving customer satisfaction

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Environmental Management
Aiming to reconcile environmental and economic needs
The Bank sees CSR as the role of the Bank as a corporate citizen in
fostering sustainable growth of society. The Bank has been developing
CSR activities based on the three key concepts of “environment,”“welfare,” and “culture.” By implementing “environmental management”
which contributes to the creation of a sustainable society through“finance,” the life blood of the economy, the Bank has taken measures
to reconcile the twin imperatives of safeguarding the “environment”
and providing “finance.”

Opened Bangkok Representative OfficeNovember 2017 Announced the Shigagin SDGs Declaration

York Branch (closed down in 1998)

April 2019

Started implementing the 7th Medium-Term Business Plan

May 2019

Joined “TSUBASA Alliance”

February 2020	Signed the Principles for Responsible Banking (PRB)

September 1993	Hong Kong Representative Office was promoted to(the first for a regional bank)Hong Kong Branch

March 2020	Obtained approval to engage concurrently

First regional bank in the Kinki area to launch a website

in the trust businessFebruary 1998	Published the first issue of “Naruhodo Shigagin,” a mini-

April 2020	Human resources placement businessdisclosure magazine
April 1998

Established the “Policies for biodiversity preservation”

February 2012

December 2015 Commenced the “Ratings Simulation Service (Ratings SS)”May 1991	New York Representative Office was promoted to New

July 1996

August 2010

started at The Shigagin Economic &Launch of “∞ (Mugen) Net” on a trial basis

February 1999

Launch of “Pricing” system operations on trial basis

October 1999

Established the “Environmental Policy”

100thanniversary

Cultural Center Co., Ltd.

December 1998 Commenced “In-house corporate credit ratings system”

December 1999 Launch of “DBM (Database Marketing)” operations

2033

2020

2010

July 2020

Established the Shigagin Regional Revitalization SD Fund

September 2020	Integrated Osaka Branch and Umeda Branch via thebranch-in-branch method
October 2020

2000
1990

March 2000

Established the Sustainability Policy
Established the Sustainable Strategy Office and Digital Promotion Office
Established the Sustainability Committee

Acquired ISO 14001 certification

Established the Digital Strategy Committee

July 2000	Commenced Shigagin New Business Forum

February 2021	Integrated Hikone Branch and Hikone Ekimae Branch“Saturday School for Entrepreneurship”

via the branch-in-branch method

October 2001	Became the first commercial bank in Japan tosign the United Nations Environment Programme(“UNEP”) Statement by Financial Institutions
April 2003	Established “Shigagin Nonohana Prize,” an incentive system through industrial-academic cooperation
December 2003 Opened Shanghai Representative Office
April 2004

Established “CSR Committee” and “CSR Office”

December 2005 Established Shiga Bank Principles for Lake Biwa (PLB) and launched the “PLB rating”
March 2007	Basel II’s Foundation Internal Ratings Based-Approach (FIRB) was approved by the Financial Services Agency
April 2007

Established the “CSR Charter” and the “Code of Conduct”

August 2007

Commenced “Shigagin Ratings Communication Service (Ratings CS)”

July 2008

Became the first financial institution to be certified as an “Eco-First Enterprise”

The 7th Medium-Term Business Plan
The 6th Medium-Term Business Plan
From April 2016

March 2019

Long-term vision
The Regional Bank that innovates the future
Main theme
Change & Challenge

From April 2019
VisionMain theme

March 2024

Sustainability Design Company—Realizing mutual prosperity based on the “Sampo yoshi” philosophy—
Define a future and realize a dream—For the future of customers, regional communities and all employees—

SHIGA BANK REPORT 2021

17

ABOUT SHIGA BANK

Financial Highlights(As of March 31, 2021)

56.6
11.4

Gross operating income (consolidated)
Net income attributable to owners of parent (consolidated)
Gross operating income(Billions of yen)

80

69.7

70

66.9

Net income

65.2

64.7

63.4

billion yen
billion yen

61.3

58.8

60

55.6

56.6

56.5

50
40
30
20
10
0

15.5

13.6

11.0

8.2
2012

2013

2014

2015

5,277.2

2016

Average balance ofGross operating income
Net income
deposits during
the periodbillion yen(including
negotiable
722
713
697
669
652
700certificates of deposits)
Share within Shiga Prefecture％(non-consolidated)
800

46.42

2017

5,000
4,467.1
43

0

4,000
2010 年

4,630.4

4,803.9

2011 年
3 月期

0

613

2017

2019

55

Deposits per employee(non-consolidated)20202014 年
3 月期

43,79942,784

3,696.7

0

2021

2.75

48,03946,304

44,6712,000

billion yen

25,0002.75
35,0002.32
2017 年
3 月期

146

138

2018 年
3 月期

2019 年
3 月期

20172017 年
3 月期

20182018 年
3 月期

2019

2020

2019 年
3 月期

2021

0

2.02

36,96735,321billion yen

29,500

2.02

138
1.89

1.95

1.76

20,0002.49

2016 年
3 月期

31,2422.0

2016 年
3 月期

148Loans and bills discounted per
35,000employee (non-consolidated) 33,316

3.02015 年 2.17
3 月期

155

40,000(Billions of yen)

2.46

556
3,994.7

3,800.2* Share within Shiga Prefecture excludes JAPAN POST BANK Co., Ltd., The Shoko Chukin Bank,
Ltd., and Japan Finance Corporation.
（億円）(Billions of yen)

2.5

48.92％

3,331.6

2015 年
3 月期

30,000

0

588

2,500

2013 年
3 月期（億円）

50,0002021

3,532.1

3,000
136

110

2012 年
3 月期

2018

3,500

* Share within Shiga Prefecture excludes JAPAN POST BANK Co., Ltd. and The Shoko
Chukin Bank, Ltd.

40,0002020

4,931.5

82

46

3 月期

45,0002019

3,994.7

5,277.2

100

2018

4,000

400

200

11.4

Average balance of loans
and bills discounted
billion yen
during the period(non-consolidated)
647
Share within Shiga Prefecture
634

6,000

300

12.4

(Billions of yen)(Billions of yen)

500

14.6

13.8

5.5

(Billions of yen)

600

14.8

1.63
2015 年
1.5

2016 年
3 月期

3 月期

2017 年
3 月期

2018 年
3 月期

2019 年
3 月期

2.0

0

2017

2018

2019

2020

2021

0

2017

2018

2019

2020

* Deposits and loans per employee = Deposits and loans (end of year) / Number of employees excluding part-time staff and seconded staff (end of year)

18

2021

TOP MESSAGE

SPECIAL FEATURE

Balance of assets undercustody

244.9(sum of investment trust, financial
instruments intermediary and publicbonds)(Billions of yen)

300

200

24.9

42.5

billion yen

CHALLENGES FORVALUE CREATION

0

20

244.9

18

54.2
44.7

2017

2018

2019

CSR 私募債

（億円）

120

2020

101

100
12

83
9.5

9.2
70

billion yen

0

16
14

9.8

12

45

10

45

Rating0

2016 年
3 月期

2017 年
3 月期

2018 年
3 月期

2019 年
3 月期

2020 年
3 月期

2017

2018

2019

2020

2021

9,561

9,280

9,521

9,295

9,875

4,000

Japan Credit Rating Agency, Ltd. (JCR)

AAA
AA+
AA
AA−

Shiga Bank

AAA
AA+
AA
AA−

A+

2,000
Japan Credit Rating
Agency, Ltd. (JCR)
A high0 level of
年 thecertainty to2015
honor
3 月期
financial obligations

2017 年
3 月期

A
A−
BBB+
BBB
BBB−
BB+
BB
BB−
B+
B

…

…

C
D

C
D

2018

2019

2020

16.67

15.94

1.99
1.00

Total dividends paid

(Billions of yen)

3

138

2.08

billion yen

16.98

billionyen
15.68

Share buyback
15.80

14.46
2.46

13.28
11.82
2.08
2

2021

普通株式等 Tier1 比率

2.19

14.79

2.28

1.99

2.02

2015 年

13 月期

2017

2016 年
3 月期

2017 年
3 月期

2018

2019

Expenses (non-consolidated)2018 年
3 月期

2020

1.002019 年
3 月期

2021

40.6
75.40

billion yen

OHR（億円）(non-consolidated)
CSR 私募債
SDGs 私募債
投資信託

120

Expenses

100
45

Shiga Bank

70

60

41.4

41

Rating and Investment
Information, Inc. (R&I)

OHR
83

80
43

76.80

75.19

72.39

High creditworthiness

40.3

39
20
370
0

101

75.64

（%）

80

45

41.2

40

2019
2018 年supported by
年
a few
3 月期excellent factors
3 月期％

金融商品仲介
107(Billions of yen)

A+
A
A−
BBB+
BBB
BBB−
BB+
2016 BB
年
BB−
3 月期
B+
B

2017

Share buyback16.45

0A＋
Rating and Investment Information, Inc. (R&I) A＋
6,000
8,000

45

8

55

（百万円）

10,00013.71

総自己資本比率(total dividends paid)
20
18

40
6

0
2

14.79

14.46

Shareholder return

11.9

20
4

17.18
14.12

（%）

11.0

60
8

17.19

83

15.68

0

SDGs 私募債
107(Billions of yen)％

Common Equity Tier 1 capital ratio

10

2021

11.9

17.19
17.18

％

45
15.80

14

145.9

115.5

16.98

16.67

16

47.4

134.4

Fees and commissions(consolidated)

80
10Total capital ratio

12
133.2

POWER THAT SUPPORTS
VALUE CREATION

Common Equity Tier 1 capital ratio(consolidated)

100
135.2

CHALLENGES FOR
FUTURE INNOVATION

Total capital ratio (consolidated)（%）

Investment trust
Financial instruments intermediary
Public bonds
236.0
218.8
217.8
208.2
59.0
55.8
59.6
57.6
15.3

ABOUT SHIGA BANK

75.40
75

45
40.6

40.5

70
55

800

65

2016 年
3 月期

2017 年 700 2018 年
3 月期
3 月期

2019 年
3 月期

2020 年
3 月期

2017

2018

2020

2021

600
500

2019

0

400

（億円）

450

経費

OHR

300
200

SHIGA BANK REPORT（%）
2021

76.80

80

19

ABOUT SHIGA BANKESG Highlights(As of March 31, 2021)

Cumulative investment and financing to promote
Sustainable Development

Education on SDGs and financial literacy (cumulative
total number of persons participated in training, etc.)

Revised upward the target
in June 2021 (see Page 30).

Revised upward the target
in June 2021 (see Page 30).

337.3

(Billions of yen)billion yen

投資信託

（億円）

337.3

350

8,338

3,000

金融商品仲介

300
2,082
2,000

200
150

2,188

2,178
590

576

596

153

249

1,352
107

1,332

150.2

公共債

2,449

2,360

250

persons

542

558
447

425

474

1,000

100
50
0

2020

0

2021

2017 年
3 月期

1,344

2018 年
3 月期

1,459

1,155

2019 年
3 月期

2020 年
3 月期

2021 年
3 月期

45

Reduction in greenhouse gas emissions

（億円）

42.07

Rate of reduction ingreenhouse gas emissions

120
100

107

101

Cumulative actual amount of CSR private placement bonds /SDGs private placement bonds

50.6

%

60
40

CSR private placement bond
SDGs private placement bond

50

138

50.6

29.9

30
20
2015 年
3 月期

2016 年
3 月期

2017 年
3 月期

2018 年
3 月期

2019 年
3 月期

1,275

requests

Revised upward the target in June 2021 (see Page 30).

19.1

10
0

Number of requests for
consultation per year

44.6
40.0

40

38

20
0

60

(Billions of yen)

83 Revised upward the target
Reduction rate compared to fiscal 2013.
80June 2021 (see Page 70
in30).

billion yen

2017

2018

2019

Number of customers receiving
business succession support
Number of customers receiving
M&A support

2020

2021

253
72

customers
customers(Cases)

1,500(Cases)

1,275
1,200

400
350

1,087

300

900

297

253

250

600

200
150

300
0

Number of customers receiving business succession support
Number of customers receiving M&A support
365

100

107

50
2020

2021

0

72

2019

45

（億円）

20

120

107

101

（億円）

120

35

29
2020

2021

TOP MESSAGE

SPECIAL FEATURE

Number of IT business support
contracts per year

ABOUT SHIGA BANK

17

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

11

Women officers ratio

contracts％

Women officers
11％

Fiscal year ended
March 31, 2021

126

Number of trust services
commissioned per year504
381.90

Number of Shigagin Welfare Fundsubsidies and the total amount ofsubsidies

cases
（人）

250

cases

million yen

200

172

156

150

212
女性役員

198

188

100
50
0

212

Number of employees withFinancial Planning Grade 1
certification

120

200
156

172

188

83
40

60

30

50

20

2017

2018

2019

2020

0

2021

（億円）

120
100

38

persons

101

50

80

40

2020 年
3 月期

107

212

198

100

0

2019 年
3 月期(Persons)

100

250

2018 年
3 月期

Number of employees certified as
Small and Medium EnterpriseManagement Consultant

persons（億円）(Persons)

1502017 年
3 月期

38

38

70

43

39

42

38

20
10

2015 年
3 月期

0

2016
年
2017
3 月期

20182017 年

3 月期

2019

2018
年
2020
3 月期

2021 2019 年

3 月期

（億円）

107

120

101

100

107 SHIGA BANK REPORT 2021

101

21

ABOUT SHIGA BANK* For information on awards
we have received in the past,please access the QR code on
the left.

External Evaluation
The 2nd ESG Finance Awards Japan (Hosted by the Ministry of the Environment)

Received the Gold Prize (Minister of the Environment Award)
in the indirect finance category (regional category) February 24, 2021

The award ceremony was held online.

The ESG Finance Awards Japan recognize and reward investors, financial institutions, and otherorganizations that have made a positive impact on the environment and society through theirproactive engagement in ESG finance and green projects. We this time received a Gold Prize(Minister of the Environment Award) in the indirect finance category (regional category), after
being awarded the Silver Prize (Minister of the Environment Award) last year.

Awarded the Prize for Excellence inthe Environmental Report Category
at the 24th Environmental
Communication Award

Selected as a componentof the SOMPO
Sustainability Index

Certified as an“Eco-First Enterprise”
by the Ministry of
the Environment

Obtained
the “Platinum Kurumin”
certification by the
Ministry of Health,Labour and Welfare

Obtained 2 stars forthe “Eruboshi”
certification by the
Ministry of Health,Labour and Welfare

JQA-EM0777
Acquired ISO 14001
Certification

Support for External Initiatives

22

Signed the United Nations Environment
Programme Finance Initiative (UNEP FI)

Signed the United Nations Principles
for Responsible Banking (PRB)

Joined the Japan Climate Initiative (JCI)

Signed the Principles for Financial Action
for the 21st Century

Supports the final recommendationsof the Task Force on Climate-related
Financial Disclosures (TCFD)

Supports the “Shiga CO2 Net Zero”
movement

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATIONCHALLENGES FORVALUE CREATIONCHALLENGES FORVALUE CREATION
24 Value Creation Story
26 Risks and Opportunities
28 Sustainability Vision (Long-term Vision)
30 The 7th Medium-Term Business Plan
32 D
 ialogue - Domestic and International Conditions andthe Role of Finance on Decarbonization
	Thinking about co-creation with local communities toward acarbon-neutral society
		 Interlocutor: Ms. Yukari Takamura, Professor, The Universityof Tokyo Institute for Future Initiatives
36

Measures for Climate Change/Global Warming

38

Principles for Responsible Banking

SHIGA BANK REPORT 2021

23

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FOR VALUE CREATIONCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Value Creation Story
Basic strategies(Challenges toinnovate the future)

Shiga Bank’sbusiness model

INPUT

Turning SDGs
into business(Capital to be Used)

Finance capital● Diversified earnings structure

Average balance of loans and bills discounted
during the period¥3,994.7 billion
Ratio of loans based on the Financial
Reconstruction Act
1.75%● Adequate Bank capital (as of March 31, 2021)
Total capital ratio (consolidated)
17.19%● Unrealized gain on securities
ranks No. 5 among regional banks in Japan(as of March 31, 2021, source: Nikkin Report)● Human resources who have advanced financial knowledge

Intellectual capital

Page 48

Crea
ting
a

Evolving into a
problem-solution
type financial
information
services provider

Customers

sus
tain
ab
le
so
cie
t

Page 52

Pioneering
ESG regional
financing● Number of employees with financial qualifications

ranks high among regional banks(fiscal year ended March 31, 2021)
Number of employees with Financial Planning
Grade 1 certification
212 persons
Number of employees with Financial Planning
Grade 2 certification
1,257 persons
Number of Small and Medium EnterpriseManagement Consultants
38 persons● Corporate culture that emphasizes regional
contribution and motivation
Women managers ratio 30.42%(as of March 31, 2021)(Value to be provided)yHuman capitalImp● Sound loan assets (fiscal year ended March 31, 2021)

Page 44

ion
solut
h
g
rou
e th ciety
u
l
a
so
ev
rat facingorps
co ssue
g
i
n
of
vi
ro
Strengths of Shiga BankOUTCOME

Increasing
productivity of
the regional
communities

BlessedmarketSprit of
“Sampo yoshi”
andvalue-added
network

Solid capital

Dominant
marketshare

Advanced risk
management
systemPage 58● Creation of shared values

Transparent
engagementwithcustomers(reconciliation of economic value and social value)● Resolving issues facing society through our

main business● Realization of social impact● Reduction in CO2 emissions

Page 15

Step
up joint approach to issu
es,

et
soci
e
l
b
na
ustai
s
a
f
o
t
lopmenfor further deveySocial relationship capital● Asia network 3 bases

institutes● Regional community which carries on the “Sampo

yoshi” philosophy

Natural capital● Natural environment with rich biodiversity

represented by Lake Biwa

24

● Creating mid-to-long-term shareholder value● Highly transparent disclosure including

non-financial information

ComplianceCorporate
Governance
Page 64

Stakeholder
Communication
Page 73

Powe
rs Suppo
rting● Concentration of National Treasures and Important

Cultural Assets

Shareholders
and investors● Promotion of engagement● Region with a moderate rate of population decline● Clusters of academic centers and corporate researchrange of diversified solutions

Page 60

Human
resources with
abundant
financialknowledge● Fulfilling consulting functions● Network of branches rooted in the community

operations centered on the customer● Helping businesses through a wide

Environmentand society● Diversified financial methods

Number of Ratings Communication Service clients
4,892● Environmental management and measures for SDGs
● Responding to digitalization

the region● Formation of assets through practical banking● Improving convenience

Mindset-Work
reforms (mindset
reform and work
style reform)

Shifting tosustainableearnings
structure● Improving profitability and productivity in

The Bank’s motto

Risk Management

Page 78

Employees

Page 74● Vigorous corporate Group

Value Creation● Organization that helps ambitious, motivatedPage 63~

les)
p
i
c
n
ri
ment P
e
g
a
n
a
M
(
CSR Charter

people realize their dreams

Page 1● Ensuring a diversified approach to work anda good work-life balance● Organization with diversity

SHIGA BANK REPORT 2021

25

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FOR VALUE CREATIONCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Risks and Opportunities
Business environment

Risks and Opportunities
Risks
Economy● Decline in the prefectural GDP and decreasein capital needs due to an increase indiscontinuance of business caused byabsence of successors and other reasons● Increase in outflow of deposits to otherprefectures due to inheritance and otherreasons as the migration of the youth fromthe prefecture increases● Continued decrease in interest income due
to ultra-low interest rate environment● Increase in bad loans caused by such reasons
as economic slowdown due to COVID-19● Changes in existing businesses andindustrial structure

Environment● Rapid social change toward achieving adecarbonized society● Tightening regulations to meet the Paris
Agreement and address climate change(implementation of carbon pricing, TCFD
disclosure, revision to the CG Code, etc.)● Regulations on waste plastics● Escalation of natural disasters (wind andflood damage)● Tightening regulations to protect natural capital● Increasing social demand for caring for theenvironment

Technology● Progress in digital innovation● Diversifying cashless payment methods● Advancements in FinTech● Increasing penetration of 5G and 6G● Increasing use of big data and AI● Advancements in renewable energy-related
technologies such as virtual power plant(VPP), wind power, hydrogen and ammonia

26● Increase in capital needs from new businessdomains such as circular economy● Increase in needs for new businesses andrelaunching● Capturing capital needs by using new
financing methodologies such as sustainablefinance● Expansion of businesses that are related tobusiness succession such as M&A● Consulting for improving regional
productivity

SocietySociety● Further depopulation, low birthrate andaging population● Accelerating rural flight and widening
regional disparities● Changes in sense of values and lifestyle● Great leap forward made by the postCOVID generation such as the Generation Z● Advancement in work style reform● Prevalence of new lifestyle to adapt to COVID-19● Responding to an unknown virus● Tightening regulations for human rights
protection● Expanding conflict zones and widening
rich-poor gap● Rise of protectionism and populism

Basic strategies

Opportunities

Economy● Regional economic downturn due todepopulation● Prolonged ultra-low interest rateenvironment● Economic slowdown due to COVID-19● Expansion of ESG investment andfinancing● Tightening requirements for supply chainsto address climate change● Changes in existing businesses andindustrial structure● Increase in renewable energy-related
businesses

Materiality● Intensifying competition for acquiring
young and specialized human resources● Increase in reputation risk, driven byhuman rights and other issues● Increasing impact of geopolitical risk,
conflict escalation, etc. on clientcompanies● Providing new services to meet social
demands● Increase in fee business such as consulting
on needs for resolving social issues● Expansion of businesses that create social impact● Rise of new generation as part ofmainstream society; Diversifying customer
needs attributable to changes in sense ofvalues and lifestyle● Development of businesses for the elderly● Expansion of the human resources placementbusiness at an associated company● Offering products and services tailored tolifestyle● Support for organizational management
such as decent work and health andproductivity management● Expansion of opportunities for environmentrelated businesses such as introduction ofrenewable energy, new materials and newtechnologies● Providing solutions for environmental
regulations, etc.
● Consulting for business transformation● Providing solutions for addressing physicalrisks such as typhoons and floods

Technology● Loss of existing business domains due todigital transformation● Responding to diversifying settlement
methods, such as cashless payment● Intensifying competition with different
industry players such as FinTech providers● Homogenization of services due tointensified competition

Creating new industry

Productivity
improvement

Business succession

Efficient use of local
resources

Low birthrate andaging population/
depopulation

Disaster prevention● Providing new products with the use ofdigital technologies● Providing diversifying settlement methods● Expanding new business domains throughcollaboration with different industry players● Streamlining business operations andimplementing work style reform

Turning SDGs intobusiness
Page 44

Increasing
productivity of
the regional
communities

DigitalEnvironment● Increase in costs for achieving adecarbonized society such as thoseincurred for meeting the Paris Agreement
and addressing climate change● Increase in transition risks that cause adecrease in asset value of customers due to,among other things, regulations forgreenhouse gas emissions and market trends● Increase in physical risks borne bycustomers such as typhoons and floods● Loss of economic base due to deteriorationin natural capital

Establishing the regional economy

Page 48

Sustainability of the global environment
Decarbonization/
renewable energy

Climate change

Water preservationin Lake Biwa

Biodiversity

Evolving into a
problem-solution
type financial
information services
providerPage 52

Shifting tosustainable earnings
structure

Training a diversified workforce
Developing humanresources
HealthWork style reform

Page 58

Compliance

Promotion of diversity

Mindset-Work
reforms(mindset reform andwork style reform)
Page 60SHIGA BANK REPORT 2021

27

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FOR VALUE CREATIONCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

価値創造のための挑戦

Sustainability vision (Long-term Vision)
The long-term vision of the Bank which serves as a guidepost for its
business plans is based on the “vision for regional communities the
Bank should aim to materialize.” The reason “an ideal bank” was not
used as the basis for the long-term vision is that we aimed to shift
our perspective from the Bank’s point of view to the point of view ofsociety and customers. We have the following aspirations under our
long-term vision.

Work first from the sustainable prosperity for theregional community
As a community-based regional financial institution, we believethat our development is predicated on the sustainability and soundprosperity of the regional community in which we operate. Based on
the recognition that the Bank’s development is unattainable without
the development of the region, we believe that the Bank can only besustainable if we are working towards sustainable prosperity for theregional community.

Linking the economy, environment and people(integrated development)

Establishing
the regional
economyInvestment and financing
to promote Sustainable
Development
New investment andfinancing for a cumulative

We create and reconcile thetotal ofthe three benchmark

75

Sustainabilityof the global
environment¥1trillion

challenges, and achieve

Activities for promotion andimprovement of SDGs andfinancial literacy; training of
next-generation workforce
Aim to target at

30,000persons

ing
t
s
a
ckc
a
B

g
nin
i
am
(Ex

)
ed
s
s
dre
d
ea
b
o
dt
e
e
tn
a
s th
e
u
iss

BP
T
M

Of the three items of the Milestones for 2030, we revised two items, forwhich we had already achieved SD targets set forth in the 7th MediumTerm Business Plan (see Page 31), i.e., interim performance indicators,
in June 2021. By setting ambitious, more difficult-to-achieve targets,
the Shiga Bank Group will make all-out efforts to achieve its long-term
vision.

Reduction in greenhouse gas
emissions(compared to fiscal 2013)
Activities for promotion andimprovement of SDGs andfinancial literacy; training of
next-generation workforce(total number of participants)

Reduce by
30% or more

Reduce by
75% or more

The Bank

The 7th Medium-Term Business Plan

Fiscal year Fiscal year Fiscal year Fiscal year

Achieve “Shiga CO2 Net
Zero”* by 2050

2019

2020

2021

30,000 persons* An initiative to reduce CO2 emissions in Shiga Prefecture to virtually zero. Shiga Prefecture
plays a central role in promoting this initiative in cooperation with various entities, including
prefectural residents and businesses.

28

TBP
M
h
t
7

2022

Next business term and thereafter
Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year

2023
Renew coresystems

10,000 persons—Realization of sustainable society throughco-creation with the community—

BP
T
M

Take on the challenge of achieving more ambitious
targets

After revision

A society where everyone
can define their future andlive happily

regional communities.

To achieve our long-term vision, we have set the Milestones for 2030
from three perspectives: economic, environmental, and people.
Through initiatives to achieve these milestones, we will create a social
impact and realize a society where everyone can define their futureand live happily.

Before revision

Vision for regional communities thatthe Bank should aim to materialize

sustainable development of% or more

Aim to achieve the long-term vision through three
milestones

Item

The Bank’s motto: Be tough on ourselves,kind to others and serve society
CSR Charter: Mutual prosperity with the regional
communities, all employees, and environment

value and social value through(compared to fiscal 2013)
Achieve “Shiga CO2 Net Zero”*
by 2050

Training adiversified
workforce

Unchanging spirit

twin imperatives of economic

Reduction in greenhousegas emissions by

Attach importance to social impact produced by
ESG financeWith growing awareness of the SDGs and the Paris Agreement, there
has been increasing interest in the importance of the social impactof finance on the environment and society. The Bank started off byindicating the “vision for regional communities the Bank should aim tomaterialize,” clarified the social impact we should create, and then tooka backcasting approach to formulate our medium-term business plan.

Sustainability vision(Long-term Vision)

Milestones for 2030 (Target 2030)

Event

Tokyo Olympic
Games

90

th
anniversary

2024

2025
Lake Biwa
National Sports
Festival

Osaka World
Expo

2026

2027

2028

2029

2030

95

th
anniversary

2031

2032

2033

100
SDGs targetthanniversary

SHIGA BANK REPORT 2021

29

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR VALUE CREATIONThe 7th Medium-Term Business Plan

Investment and financing topromote Sustainable Development(cumulative total of new investment
and financing)

Outline of the plan and progress in year two“Sustainability Design Company”—Realizing mutual prosperity based on
the “Sampo yoshi” philosophy—

Item

30

Before revision
500.0 billion yen

Support for value improvementof regional customers

2022: 850 requests
2024: 1,000 requests

2022: 1,500 requests
2024: 2,000 requests

Reduction in greenhouse gas
emissions (compared to fiscal
2013)

25% reduction

50% reduction

Activities for promotion andimprovement of SDGs andfinancial literacy; training of nextgeneration workforce

5,000 persons

15,000 persons

700.0 billion yen

SD targets—For the future of customers,
regional communities and all employees—

Basic strategies(Challenges to innovate the future)

Shiga Bank’sbusiness model(compared to fiscal 2013)

Activities for promotion andimprovement of SDGs andfinancial literacy; training of
next-generation workforce(total number of persons participatedin training, etc.)

Evolving into a
problem-solution
type financial
information
services provider

Man
Prinagemen
ciple tsEnhancement ofmanagement foundation
Hum
resourcaens

GovernanceCapital

Revenue targets

Mindset-Work
reforms(mindset reform
and work stylereform)Shifting tosustainableearnings
structure(balance of assets under custody“investment trust + financial
instruments intermediary”)

Reduction in greenhouse gas
emissions

Increasing
productivity of
the regional
communities

Turning SDGs
into businessSupport for asset formation ofregional customers

Net income attributable toowners of parent (consolidated)

ms

337.3 billion yen
1,500 requests
2024: 2,000 requests

New 2022:
target1,275 requests

ResultTargetResult220.0 billion yen
2024: 300.0 billion yen
190.7 billion yen
2022:

New
target

50% reduction

Result42.07% reduction

Newtarget15,000 persons

Result8,338 persons

POWER THAT SUPPORTS
VALUE CREATION

Comments

We successfully achieved steady results as aresult of the launch of Shigagin Sustainability
Linked Loan as well as our efforts such as
engaging in dialogue with customers throughthe Ratings Communication Service.

As a result of our efforts to implement ourgoal-based support based on a customeroriented perspective (market-in), we increased
the number of consultations on trust businesslaunched by the Bank itself, human resources
placement, and IT consulting.

We provided customers with meticulous
support even during the stock market
downturn caused by the coronavirus outbreakby restructuring our system for promoting
assets under custody. Such efforts led to anincrease in assets under custody during thephase of market recovery.
Energy consumption reduced through therenovation of the entire administrative center
within the Head Office undertaken in the pastand consolidation of branches byimplementing the branch initiatives. The
reduction was substantial, partly due to a
reduction in the emission factor for electricity.

In year two, with restrictions on our activities
due to the coronavirus outbreak, 2,923
persons participated in our activities andtraining provided through such means as
web-based online seminar.

Target10.0 billion yen or more

Result11.4 billion yen

Although the interest rate environment
remains challenging, we successfully secured
a revenue level exceeding our target, partly asa result of an increase in loans due to thenovel coronavirus support financing, declines
in interest rate levels abroad, and an increasein fees and commission income.

2.0 billion yen
2024: 3.0 billion yen
2.9 billion yen

Despite being slightly affected by declines indeposit and loan yields, net income fromservices for customers exceeded the target
level, reflecting steady growth in service
revenues, such as financing-related fees andcommissions from assets under custody.

5.0% or more
2.62%

Our ROE declined to the 2% range amidst thecontinued challenging revenue environment.
We will work to restructure our businessmodel to achieve more efficient business
operations.

TargetIncome from services forcustomers
Resultte
Sys

Cumulative total of

ResultDefine a future and realize a dream

After revision

Investment and financing
to promote Sustainable
Development(number of requests for consultation
per year)

Main theme

Upward revision of SD targets
In June 2021, we revised four benchmark challenges, investment andfinancing to promote Sustainable Development; support for value
improvement of regional customers; reduction in greenhouse gas
emissions; and activities for promotion and improvement of SDGs andfinancial literacy; training of next-generation workforce, to further
deepen our initiatives.
While continuing to pursue higher targets, we will move step bystep to achieve our vision, becoming a Sustainability Design Company.

Support for value improvementof regional customers

700.0 billion yen

NewtargetVisionLong-term benchmark challenges

Our vision is to plan and create sustainable development of the region
and customers. Two years have passed since we launched our 7th
Medium-Term Business Plan to achieve this vision. We have taken up
the challenge of achieving five Sustainable Development targets (“SDtargets”) over a period of five years. The implementation status of suchinitiatives is outlined below.
In reduction in greenhouse gas emissions, we reduced emissions by
42.07% compared to levels in fiscal 2013 and achieved this SD target
ahead of schedule. This was made possible by the reduction of energy
consumption through large-scale renovations, consolidation of
branches through the branch initiatives and the reduction of theworkload through productivity improvement measures including
operation reforms.
In addition, in activities for promotion and improvement of SDGs
and financial literacy and the training of next-generation workforce, we
exceeded our SD targets by proactively developing human resources
and implementing lecture activities both inside and outside of the
Bank through web-based online distribution with behavioral
constraints due to the coronavirus outbreak.
In investment and financing to promote Sustainable Development,
support for value improvement of regional customers and support for
asset formation of regional customers, we moved forward withinitiatives by providing support through caring and detailed dialogue
with customers that only regional financial institutions can provide
using digital tools, such as a membership web service for business
operators Shigagin Big Advance, while being affected by thecoronavirus outbreak. As a result, we have generally made good
progress overall.

Results by year two

Progress in benchmark challenges

CHALLENGES FOR
FUTURE INNOVATION

TargetROE (consolidated)
ResultTargetOHR
Result2022:

Less than65%

75.40%

OHR was high partly due to expenses recorded
for the system renewal for next-generationcore systems, although our efforts, such as thebranch initiatives, have had some beneficial
effects on improving productivity.

SHIGA BANK REPORT 2021

31

TOP MESSAGE

ABOUT SHIGA BANK

- Domestic andDialogue Dialogue
the Role of FinanceInternational Conditions andin Decarbonization

Thinking about Co-creation

with Local Communities

for a CarbonProfessor, The University of Tokyo Institute for
Future Initiatives

Yukari Takamura
The world is making rapid progress in dealing with global warming andclimate change. In October 2020, the Japanese government declaredthat Japan would become carbon neutral, with a target of net-zero
GHG emissions in 2050. In May 2021, the revised Act on Promotion of
Global Warming Countermeasures was enacted, specifying this goal.
The government has set a target of reducing GHG emissions by 46%
from the fiscal 2013 level by fiscal 2030, and has positioned “green anddigital” as the cornerstones of economic growth.
Efforts to realize a decarbonized society are accelerating in many
fields related to our lives and the economy. Ms. Yukari Takamura,
Professor of The University of Tokyo Institute for Future Initiatives, wasappointed as chair of the Central Environment Council, a body that
discusses environmental policies and communicates opinions to thegovernment, in February this year. She joined us for an interview with
the Bank’s President Shojiro Takahashi on the topic of domestic andinternational conditions and the role of finance in decarbonization.

The decarbonization declaration that turned the tide
Takahashi Thank you for joining me today. Ms. Takamura, you haveheld various key positions in the government. What do you think is thesignificance of setting a carbon-neutral target for 2050?
Takamura Many companies say that the government’s declaration ofcommitment to carbon neutrality has turned the tide. The government
made it clear that Japan would be transitioning to a decarbonizedsociety and set out the targets to be achieved. This was significant
in that it led to a huge step forward in initiatives for becoming adecarbonized society. For example, companies saw it as a new business

32

SPECIAL FEATURE

opportunity and began to actively invest in carbon reduction. The
declaration has also a tremendous impact on energy policies. Eightyfive percent of Japan’s greenhouse gas is CO2 emitted from energy use.
We need to have a fundamental rethink about energy.
Takahashi I could not have imagined a year ago that such a bigchange would happen so suddenly and that things would progress soquickly. As changes continue to take place globally and at the centerof society, we as local financial institutions need to think carefully
about how they will affect local SMEs and the local economy. Up tonow, we have been telling people that the era of decarbonization iscoming, but from now on, we need to tell them, "How will you realize
decarbonization? If you don't, you will be left behind the competition.”
We also have a data center. Since the financial industry consumes more
electricity than the sectors such as the service industry, we are currently
considering the introduction of locally-generated electricity andrenewable energy. While explaining our efforts, I think it is necessary to
deepen the understanding of local residents that our decarbonization
efforts are not a cost, but an investment for the future.
In addition, the Financial Services Agency has revised its corporate
governance code to require information disclosure in line with therecommendations of the Task Force on Climate-related Financial
Disclosures (TCFD), and central government agencies are discussing
carbon pricing. However, the current situation is that small andmedium-sized companies do not have that level of awareness.
Takamura It is said that only about 200 listed companies are fullycompliant with TCFD standards, so there are still many issues to beaddressed. However, the trend will undoubtedly move in the right

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

neutral Society
President of
The Shiga Bank, Ltd.

direction in the future as investors, shareholders, and business partners
work together. I also believe that even if local companies do notdisclose the same level of information, they will be able to grasp theamount of their emissions and will be encouraged to reduce them. In
addition, the Green Growth Strategy formulated in December 2020states that carbon pricing, which contributes to growth, should not be
regarded as taboo. Currently, the Ministry of the Environment and theMinistry of Economy, Trade and Industry are considering introducing acarbon tax, emission reduction credit transactions, and so on, and theyagree that it is important to price carbon and give a signal.

Carbon neutrality in regional communities
Takahashi I feel that having the discussion of carbon pricing on thetable is a big change in itself. We have been focusing on environmental
finance for a long time. Actually, we launched a financial product with
the idea of carbon pricing, “Carbon Neutral Loan, Mirai-Yoshi” in April
2007. It was designed to promote the introduction of natural energy
and preserve the environment and the ecological system of Lake Biwa.
If a solar power generation system or other system is installed throughthe use of our environment-friendly loan products, we estimate thereduced amount of GHG emissions and convert it into a monetary
value based on the emission trading price. We contribute the funds
to a project to protect, nurture, and release nigorobuna fish (carassius
auratus grandoculis) and wataka fish (ischikauia), species that are
unique to Lake Biwa. The nigorobuna fish released can be identified
by staining the otoliths of the inner ear with a special dye. So, they
can be captured after a certain period of time to allow their breeding
status to be studied. If the positive aspects for companies and society

Shojiro Takahashi

of our efforts to decarbonize can be recognized, even if only a little, itwill be easier for us to explain, and our business partners will be moreconvinced.
Takamura You have been visualizing the value of carbon reduction
for more than ten years. The first issue in promoting net-zero CO2emissions is cost. The cost of generating electricity from renewableenergy sources has fallen considerably worldwide. In Japan, solar
power generation costs have fallen by 63% over the past decade. Of
course, there are issues to be resolved, such as how to connect to thepower grid and how to deal with decreases in the output of solar andwind power. However, the government will work out the issues andimplement policies to reduce the costs of renewable energy as muchas possible. The introduction of renewable energy is also a positive
thing for the regional communities. For example, if you purchase froma local power company, the money will circulate in the community.
If you generate electricity by yourself and use it, you can also save on
your electricity bill.
I also believe that climate change measures can be made to bepositive rather than simple costs. Zero Energy Homes (ZEH) can lower
energy costs by reducing utility bills through high insulation. It makes it
easier to maintain a constant temperature in the house and is effective
in dealing with heat shock. If you have a storage battery, you can
use electricity during a disaster. A typical example is housing, which
involves various industries such as architecture and home electronics
and has a large economic ripple effect. If this kind of information iscommunicated to residents by local financial institutions when they
provide loans for home purchases, I think that the loans will generate avariety of benefits for the community.

SHIGA BANK REPORT 2021

33

Thinking about Co-creation with Local Communities for a Carbon-neutral Society
Takahashi We have been practicing environmental management
since the 1990s. We have been working on balancing the economy
and the environment with the belief that we should protect the global
environment not only through volunteering but also through our corebusiness. We committed to the SDGs in November 2017, became thefirst regional bank to endorse the TCFD in July 2018, and became thefirst regional bank to start offering sustainability-linked loans (SLLs)
in August 2020. SLLs are loan products that allow customers to set
ambitious business goals related to SDGs and ESGs, and the loan
conditions are linked to the degree of achievement. Under this system,
the rationality of the targets is checked by Rating and Investment
Information, Inc. (R&I), and subsequent monitoring is conductedby Shigagin Keizai Bunka Center Co., Ltd. (KEIBUN). As of the end of
May this year, 9 billion yen has been spent in six projects, including
those of major companies. Our goal is not to sell loans, but to solve
business problems. We hope that our business partners will deepen
their understanding of SDGs and ESGs, as doing so will increase theircorporate value.
Takahashi Global companies are leading the way in decarbonization
efforts, but I believe that the demand for decarbonization will increase
not only for their own efforts but also for their supply chains. Shiga
Prefecture ranks first in Japan in terms of the percentage of its grossprefectural product accounted for by secondary industry, and there aremany local companies associated with global companies. I believe that
this will have a significant impact.
When I exchanged greetings at the beginning of this year via theweb with a manager of a global company in the Kansai region, I was
asked about their decarbonization efforts and how subcontractors
and related companies should be dealt with in the future. I explainedthat the first step is to accurately understand the positive and negative
impacts of the arrival of a decarbonized society on business and to
start specific initiatives that will lead to business opportunities while
minimizing risks. At the same time, many of our business partners do
not know what their CO2 emissions are and how to reduce them. This
reaffirmed the need for us to provide a variety of consulting services
to help companies decarbonize, including ones related to resourceand energy conservation. We start with a survey, and then analyze theinformation obtained from it so that our business partners can put it
into practice themselves. I believe that such initiatives will lead to new
business opportunities.

Roles of financial institutions
Takamura The realization of a decarbonized society requires a change
in energy, in industry, and in the nature of cities. In order to achieve this,policies are important, and funds are also needed. We need to createa system where investments and loans are provided to those who arewilling to change. In addition to climate change measures, biodiversity
issues are also serious. Since the 1970s, many species have been lost andecosystems have been destroyed, affecting our lives and economies. I
believe that the role of finance is very important in creating businesses
that will change this society and in providing funds for these businesses.
In the process of changing society, new businesses will be born, and a
new society will be created. New roles and business opportunities will
emerge in the better regional communities of the future. Those are thekind of relationships that will exist. I believe that financial institutions are
the ones who can demonstrate the need for change in their businesses
from a long-term perspective.

34

ESG finance and economic rationality
Takahashi We are promoting ESG finance initiatives, but there arestill issues in connection with corporate philosophy and economic
rationality (profitability). Recently, a manager of an overseas company
that was a top ESG performer was dismissed at the request ofshareholders. Ms. Takamura, what do you think about ESG initiatives
and economic rationality?
Takamura That is a difficult question. ESG investments and loans are
made with a focus on various points, not just profitability, but I believe
there is still debate over where they will really boost earnings andcorporate performance. As for climate change, companies that areproperly addressing the issues have been gaining recognition in thefinancial markets. However, looking at individual cases, there are still
issues as to whether profitability and ESG assessment are truly aligned.
As a business entity, we must constantly strive to build a profitablebusiness model while addressing ESG and sustainability issues. At thesame time, I believe that it is important to change customer awarenessabout how society changes so that a company that addresses ESG andsustainability can also become a profitable company.
It is unfortunate that a good ESG company manager was dismissed.
In individual companies, decisions are made by shareholders, andnot everyone has the same ideas, but we need to think about how
to create companies and businesses that can balance ESG andprofitability.
Takahashi It is hard to determine profitability in environmental
finance, but if we aggregate SDGs consulting, private placement bonds,
and SLLs, I think the revenue is commensurate with the cost. Regional
financial institutions support a variety of economic activities in theregion using their customers’ money. A certain level of understandingthat our Bank’s business is involved with customers, local issues, andenvironmental problems is a positive effect that is not always visible.
No one can deny the contribution of companies to society. However,
we always tell our clients that they should do their core business well,so if both our Bank and our clients take a stance of supporting eachother, I believe it will be beneficial in the long term.

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANK

Takamura What you have just said is very important. I thoughtthat creating an opportunity for businesses to think about climatechange, sustainability, ESG, and other issues would have the effect ofincorporating regional and medium- to long-term perspectives into
their business.

Toward sustainable communities
Takahashi We can offer a variety of consulting services not only on
environmental issues, but also in the sense of listening to the issuesof our customers. We are also exploring the possibility of solving
problems in a way that can be linked to financing and the businesses
we are involved in. This approach also applies to our customers. With afirm understanding of the global trend toward decarbonization, various
initiatives for the future may lead to new businesses. I believe that theaccumulation of these efforts will gradually grow the business from therealm of challenge to the realm of profitability.
Regional financial institutions must be able to protect their local
economy. This is where the role and significance of regional bankslies. To achieve this, we need to increase the corporate value of ourcustomers. This is why we focus on providing companionship andsupport to our customers. Through consulting and financing, we areworking to transform businesses through digital transformation (DX)and green transformation (GX).
Takamura Regional financial institutions cannot run away fromthe community, which is why they are trusted by the local people.
I believe that being able to conduct business based on that trust
is a strength. On the other hand, the difficulty for regional financial
institutions lies not only in the changes related to decarbonization,
but also in the many challenges that Japan is already facing. They
include a declining population and the problem of who will be
responsible for the industries that support society as the population
ages. With the exception of major metropolitan areas, these issues arecommon throughout Japan. We must face the challenge of making ourcommunities sustainable and attractive as places to work and live.
Therefore, it is necessary to work well with local stakeholders.
The same problem is faced by local governments. Regional financial
institutions need to be actively involved in the formation of businesses
that will help change the region by seeking ways for the region
to address issues and boldly taking on challenges. The resourcesthat regional financial institutions have are that important to thecommunity. Unless we make good use of these resources, the region
itself will not be able to survive. I think we are in that phase now.

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

declining birthrate and aging population. Not only municipalities, butalso communities and businesses have faced a never-ending stream ofchallenges.
For example, there are various patterns of business succession, so we
examine what is the best way for our business partners, including M&A.
Working hard, we will identify needs of such as own stock succession
and minority shareholders, which will lead to business opportunities
for our bank.
The most important thing is to maintain a relationship where
customers feel secure in entrusting their money and business partners
are willing to associate with us and talk with us about various issues
because they can get support when they need it.

Expectations for Shiga Bank
Takamura We are in the midst of major changes, which are affecting
not only global companies, but also local SMEs that play a partin supply chains. It is important to ensure that business funds areprovided for these changes, and regional financial institutions are a key
player in solving local issues.
Shiga Prefecture, in particular, has the tradition of the “Sampo yoshi,”a philosophy embraced by merchants in the Omi region. At the sametime, it has many industries due to its high environmental awarenessand favorable location. Therefore, if you cannot succeed in Shiga
Prefecture, it is highly likely that you will not succeed anywhere else
in Japan. In that sense, Shiga Bank's efforts will serve as an importantrole model for financial institutions and communities across Japan thatare facing similar challenges. I would like to see your bank become afinancial institution that provides financial services and solves problems
with the community while still generating profits. This will be a shout
out to everyone in Japan, and to everyone in the region. I hope thatyou will do your best.
Takahashi Thank you for cheering us on. With the spirit of creatinga new community with all our stakeholders, we will continue to work
steadily, and sometimes hit the accelerator.
I would like to ask you to bridge the gap between the government
and the private sector for the future of a new Japan by providing
policy support and information for the decarbonization of regional
communities and SMEs as well as the central government and large
corporations. Thank you for joining us today.
(May 31, 2021)

Takahashi Local communities, local SMEs, and local governments all
have their own dreams, ideals, goals, and plans for the future, and there
are challenges involved in making these dreams reality. I believe that if
we communicate carefully and work firmly as a problem-solution typefinancial information service provider with a clear vision, the road will
open on its own.
In our 7th Medium-term Business Plan, implementation of whichstarted in April 2019 and ends in March 2024, we have set forth avision of becoming a “Sustainability Design Company.” It expresses ourdetermination to design sustainable development for the region andto become an indispensable company for it. Once a year, I visit theleaders of 19 cities and towns in Shiga Prefecture to ask them about
the impact of the COVID-19 disaster, digitalization, agriculture, and the

SHIGA BANK REPORT 2021

35

CHALLENGES FOR VALUE CREATION

Measures for Climate Change/Global Warming
Climate change and other global environmental changes, such as the increasing damage
caused by abnormal weather, are having a major impact on economic activities and ourdaily lives. These changes have already become a significant risk to all humanity. Under
these circumstances, governments and companies worldwide are accelerating their efforts
to shift to a decarbonized society by reviewing their social and economic structures, which
are dependent on fossil fuels.
Recognizing climate change as one of our most important management issues, the Bank
will strive to create a sustainable society by establishing a “virtuous circle propelling the
economy and environment forward” by fulfilling its role as a financial institution.
The Bank also supports the TCFD* Proposal, and it will take measures to enhance thesophistication of its information disclosure to meet recommendations by the TCFD.
* An abbreviation for Task Force on Climate-related Financial Disclosures, established by the Financial Stability Board (FSB) in
2015. It calls for companies’ climate-related impact disclosures on a voluntary basis upon providing financial reporting.

Initiatives for Task Force on Climate-related Financial Disclosures (TCFD)
Governancethat contribute to mitigating climate change such as renewable energy
and green projects, corporate investments toward enhancing energy

The Shiga Bank has established the Sustainability Committee, whichefficiency and infrastructure development, as well as creation of climate

is chaired by the President. The Committee meets three times a yearchange-resilient regions and establishment of sustainable lifestyles.

with Management Meeting members, General Managers of each

Furthermore, we will review the risks and opportunities that climate

department and office, and presidents of associated companies aschange presents through multiple scenario analyses. In fiscal 2020, we

Committee members. The Committee members deliberate on policies

were selected by the Ministry of the Environment as a recipient of theand plans for addressing risks and taking advantage of opportunities in“Climate Risk / Opportunity Scenario Analysis Pilot Program Support

connection with medium- to long-term ESG issues, including climate

Project (for financial institutions) in line with TCFD recommendations.”change issues.

We researched methods for analyzing physical risks and transition risks

Specific activities of the Committee include the identification of theMateriality, development of the Sustainability Vision, and discussion on

associated with climate change. We will continue to narrow down theconditions and work toward analysis and publication.

how to respond to the TCFD.
Looking ahead, the Bank will regularly report on measures andRisk Management

responses concerning climate change to the Management Meetingand the Board of Directors.

The Bank recognizes that physical risks and transition risks stemmingfrom climate change will deeply affect the Bank’s operation,

Strategy

strategy and financial planning. We will therefore establish systems
for managing such risks in a framework of comprehensive risk

While designating priority issues to be tackled by the Bank (Materiality),

management.

we formulated the Sustainability Vision (Long-term Vision), with the aimof establishing a sustainable society. Based on the Sustainability Vision,

Indicators and targets

the 7th Medium-term Business Plan that started in April 2019 set forth“Sustainability Design Company” as our new vision and “Define a future

The Bank has stipulated environmental impact reduction goals as

and realize a dream” as our main theme. We uphold evolving into afollows.

problem-solution type financial information services provider that

(Scope 1 and Scope 2 standards)

turns SDGs into business and transforms society through its businesses.

Medium-term indicator (by March 31, 2024)

The Bank established the Sustainability Policy in October 2020. To
create a new structure, we have established the Sustainable Strategy

Long-term indicator (by March 31, 2030)

Office in the General Planning Department and a dedicated team for

Reduce CO2 emissions by at least 75% (compared to fiscal 2013)

ESG finance in the Business Promotion Department.
Specifically, we are working to promote environmental financeto realize a decarbonized society and a circular economy and tostrengthen community-based consulting. We will support businesses

36

Reduce CO2 emissions by 50% (compared to fiscal 2013)

Achieve “Shiga CO2 Net Zero”* in 2050
* An initiative to reduce CO2 emissions in Shiga Prefecture to net zero Shiga Prefecture playsa central role in promoting this initiative in cooperation with various entities, including
prefectural residents and businesses.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
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VALUE CREATION

Approaches to scenario analysis in line with TCFD recommendations
With growing concerns about the impact of climate change on

implemented by the Ministry of the Environment in fiscal 2020 tocorporate management and financial systems, moves are underway toaccumulate knowledge and know-how on scenario analysis.

require scenario analysis and disclosure of the results. Scenario analysis

Under the guidance of experts, the support project conductedrefers to assessing the financial impact on the company by setting

the analysis using sample data on (i) risks materiality assessment, (ii)multiple future scenarios that assume an increase in natural disasters,

scenario group definition, (iii) qualitative business impact assessment,changes in the business environment toward decarbonization, etc.

(iv) quantitative assessment of transition risk, and (v) quantitative

The financial impact on regional financial institutions as assessed

assessment of physical risk based on the Bank’s industry-specificusing scenario analysis could be said to be equivalent to the impact

exposure and regional characteristics. We shared the basic knowledge

on the local economy of climate change. That is, each of us should be

and know-how needed to conduct full-scale scenario analysis in theaware of climate risks and opportunities. Adapting to climate change

future with management and other related departments.

will enhance the resilience of the local economy and our bank.

We will continue to conduct scenario analysis for transparent

Based on this recognition, the Bank was selected to participate in

information disclosure and promote initiatives to address climate risks

the “Climate Risk / Opportunity Scenario Analysis Pilot Program Support

and opportunities to contribute to the resilience of our customers andProject (for financial institutions) in line with TCFD recommendations”

local communities.

Examples of materials used in the support project
Partly excerpted from “Practical Guide for Scenario Analysis in Line with the TCFD Recommendations (Banking Sector)” by the Ministry of the Environment.

We reviewed the industries to be analyzed for transition risk from our industry-specific exposure.

We analyzed the possible future social changes in the target industries under the 2°C and 4°C
scenarios.

We organized and reviewed the financial impact of the transition risk for each industry.

Using the sample data, we reviewed how the increased flood risks due to the increase in abnormal weather would affect companies in the prefecture.

SHIGA BANK REPORT 2021

37

CHALLENGES FOR VALUE CREATION

Principles for Responsible Banking
In February 2020, we became the first regional bank in Japan to sign

environmental initiatives and is certified as an Eco-First Enterprise by

the Principles for Responsible Banking (the “PRB”), which was drafted

the Ministry of the Environment. After signing the PRB, we have further

by the United Nations Environment Programme Finance Initiative

strengthened our efforts toward the development of sustainable regional(*UNEP FI) and launched in September 2019. Together with morecommunities. Our progress outlined in the first report is as follows:than 230 other signatory banks, we have been practicing finance with

Ripple effects of social impact

sustainability at the core of business.
The PRB provide a framework for a bank to take a leading role

Making society better throughsocial impact

and responsibility as a financial intermediary and voluntarily set out
business strategies that are aligned with the Sustainable Development
Goals (SDGs) and the Paris Agreement based on the recognition that

Customers

Regional
communities

sustainable social prosperity is key to development of the banking
industry. In accordance with the six principles of the PRB, signatory
banks are required to set their own strategies and targets and engage
and partner with stakeholders including customers so as to increase
the positive impacts as well as reduce the negative impacts of theirbusiness activities on the environment and regional communities.

Investment andfinancing in areasthat have an impact

Wanting to makesociety better

Initiatives during the first year
The PRB require signatory banks to disclose their progress in following
the Principles. Specifically, signatories are required to publish the firstreport and self-assessment regarding the Principles within 18 months ofsigning, and annually thereafter, and to conduct an impact analysis, set
and implement targets, and achieve accountability within four years.
Based on the recognition that “the Bank’s development is unattainable

Bank*The United Nations Environment Programme Finance Initiative (UNEP FI)
UNEP FI was established in 1992 by the United Nations Environment Programme, a UN auxiliaryorganization that was formed in 1972. It is a partnership of financial institutions around theworld that is working to transform into financial systems integrating economic development

without the development of the region,” we are committed toenvironmental management that helps protect the global environment

with ESG (environmental, social, and governance) considerations. The Bank signed the UNEP FI
in 2001, a first for a commercial bank in Japan.

through the circulation of money. In fact, the Bank has pioneered

Reporting and Self-Assessment Requirements

High-level summary of bank’s response

Reference(s)/Links to detailsof bank’s full response/
relevant information

Principle 1. Alignment
We will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable
Development Goals (SDGs), the Paris Agreement, and relevant national and regional frameworks.

38

1.1 An overviews of our banking business, including majincustomer segments in key regions where it operates, the products
and services it offers, the sectors and projects it finances, and insome cases, technologies.

The Bank, as a regional bank in Japan, operates business mainly in
Shiga Prefecture. We provide products and services, with financial
intermediary at the core, primarily to customers in the region,
including individuals, SMEs, and local governments.
Of the loans outstanding totaling about four trillion yen asof the end of March 2021, domestic borrowers account for
approximately 99.7%. Of the loans extended to domestic
borrowers, corporate customers account for 74.5% andconsumers 25.5%.

Page 15 of this report(Strengths of ShigaBank)

1.2 Describe how your bank has aligned and/or is planning toalign its strategy to be consistent with and contribute to society’s
goals, as expressed in the Sustainable Development Goals(SDGs), the Paris Agreement, and relevant national and regionalframeworks.

In its Sustainability Vision, the Bank is committed to creating “asociety where everyone can define their future and live happily”
as a goal for regional communities, which is aligned with thegoals expressed in SDGs and the Paris Agreement. To achieve
the goal, we have set out specific benchmark challenges in our
Medium-Term Business Plan.
In October 2020, we formulated the Sustainability Policy,” whichsets out our basic policies for realizing a sustainable society,and revised the existing Environmental Policy, to improve ourorganizational structure.
We are also aware that climate change is a priority issue(Materiality) that potentially has a material impact on regional
communities. In July 2018, we declared our support for the Task
Force on Climate-related Financial Disclosure (TCFD) and havesince taken measures to meet its recommendations.

Page 28 of this report(Sustainability Vision)

Page 12 of this report(Sustainability Policy)
Page 36 of this report(Measures for
Climate Change
and Information
Disclosure inLine with TCFD
Recommendations)

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SPECIAL FEATUREABOUT SHIGA BANK

Reporting and Self-Assessment Requirements

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

High-level summary of bank’s response

Reference(s)/Links to detailsof bank’s full response/
relevant information

Principle 2. Impact and Target Setting
We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from
our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.
2.1 Impact Analysis
Show that your bank has identified the areas in which it has its
most significant (potential) positive and negative impact throughan impact analysis that fulfills the following elements:a) Scope: The bank’s core business areas, products/services acrossthe main geographies that the bank operates in, as describedunder 1.1, have been considered in the scope of the analysis.
b) Scale of Exposure: In identifying its areas of most significant
impact, the bank has considered where its core business/
its major activities lie in terms of industries, technologies andgeographies.
c) Context & Relevance: Your bank has taken into account themost relevant challenges and priorities related to sustainable
development in the countries/regions in which it operates.
d) Scale and Intensity/Salience of Impact: In identifying its areasof most significant impact, the bank has considered the scale
and intensity/salience of the (potential) social, economic andenvironmental impacts resulting from the Bank’s activities andprovision of products and services.
Engage relevant stakeholders in the analysis under elements c)and d)Show that building on this analysis, the bank has
Identified and disclosed its areas of most significant (potential)
positive and negative impact
Identified strategic business opportunities in relation to theincrease of positive impacts / reduction of negative impacts

We have identified Materiality (priority issues) in view of the social
needs as expressed in SDGs and the Paris Agreement, as well as
the expectations and requests to regional financial institutions
from stakeholders, and have also defined the following threeareas for priority action over the medium- to long-term based on
our CSR Charter (our Management Principles):(1) Establishing the regional economy(2) Ensuring sustainability of the global environment(3) Training a diversified workforce

Page 26 of this report(Risks andOpportunities)
Page 28 of this report(Sustainability Vision)

To achieve SDGs and the goals of the Paris Agreement, people
and companies from across all sectors need to transform their
behaviors. As the bank representing 48% or more of overall loansin Shiga Prefecture and thereby having a certain degree of impact
on the economy of the prefecture, we believe we can contributeto realizing a sustainable society by making continuous efforts todrive behavioral transformation in the regional communities.
We are now studying impact analysis and intend to announce
what initiatives and measures to take based on the results of theanalysis.

Publicize verification results and statements as a signatory bank to determine whether it meets the requirements for Impact Analysis.
We have identified the areas for priority action over the medium- to long-term by taking into account a range of factors, including the social needs as
expressed in SDGs and the Paris Agreement, expectations and requests to regional financial institutions, and the potential impact of our activities on theregional communities. We have attached importance especially to environmental initiatives due in part to the environmentally conscious characteristicsof the regional communities.
2.2 Target Setting
Show that the bank has set and published a minimum of
two Specific, Measurable (can be qualitative or quantitative),
Achievable, Relevant and Time-bound SMART targets, which
address at least two of the identified “areas of most significant
impact,” resulting from the bank’s activities and provision of
products and services.
Show that these targets are linked to, drive alignment with,and have made a great contribution to appropriate Sustainable
Development Goals, the goals of the Paris Agreement, and otherrelevant international, national or regional frameworks. The bankshould have identified a baseline (assessed against a particularyear) and have set targets against this baseline.
Show that the bank has analyzed and acknowledged significant(potential) negative impacts of the set targets on otherdimensions of the SDG/climate change/society’s goals and that it
has set out relevant actions to mitigate those as far as feasible tomaximize the net positive impact of the set targets.

In our Sustainability Vision, we have set three milestones asbenchmark challenges, which are aligned with the areas forpriority action, to realize the vision of the regional communities.
Of these milestones, we raised the targets for the following two
in June 2021 in view of our progress against the benchmark andthe growing need to urgently address climate change: “Reduction
in greenhouse gas emissions” and “Activities for promotion andimprovement of SDGs and financial literacy, and Training of nextgeneration workforce.”<Milestones for 2030>(1) Establishing the regional economy
Investment and financing to promote Sustainable Development
New investment and financing for accumulative total of ¥1
trillion(2) Ensuring sustainability of the global environment
Reduction in greenhouse gas emissions by 75% or more (vs.
fiscal 2013)
Achievement of “Shiga CO2 Net Zero” emissions by 2050
(3) Training a diversified workforce
Activities for promotion and improvement of SDGs and financial
literacy; training of a next-generation workforce
Aim to target at 30,000 persons

Page 28 of this report(Sustainability Vision)

Publicize verification results and statements as a signatory bank to determine whether it meets the requirements for goal-setting.
We have assessed what impact we should have on the regional communities to achieve their vision and have set three milestones towards that vision.
In addition, we have examined the validity of the set targets through Impact Analysis and intend to review and revise these targets as needed.

SHIGA BANK REPORT 2021

39

Principles for Responsible Banking
Reporting and Self-Assessment Requirements

High-level summary of bank’s response

2.3 Plans for Target Implementation and Monitoring
Show that your bank has defined actions and milestones to meetthe set targets.
Show that your bank has put in place the means to measureand monitor progress against the set targets. Definitions of key
performance indicators, any changes in these definitions, and any
rebasing of baselines should be transparent.

We have been managing three milestones as our benchmark
challenges as part of the 7th Medium-Term Business Plan of five
years and have disclosed our progress against these milestones.
In addition, we have set annual targets, as the Group-wide targets
for retaining the ISO 14001 certification, which are incorporated
into the activities of each department and affiliate, while eachdepartment and affiliate has set its own implementation plan.
The Sustainability Committee, which normally meets three times
a year, monitors progress as part of the PDCA cycle we havedeveloped over the years.
The Sustainability Committee also deliberates on matters related
to monitoring and revision of the targets set and the status
of initiatives implemented by each department based on the
Sustainability Policy, and refers/reports these matters to the Boardof Directors and the Management Meeting depending on thecontent of such matters.

Reference(s)/Links to detailsof bank’s full response/
relevant information
Page 30 of this report(The 7th MediumTerm Business Plan)

Page 64 of this report(Corporate
Governance)

Publicize verification results and statements as a signatory bank to ensure that requirements are met for the implementation of objectives and monitoringplans.
We have set targets towards achieving the milestones, which are part of our activities to meet the 7th Medium-Term Management Plan and retain the ISO
14001 certification, and have also formulated an implementation plan.
The Sustainability Committee monitors progress against the milestones, and has disclosed the results of the monitoring after referring/reporting theresults to the Board of Directors and the Management Meeting.
2.4 Progress on Implementing Targets
For each target separately:
Indicate that the Bank has implemented what it should havedone to achieve the target set.
Or explain why actions were not taken or did not need to bechanged, and how banks are changing our plans to achive ourgoals.
Report on your bank’s progress over the last 12 months (up to
18 months in your first reporting after becoming a signatory)
towards achieving each of the set targets and the impact yourprogress resulted in. (where feasible and appropriate, banks
should include quantitative disclosures)

We have disclosed our progress against the milestones and thebenchmark challenges in the 7th Medium-Term Business Plan.
In June 2021, we reviewed and revised the set targets tostrengthen our sustainability efforts.

Page 28 of this report(Sustainability Vision)
Page 30 of this report(The 7th Medium-TermBusiness Plan)

Publicize the results of the review and statements of the signatory bank to determine whether it meets the requirements for progress toward goal-setting.
We will continue to proactively disclose our progress against the set targets and specific measures implemented for achieving the targets.
Principle 3. Customers (Corporate and Retail)We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity forcurrent and future generations.
3.1 Provide an overview of the policies and practices your bankhas in place and/or is planning to put in place to promoteresponsible relationships with its customers. This should include
high-level information on any programs and actions implemented(and/or planned), their scale and, where possible, the results
thereof.

3.2 Describe how your bank has worked with and/or is planningto work with its clients and customers to encourage sustainable
practices and enable sustainable economic activities. This should
include information on actions planned/implemented, products
and services developed, and, where possible, the impacts
achieved.

40

We uphold our CSR Charter (Management Principles), the Bank’smotto representing our unchanging spirit, and established theSustainability Policy in October 2020.

Page 12 of this report(Sustainability Policy)

To promote responsible relationships with customers, we havefocused on constructive dialogues (engagement) with themthrough a range of initiatives such as Ratings Communication
Service. We have supported our customers in their efforts toimprove corporate value by sharing their management issues,
including not only financial issues but also ESG issues.
Based on our “Policy for customer-first business operation,” we havesought to provide customer-centric goal-based support.

Page 76 of this report(Ratings
Communication
Service)

We have supported our customers in improving their corporate
value with sustainability-oriented management, primarily throughthe team dedicated to ESG finance established under the Business
Promotion Department.

Page 44 of this report(ESG finance)

SDGs consulting“Shigagin” Sustainability Linked Loan
Private placement type green bonds

Page 60 of thisdocument (MindsetWork reforms)

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SPECIAL FEATUREABOUT SHIGA BANK

Reporting and Self-Assessment Requirements

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

High-level summary of bank’s response

Reference(s)/Links to detailsof bank’s full response/
relevant information

Principle 4. Stakeholders
We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.
4.1 Describe which stakeholders (or groups/types of stakeholders)
your bank has consulted, engaged, collaborated or partneredwith for the purpose of implementing these Principles andimproving your bank’s impacts. This should include a high-level
overview of how your bank has identified relevant stakeholders
and what issues were addressed/results achieved.

Our CSR Charter (Management Principles) states that weare committed to ensuring mutual prosperity with regional
communities, all employees, and the environment, and haveemphasized co-creation with all our stakeholders.
Our Sustainability Vision reflects not only opinions from inside the
Bank but also the opinions of multiple outside experts obtained
through stakeholder dialogues.

Page 28 of this report(Sustainability Vision)
Page 73 of this report(Stakeholder
Communication)

Principle 5. Governance and Corporate Culture
We will implement our commitment to these Principles proactively and transparently, through effective governance and a corporate culture of responsiblebanking, by publicizing our targets set in relation to the areas in which we potentially have significant impact.
5.1 Describe the relevant governance structures, policies andprocedures your bank has in place/is planning to put in place tomanage significant positive and negative (potential) impacts andsupport effective implementation of the Principles.

In our Sustainability Policy, we state that we are determined
to focus on increasing positive impacts and reducing negative
impacts of our activities as a financial intermediary.
Within the governance structure of the Bank, the Group
Sustainability Committee, chaired by the President and CEO,reviews medium-to long-term ESG issues and monitors the status
to responses to them.

Page 12 of this report(Sustainability Policy)

5.2 Describe the initiatives and measures your bank has
implemented or is planning to implement to foster a cultureof responsible banking among its employees. This should
include a high-level overview of capacity building, inclusion in
remuneration structures and performance management andleadership communication, amongst others.

To foster the corporate culture of a responsible bank, we haveprovided opportunities to learn about sustainability through job
rank-based seminars, and also have held seminars related to theenvironment based on ISO 14001, as well as semiannual seminars
aimed at raising awareness of human rights, for all employees of
the Group. Further, to encourage self-study, we recommend our
employees participate in courses to learn about ESG finance andtake relevant examinations.
Also, in April 2020, we reorganized the Committee for Advancing
Women’s Success into the Diversity Promotion Committee tocreate a work environment in which diverse opinions are respected
and everyone can fulfill their potential.
We are also transforming our performance evaluation system
into one that assesses efforts made from a medium- to long-term
perspective to address social issues in the regional communities.

Page 60 of this report(Mindset-Work reforms)

5.3 Governance Structure for Implementation of the Principles
Show that your bank has a governance structure in place for the
implementation of the PRB, including:a) target-setting and actions to achieve the targets setb) remedial action in the event of targets or milestones not being
achieved or unexpected negative impacts being detected.

We have been working towards setting and achieving targets
under the governance structure described in 2.3.
We will also manage our progress against the targets set andwill take remedial action, drawing on the same structure, should
negative impacts be detected.

Page 30 of this report(The 7th Medium-TermBusiness Plan)

Page 64 of this report(Corporate Governance)

Page 64 of this report(Corporate Governance)

Publicize the results of the review and statements of the signatory bank to determine whether it meets the requirements for governance structures for
implementing the principles.
To effectively implement the Principles for Responsible Banking, we have established a governance system which covers target setting and monitoring.
The Sustainability Strategy Office under the General Planning Department is responsible for implementation and reports progress to the Sustainability
Committee, which normally meets three times a year.

SHIGA BANK REPORT 2021

41

Principles for Responsible Banking

Reporting and Self-Assessment Requirements

High-level summary of bank’s response

Reference(s)/Links to detailsof bank’s full response/
relevant information

Principle 6. Transparency and Accountability
We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive andnegative impacts and our contribution to society’s goals.
6.1 Progress on Implementing the Principles for Responsible
BankingShow that your bank has progressed on implementing the six
Principles over the last 12 months (up to 18 months in your firstreporting after becoming a signatory) in addition to the setting
and implementation of targets in minimum two areas (see 2.1-2.4).
Show that your bank has considered existing and emerging
international/regional good practices relevant for the
implementation of the six Principles for Responsible Banking.
Based on this, it has defined priorities and ambitions to align withgood practice.
Show that your bank has implemented/is working on
implementing changes in existing practices to reflect and bein line with existing and emerging international/regional goodpractices and has made progress on its implementation of these
Principles.

Initiatives implemented since we signed the PRB in February
2020:
Established the Sustainability Policy
Revised the Environmental Policy
Reorganized the CSR Committee into the Sustainability
Committee
Reorganized the Committee for Advancing Women’s Successinto the Diversity Promotion Committee
Established the Sustainable Strategy OfficeRaised the targets for the milestones and benchmark
challenges in the Medium-Term Business Plan
Joined the Scenario Analysis Pilot Program in Line with TCFD
Recommendations by the Ministry of the Environment
Launched “Shigagin” Sustainability Linked Loan

Page 12 of this report(Special Feature)

Page 60 of this report(Mindset-Work
reforms)

Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Progress on Implementing the Principles for Responsible
Banking.
We set out basic principles for strengthening our sustainability efforts during the first 18 months following signing, and established an effective
sustainability management system through organizational restructuring. Also, to respond to TCFD Recommendations, which have been gathering steam
worldwide as a global trend, we have sought to acquire know-how on scenario analysis.
We are determined to ensure transparency and fulfill accountability by upgrading our efforts in a phased manner.

42

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATIONCHALLENGES FOR

FUTURE INNOVATIONCHALLENGES FOR FUTURE INNOVATION
44

Turning SDGs into Business48

Increasing the Productivity of the Regional Communities

52

Evolving into a Problem-solution Type Financial Information
Services Provider

58

Shifting to a Sustainable Earnings Structure60

Mindset-Work reforms(Mindset Reform and Work Style Reform)

SHIGA BANK REPORT 2021

43

CHALLENGES FOR FUTURE INNOVATION

Turning SDGs into business
SDGs have increasingly become a common language across the world of business today. SDGs
have helped define the “future vision of the world,” and the gaps between the vision and thecurrent reality are presenting potential business opportunities. We are committed to realizing
sustainable regional communities and are paving the way for increased corporate value by
strategically turning SDGs into business and raising awareness of SDGs among the regional
communities and our customers.

Driving ESG Finance
In September 2020, we declared to society our commitment tostrengthening our sustainability initiatives (see page 12). Based on
our Sustainability Policy, we have worked on a range of efforts forpromoting sustainability in the regional communities to ultimately
realize a sustainable society.

Team dedicated to ESG finance established
In October 2020, we set up a team of three members dedicated to
ESG finance under the Business Promotion Department. The team is
expected to further drive SDGs initiatives in the regional communities
towards realizing a sustainable society.
The team supports promoting and raising awareness of SDGs in
the regional communities and assists customers with sustainablebusiness operations through consulting. Also, we provide support

SDGs consulting scene

with the structuring of ESG financing instruments, such as
Sustainability Linked Loans and green bonds, and offer one-stop
services ranging from consulting to financing.
Going forward, we will position climate change as a significant
regional issue and strongly support customers in their sustainabilitydriven management through consulting and financing to ultimately
achieve decarbonization by 2050.

SDGs consulting
We are now in an era in which pursuing SDGs will provide companies
with opportunities, while the failure to pursue them poses risks.
We are providing “SDGs consulting,” a service that incorporates theconcept of SDGs into customers’ business strategies and assists themin launching new businesses. We also conduct activities to raiseawareness of SDGs in the regional communities.
For a company to operate business in a sustainable manner, itneeds to implement a consistent sustainability strategy in everythingfrom management principles and business strategies to more
specific tactics. We have supported our customers in publicizing theircommitment to SDGs in the form of “SDGs declarations.” Specifically,
we have assisted them with developing their sustainability strategies
and specific benchmarks for actions through tailored and meticulous
consulting.

44

Underwriting of green bonds
Green bonds, which are designed to promote green businesses
by limiting the use of proceeds only to green businesses, need bealigned with customers’ sustainability strategies. We have sought
to expand proliferation in green bonds and green loans, while
supporting our customers in developing their sustainability strategies
through consulting.

Participation in Positive Impact Finance
We have worked to promote ESG finance, specifically bycomprehensively analyzing and evaluating the positive and negative
impacts of corporate activities on the environment, society andeconomy, and by participating in Positive Impact Finance, which is
aimed at continuously supporting such efforts.

TOP MESSAGE

Value to beprovided

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Incorporate SDGs into business and reconcile the creation of economic value with the creation of social value
Assist customers with their SDGs initiatives and contribute to improving their corporate value

Rollout of Sustainability Linked Loans - a first for a regional bank
In August 2020, we became the first ever regional bank to offer

in Japan. With respect to specific financing transactions, we makeSustainability Linked Loans (SLL) when we rolled out our “Shigagin”

sure to obtain second party opinions from external rating agencies

Sustainability Linked Loan.

(including Rating and Investment Information, Inc., and The Shigagin
Economic & Cultural Center Co., Ltd.).

Sustainability Linked Loans are loan products the conditions ofwhich are linked to the borrowers’ progress in achieving challenging
business objectives they have set in connection with SDGs and ESG

Concluding loan agreements and setting Sustainability performance targets(Sustainability Performance Targets or SPTs). Favorable loan terms,
Customerssuch as preferential interest rates, provide the borrowers with an

Reporting on/disclosing the results of initiatives

incentive to take concrete actions based on their SDGs declaration

Shiga Bank

Reportingand environmental policies.

Second party opinions

Sustainability linked loans should comply with the international
Sustainability Linked Loan Principles (SLLP) and the Sustainability

Rating agencies

Linked Loan Guidelines developed by the Ministry of the Environment

Rating and Investment Information, Inc. (R&I)
The Shigagin Economic & Cultural Center Co., Ltd.

“Shigagin” Sustainability Linked Loan “Shiga Net-zero CO2 Emissions” Plan, a special loan package aimed at accelerating the shift to a decarbonized society
In March 2021, the Bank launched “Shigagin” Sustainability Linked

to file a report on their SPTs and the status of their sustainability

Loan “Shiga Net-zero CO2 Emissions” Plan (hereinafter the “Plan”)

initiatives with the Shiga prefectural government in accordancefor customers who have offices in Shiga Prefecture, in response towith the “Action Plan System for Business Entities” implemented

decarbonization initiatives promoted by Shiga Prefecture.

by Shiga Prefecture, and also submit the same report to the Bank.

All business entities are called on to pursue decarbonization as an

The prefecture then publishes the content of their reports inimportant management task for achieving a decarbonized society

accordance with the system. Drawing on the Plan, business entities,

by 2050. The Sustainability Linked Loan is available only to borrowers

administrative bodies, and financial institutions are expected towhose Sustainability Performance Targets (SPTs) are linked to thecollaborate in addressing decarbonization issues.

reduction of CO2 emissions. The borrowers, therefore, are required

Sustainability Linked Loan offered in collaboration with Shiga Prefecture

Supporting the “Shiga CO2
Net Zero” movement
Action Plan System for Business Entities

Customers

committed todecarbonization/
sustainability-oriented
business management

Determine reduction targets/plans

Disclose reduction targets/plans andthe progress of initiatives underway

Conclude a loan agreement
Report on the progress of initiatives underway

CO2 net-zero emissions

Support CO2 emissions reduction

Second party opinions

Verify the amount of CO2 reduction

Shiga Bank

Shiga
Prefecture
Disclose reduction targets/plans andthe progress of initiatives underway

Mr. Mikazuki, Governor of Shiga Prefecture (right), and President &CEO Takahashi jointly announced the collaborative plan at a press

Initiatives based on a comprehensive
alliance agreement

Rating and Investment

The Shigagin Economic & Cultural Center Co., Ltd.
(rating agency)

Information, Inc.
(R&I)

conference.

Comprehensive second party opinions about the entire scheme

SHIGA BANK REPORT 2021

45

Turning SDGs into business[Environmental finance]
SDGs private placement bonds “Tsunagari”

Other ESG investments and loans

To commemorate the issuance of SDGs private placement bonds,

Investment in JICA (Japan International Cooperation Agency) bonds

the Bank has used 0.2% of the total amount of the bonds issued toInvestment in Japan Student Services Organization bondspurchase goods to donate to schools and designated public-service

Investment in Low Carbon Japanese Equity Fundpromotion corporations. (Refer to the material section on page 10.)

Participation in provision of sustainability loans

Structure of SDGs private placement bonds

Corporate credit ratings
that take ・
account
of
国連環境開発会議
地球サミット（1992年6月）
地球環境保全のための「両輪」の条約策定
customerSDGs
environmental awarenesscharacteristics and make maximum use of their local resources, including
their beautiful natural landscapes, to form a distributed autonomous
society and harness their regional vitality to the fullest extent by allowing
their resources to complement those of other regions.

SDGsof私募債の仕組み
Example 1: Underwriting
green bonds to fund a hydropower generation project
Business entity: Okuibuki Hydroelectric Power LLC
Location:

MaibaraCity, Shiga Prefecture

Use of proceeds: Construction of Okuibuki Hydroelectric Power Plant

Corporate credit ratings system
Credit ratings
Qualitative evaluations
Industry trends
Business foundation
Care for the environment, etc.
Quantitative evaluations
Profitability
SafetyGrowth potential, etc.

Transaction
evaluations
Transaction profitability
Maintainability
Familiarity
Care for the environment

Proposal measures for improvement of corporate valueand Ecological Sphere where regions draw on each other’s regional

environmental protection measures are reflected in these ratings.

Sharing of areas needing improvement andother issues uncovered by rating process

Through project finance, we have sought to realize a Regional Circular

criterion” in the Bank’s “corporate credit ratings.” Customers’

Transaction policy

Initiatives towards creating a Regional Circular and Ecological Sphere

Environmental awareness has been established as a “screening

Transaction policy matrix

Schools
Designated public-service
promotion corporations

Shiga Bank

Self-assessment

Donation

Corporations and proprietors

Issuing company

Issuance of SDGs
private placement bonds

Participation in Sustainability Linked Loans

The Bank’s original environmental rating (PLB)
The Bank has established its own unique Shiga Bank Principles for Lake
Biwa (PLB) to protect Lake Biwa and the global environment, and isenlisting support for these principles from customers. In addition, theBank rates customers who have agreed with the principles of the PLB,
using the “environmental rating (PLB rating)” based on the Bank’s uniqueevaluation standards. This is used as a tool for raising awareness ofenvironmental management.
Example 2: Underwriting of green bonds to fund a recyclable fuel businessBusiness entity: CAMPO Co., Ltd.
Location:

Kyoto City, Kyoto Prefecture

Use of proceeds: Capital investments in recycled fuel (RPF) plants, etc.

46

Customers who develop products or services that are practically
helpful in preserving the environment or introduce energy-saving
facilities, etc. are eligible for funding under the Principles for Lake Biwa
Support Fund (PLB Fund). We offer loans at preferential interest rates toborrowers based on their environmental ratings.

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Initiatives for Preserving the Environment
Eco-office creation

Environmental volunteering

The Bank is actively promoting resource and energy usage

We are committed to protection of the environment andreduction in accordance with its environmental policy.

biodiversity so as to pass on to future generations the bountiful
blessings that the global environment brings to us.

Power-saving measures
The Shigagin Eco Style summer campaign between May and“Ikimonogatari” (Tales of Life) activities

October and winter campaign between December and March

The Bank’s “Ikimonogatari” activities, unique to Shiga Prefecture,are implemented, while lighting is reduced and overtime isare all about protecting the quality of water in Lake Biwa anddiscouraged. In fiscal 2016, we conducted repair works of theprotecting and developing spawning grounds and reed beds to

Headquarter administrative center installing the latest energy-

protect, nurture and release nigorobuna fish (carassius auratus

saving facility and realized significant power usage reduction.

grandoculis) and wataka fish (ischikauia), endangered species
unique to the Lake, and to eliminate invasive alien fish species.

Recommending eco-commuting
In 2011, the Bank was certified for excellence in eco-commuting.

Volunteers planting reed seedlings

Volunteers cutting reed

The Bank aims to raise awareness of eco-commuting in every
employee, and encourages them to shift to commutation modesof low environmental impact such as trains, buses, bicycles, andヨシ刈り

walking.

Activities to support the creation of forests

Development of environment-conscious branches
Ritto Branch was opened in 2015 as a “carbon-neutral store,” which
realize practically zero CO2 emissions. We aim to raise environmental
awareness among employees at our branches and the customers
who use them.

Volunteers fishing and removing fish of foreign origin

Releasing nigorobuna fish (carassius auratus grandoculis)
and wataka fish (ischikauia)

Practicing sustainability management with ISO 14001
We have been operating our own environmental management
system since we received certification in 2000. We are solving social
issues through our core business by incorporating SDGs into the
PDCA cycle that we have developed over the years and linking
them with our Medium-Term Business Plan.

STAK EHO LDERS ’VO I CEMr. Toyoo Takada, President and Representative Director of Kusatsu Electric Co., Ltd.
A user of “Shigagin” Sustainability Linked Loan “Shiga Net-zero CO2 Emissions” Plan
We have long advocated environmental preservation as part of our management principles, and have practiced sustainability management. In April 2020, we issued a “SDGs Declaration.” Decarbonization is becoming a critical managementtask, and one that is unavoidable even for SMEs. The impact of activities by a single company may not be material.
However, if the decarbonization movement spreads and many companies promote related initiatives hand in hand withadministrative bodies and financial institutions, the activities of the respective companies combined will contributesignificantly to regional decarbonization and provide new business opportunities.

SHIGA BANK REPORT 2021

47

CHALLENGES FOR FUTURE INNOVATION

Increasing productivity of the regional communities
Digital technologies have been developing and spreading exponentially as seenin ever faster communications via 5G and the expanded use of AI. In fact, theeffective use of these technologies allows for the transformation and evolution of
our business processes and daily lives. We are determined to resolve the issues of
the region and our customers using the power of digital technologies, improve theoverall productivity of the regional communities, and contribute to increasing their
attractiveness and earning potential.

The Bank’s Digital Strategy
Basic policies of the Digital Strategy

In September 2020, we declared to society our commitment tostrengthening our digitalization initiatives (Page 12). With the Digital

Improving
convenience andcustomer satisfaction

Strategy as one of the pivots of our business strategy, we have set thefollowing three basic policies for the Digital Strategy:
Contributing to greater convenience and customer satisfaction

Improving
the productivity ofbusiness operations

Providingworry-free andsecure ICT services

Leveraging digital technologies

through digitalization
Improving the productivity of business operations

Expanding financial services

Working to provide worry-free and secure digital services
In line with the basic policies of its Digital Strategy, the Bank

Streamlining business operations and ensuring risk control

is committed to proactively mobilizing digital technologies toCreating a system enabling implementation ofstrategic management policies

understand our customers even better and provide high value-added
services, by aiming to “expand financial services” so as to accurately
address customer needs; further “streamline business operations andensure risk control,” and “create a system to enabling implementation ofstrategic management policies in a flexible and scalable way.

Backcasting

Diagram of Digital Strategy looking to the future
InfrastructureCore system(an optimal platform
selected in accordancewith the strategy)

Cashless

Productivity

Commonitems(concentrated
investment)

Customer
service

Reducing
burdenBranchoperations

Reduction and Work style
integration
reform48

Contribution
to sustainable
developmentof the region

Renovationof nextgenerationcore systems

Review of
product lines

Customer convenience

Strategic
investment

Future strategy
Future forecast

Accounts-related API
Regions going
cashless

API linkage

Streamlining
customers’
operation Shift to self-service

Sophistication of
FinTechApplication to the region(IT-based business support)

Open innovation

Seal-lessTransactions
Passbook-lesscompleteon smartphones

Utilization ofsmartphoneauthenti
cation/biometric Password-lessauthentication
Card-less

Online andofflineintegration

Coordination with local
enterprises and organizations

Utilization oftablet devices

Streamlining
operation

Information
sharing
Expansion andgreater efficiency

PaperlessSeal-less
Asynchronous communication

Smallerbranches
Reduction
in officeequipment
Reducing burden

TOP MESSAGE

Value to beprovided

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Proactively drive the use of digital technologies and deliver worry-free and secure services with greater convenience.
Define our future jointly with customers and the regional communities and support them in driving the adoptionof digital technologies to ultimately contribute to enhancing productivity and operational efficiency in the region.

Flexsus Project
The Bank’s computer system is one of the important parts of public

next-generation digital society more flexibly and agilely, while retaining

infrastructure, and is expected to have a robust platform to ensure

its uniqueness, the Bank is determined to migrate its accounts-related

provision of secure and reliable financial services.

systems from mainframe to open platform. The project for building the

The Bank’s core systems have been in operation for more than 30

new system structure, including the migration, is named the “Flexsus

years. We have recently decided to introduce next-generation banking

Project.” The project is being executed mainly by a diverse team ofsystems developed by Hitachi, Ltd. (headquartered in Tokyo) to replacepersonnel with various skills.

such legacy systems with new core systems developed for the purpose* Flexsus: Flexsus is a name coined from two words, Flexible and Sustainable, which represent
our commitment to transition to a flexible and sustainable operating foundation.

of transitioning to the next-generation digital society. To adapt to the

Next-Generation system (open platform)

Illustrative image of transition through the Flexsus Project

Collaboration with outside parties (open)

Current system (mainframe)
Used for banking operations (closed)“Open”
financial system

CounterATM
OnlineAccounts-related
systems

Complex structure

System linkage

C us t o m e r s

Banking systems

Customers

Value co-creation partners (Partners)
Local
companies

Local
governments

API linkage

Professional
service providers

API linkage

Banking systems
CounterATM
OnlineAccounts-related
systems
Simple structure

Systemlinkage<Digitalization Policy supporting regional communities>
1. Higher development speed and adaptability
ensuring agile business operations
2. A full range of security measures addressing
the needs of customers who trust the Bank
3. Collaboration with outside parties through safeand flexible API connections<Effects of transition to the next-generation system>
1. Departure from legacy assets, shorter development
period, and cost reduction
2. Provision of worry-free and secure settlement
platform and smooth system linkage with partners
3. Training and production of human resources
capable of responding to a digitalized society

Building a “secure and open” financial infrastructure

SHIGA BANK REPORT 2021

49

Increasing productivity of the regional communities

Strengthening digitalization initiatives
In strengthening our digitalization initiatives, we established the Digital Strategy Group and Digital Promotion Office within the Head Office in October 2020.
The Digital Strategy Group has planned and developed a medium- to long-term digital strategy, taking into account the factors that could affectthe social environment like the COVID-19 crisis and various new technologies, and has promoted digitalization within the Bank.
Further, the Digital Promotion Office, responsible for supporting the digitalization of regional communities and customers, is offering “IT businesssupport” to proactively provide regional communities and customers with expertise and know-how acquired through digitalization of the Bank and toresolve customers’ management issues in the context of digitalization.
Specifically, the Office has assigned digital promotion leaders, digital promotion supporters, and digital promotion officers at each site to accelerateregional digitalization.

Illustrative image of how the Digital Strategy is implemented
Co-existence with
the new coronavirus

New technologies

Changes insocial environment

Forecasting the future of the society/banking sector
Medium- tolong-term
strategy

Digital Strategy

Initiatives

Drive digitalization ofcustomers/regional communities

Create time
Strengthen the ability tomake proposals

Drive digitalization within the Bank

Important infrastructure: Open API

Important infrastructure: tablets

Newly establish Digital Promotion Office (enhancement of IT Business Support)

Reform work styles using tablets

Promote collaboration with outside parties using API (open innovation)

Dispatch personnel to companies outside the Group (development of human resources)

Flexsus(next-generation
open accountsrelated system)

Reform internal processes (operations, branch functions)Improve operational efficiency and develop human resources through Flexsus Project, etc.

Achieve sustainable development for customers, the region, and the Bank

50

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANK

Digital Strategy Group

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Digital Promotion Office

We have established the Digital Strategy Committee, responsible for

The Office’s mission is to realize sustainable regional communities

planning and supervising the Digital Strategy, and have formulated

from the digital side. In fact, the Office is responsible for supportinga “Digital Strategy Roadmap” which defines the direction we should

the digitalization of regional communities and customers.

head for from a medium- to long-term perspective.
By joining the TSUBASA Alliance, we have strengthened

Specifically, the Office will proactively provide customers withthe know-how acquired through digitalization of the Bank, mainlycollaboration with other banks in a broad range of advanced fields,in the form of “IT business support,” which is aimed at resolving

while promoting collaboration with a variety of other companies

customers’ management issues in the context of digitalization, andoutside of the Group to provide prompt and meticulous services towill promote digital transformation (DX) of regional communities inour customers in the regional communities, where digitalization iscollaboration with a variety of outside companies.

progressing rapidly.
In addition, we have made efforts to provide a high-quality,
problem-solving type financial information service, such as
promoting work style reform using tablets, fundamentally
improving our operational efficiency, and spending more time indialogue with customers.

Collaboration with local governments

Paving the way to resolving customers’ issues fromthe viewpoint of digitalization

While the Japanese government plans to establish a “Digital Agency,”
local governments have also accelerated their digitalization initiatives,

We offer “IT business support” as a means of contributing to resolving

including the digitalization of administrative procedures, the planned

the issues of the regional communities and our customers and realizing

provision of what is called the “one-stop, once-only service,” and thesustainable regional communities in the context of digitalization.

support of digitalization efforts by regional communities includingSpecifically, we first share customers’ management issues anddecide on a course of action on the introduction of digital tools. We

SMEs.
Shiga Prefecture also has focused on a range of efforts to drive thethen provide support to customers until they actually complete theuse of digital technologies, including the establishment of the “DX

introduction and deployment of the tools. The objective of our support

Public-Private Co-Creation Salon” which is a platform to bring together

is to “resolve customers’ management issues” rather than drive theirhighly specialized companies with cities, towns and companies indigitalization. To that end, we have sought to understand customers’

Shiga Prefecture.

management issues and explore solutions to these issues from the

The Bank, which has supported digitalization of its customers
in the region, is also committed to supporting the digitalization ofdigital side.
Going forward, we will address increasingly diversified andadministrative bodies and promoting the digitalization of the entire

sophisticated management issues faced by our customers based onregional communities.

a policy of expanding alliances with outside companies that offer abroad range of digital services.

STAK EHO LDERS ’VO I CEMr. Tetsuya Furukawa, President and Representative Director of Sanki Kogyo Co., Ltd.
The company is headquartered in Maibara and is engaged in the track construction business and the civil engineering
work business. It also operates an auto-repair garage. In the face of the COVID-19 epidemic, we were aware of the need to
go digital and better utilize IT. But to be honest, we had no idea where to start. We therefore consulted Shiga Bank in ourneighborhood and they kindly offered to support our digitalization efforts. Thanks to the support of the bank, we haveboldly transformed our traditional business practices, which involved paper, seals and white boards, into a new style using
cloud services and other advanced technologies. We tend to think that digitalization is challenging, but as the bank supported us from the standpoint of a user. Just like us, we were able to tackle digitalization with peace of mind.

SHIGA BANK REPORT 2021

51

CHALLENGES FOR FUTURE INNOVATION

Evolving into a problem-solution typefinancial information services provider
We will launch the solution-type financial information services business, sharing and resolving
the issues of regional communities and customers, which goes beyond the conventional
scope of banking operations. The region has various issues. We will contribute to sustainable
development of the region by carefully responding to and resolving these issues one byone. To this end, we will work to enhance the sophistication of the lineup of our consulting
services, and improve the consulting capabilities of each of our employees.

Revitalizing regional economies
Need to revitalize regional economies

Shigagin Nonohana Prize
The prize is awarded to the students of Saturday School for

The COVID-19 crisis has renewed our awareness of the need for regional

Entrepreneurship in appreciation for their efforts in starting newregeneration. Revitalization of regional economies is a challenge essential

businesses. We collaborate with candidate businesses in planning,

to regional regeneration. Revitalization of regional economies will leaddesigning and implementing their business plans. We also provide

to an increase in the population who work and live in the region, andtailored support to the winners from their start-up to growth phase.

as a result, will contribute to overall population growth/stabilization.
This will also help enhance the life infrastructure, improve the level ofadministrative services, and boost the vitality of Japan as a whole.
Revitalization of regional economies is an important task that
regional banks should tackle. We will understand the issues of theregion and our customers and will pave the way to realizing sustainableregional communities through tailored consulting services.

Creating new businesses in the region
We have made various efforts to create new industries and revitalize
the economy in the region.
Saturday School for Entrepreneurship / Shigagin Nonohana Prize

A winner of the Shigagin Nonohana Prize: BIOAPATITE, Inc. (second from the left)

Nonohana Support GroupNew Business Support Loan
Crowdfunding
Shigagin Regional Revitalization SD Fund

Shigagin Regional Revitalization SD Fund
In July 2020, we established Shigagin Regional Revitalization SD Fund
Investment Limited Partnership, a fund supporting the creation of new
businesses that have new growth potential. In December of the same
year, we invested in T-ICU Co., Ltd., a company remotely providing

Support for creation of new businesses

intensive care support services.
We will continue to support the companies developing new

Saturday School for Entrepreneurship
We have held lectures since fiscal 2000 with the aim of supporting thosewith strong entrepreneurship spirit. The school has provided lectures byhigh-profile corporate executives in each industry on topics including
SDGs, local resources, and human resources. Through these lectures,
we provide new business tips and support customers in starting new
businesses/relaunching businesses.

52businesses in growth areas or aiming for growth in existing areas with aninnovative business model.

TOP MESSAGE

Value to beprovided

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Contribute to sustainable development of the region and customers by resolving their issues
Provide appropriate financial information services catered to each of the issues by leveraging a variety of networks

Tapping into attractive local resources
Regional trading company project
In May 2019, the Bank launched a regional trading company project tocreate new businesses with business operators by making use of theregion’s abundant and attractive products, sophisticated technologies,
and historic cultural heritage.
Projects currently underway include the development of new
products using Omi tea, the development of overseas sales channels
for sake, and the revitalization of the lake fish aquaculture business.
As part of these projects, we have worked to expand sales channels
for local resources and activate tourism resources by utilizing a broad
network and accumulated know-how.
Through these projects, we are contributing to resolving regional
issues, achieving customers’ dreams, and realizing a sustainable society.

<Crowdfunding Example 1>
Morimura Shokai
The company set up the fund hoping to deliver meat that has nowhere
to go amid the COVID-19 pandemic to households so they can enjoy
the meat at home.

<Details of major initiatives>
 iscovery of local products and other resources, marketing and sales
D
support iscovery of tourism resources, development of tourism products,
Dand tourism promotion support
S upport for securing human resources, bringing human resources
back to the region<Crowdfunding Example 2>
NANGA INC.
The company sought to produce sleeping bags and air mattresses as
emergency goods. These products recorded remarkable sales, having
attracted demand not only in the disaster prevention market but also
in the camping market.

Crowdfunding
Through crowdfunding, we support business operators who are
working to make local brands more appealing and to provide new
products/services by leveraging local resources.
Benefits of crowdfunding are wide-ranging, including leeway infunding, acquisition of new customers for products/services, and trial
marketing. Amid the COVID-19 crisis, the demand for crowdfunding
has been growing more than ever.

Cooperation with the community
We have collaborated with various stakeholders in the region, including
industry, academia, and government agencies, to resolve the issues
facing the region, and create a virtuous cycle for the revitalization of
the regional economy. As a result, a variety of collaborations have been
taking place. For example, based on a comprehensive partnershipagreement with a university, we worked on customer data analyses
and e-commerce strategies to resolve customers’ issues and provide
university students with opportunities to learn about regional
agriculture and food culture through fieldwork in a Japanese restaurant
run by our customer.

SHIGA BANK REPORT 2021

53

Evolving into a problem-solution type financial information services provider

We have also been striving to expand our overseas consulting

Support tailored to each customer’s issues

network by dispatching trainees to the Japan Bank for International
We have been striving to better understand our customers and their issues

Cooperation (JBIC), for instance.

through dialogue. We have a broad assortment of solutions and provide

We have also proactively supported overseas companies that areappropriate and meticulous support catered to the issues of each customer.

working to solve issues in the international community. In February
2021, the Bank provided funding to Thai Union, a major canned foods

Resolving management issues related to human resourcesmanufacturer based in Thailand, by participating in the provision of a

Many business operators have issues related to human resources. To

syndicated sustainability linked loan. Thai Union has worked to ensure

resolve customers’ management issues related to human resources, The

the sustainability of fishery resources and the protection of human

Shigagin Economic & Cultural Center Co., Ltd., one of the Bank’s grouprights, and we expect this sustainability linked loan to further drive thecompanies, has obtained a license to operate in the fee-charging

company’s ESG and SDGs initiatives.

employment placement business, and has operated a human resource
placement business since April 2020.
In addition, the Shiga Bank Group was selected as an indirectly

BCP support
We support our customers in the development of business continuity

subsidized business of the Pioneering Human Resource Matchingplans (BCP), which are necessary in order to continue operations

Project* by the Japanese Cabinet Office, and has launched a matchingeven in the event of unexpected disasters, such as an earthquake orbusiness for our customers in the region in collaboration with a humana pandemic. Specifically, we have proposed risk hedging solutions,

resources placement company, supporting customers in securing high-including consulting on disaster risks and emergency solutions, inlevel executives and specialized human resources, which are required

cooperation with non-life insurers and partner companies.
In addition, we provide immediate and flexible financing by

for resolving business issues.
*Pioneering Human Resource Matching Project: a project designed to share management
issues with customers, assess the type of human resources needed to resolve the issues, andintroduce matching high-level executive personnel and human resources wishing to work on
a part-time/sideline basis.

Management issues /human resource needs

Customers

The Shiga Bank Group
Coordination

Problem solving support
Placement of humanresources

Human resources recruitmentcompanies, etc.

activating our BCP support loans (disaster countermeasure plans) inthe event of a disaster.
Business succession / M&A
For an operator of business, business succession is a once in lifetime
event. For customers that have candidate successors, we provide a
range of succession services for ensuring smooth business succession,
including the systematic training of successors, transfer of treasury
shares, and acquisition of dispersed shares. For customers with nocandidate successors, we assist them with third-party succession via

Overseas consulting
To revitalize regional economies, we need to expand regional business

A successor takes on not only treasury shares but also intangible

globally, even amid the COVID-19 crisis. In fact, we have provided ourassets, such as technologies, know-how, customers, and reputation,customers with sophisticated solutions for overseas business expansion by

and this needs to be considered when planning a businessstrengthening ties with our overseas sites, including the Hong Kong Branch,

succession. Also, it is important that successors are trained in a

Shanghai Representative Office, and Bangkok Representative Office.

systematic manner, as things will not just progress naturally. The Bank

These days, the issues faced by customers in connection withoverseas business expansion are diversifying. We have strengthened54

M&A in collaboration with external specialized institutions.

has supported customers in training successors by consulting withthe successors.

ties with municipal governments, public institutions, and companies

Inheritance by individual owners is one of the major issues inin the private sector to upgrade our overseas consulting functions. For

business succession. The transfer of treasury shares also needs to beinstance, we have provided a service to match the development needs

carried out in a systematic manner as it often results in unexpectedlyof developing countries with customers’ products and technologies

large amounts of expenditures being incurred. For family-owned

through “Transactions in Collaboration with Regional Financial

companies, the Bank has provided inheritance related solutions

Institutions,” a project supporting SMEs in their overseas businessthrough consulting, such as countermeasures against disputes

expansion that is administered by the Japan International Cooperation

among family members, will trusts, and inheritance tax measures,

Agency (“JICA”).

through consulting.

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANK

M&A is increasingly being employed not only as a solution to

CHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Establishment of Solution Sales Office and Finance Officebusiness succession issues but also as a growth strategy option. To
appropriately address the growing needs of customers, we have

On June 25, 2021, the Bank set up the Solution Sales Office within

worked to develop specialized human resources and build strategic

the Business Promotion Department and the Finance Office withinties with outside organizations.

the Financial Markets & International Department for the purpose ofSpecialized knowledge is essential for M&A. However, knowledge
accumulated through hands-on experiences and the ability to deal
with problems are also important. The Bank therefore has regularly

resolving increasingly diversified and sophisticated customer issues
and increasing customers’ corporate value.
The Solution Sales Office is designed to provide consulting services

dispatched its employees, as trainees, to a partner company thatto corporate customers and retail customers, as well as solutions

specializes in M&A. After these trainees return to the Bank from theto revitalize regional communities in a unified manner, and has

partner M&A company, we additionally train them through OJT tostrengthened customer support operations including digitalization,

produce human resources with a wealth of skills and experience.

aiming to contribute to sustainable development of regional

The Bank also has enhanced its ability to deliver value to customers
by complementing its professional expertise and networking skills,

communities.
The Finance Office caters to various financing needs of customers

which cannot be obtained on its own, through alliances with external

by working on new financing methods and strengthening financespecialized institutions and participation in the TSUBASA Alliance.

operations for corporate customers.

Succession to family member
Measures forbusiness succession

Succession to an employee, etc.
Succession to a third party(M&A)

Business
succession plan

Initial public offering (IPO)
Support with business discontinuance

TOPICS

経営課題・人材ニーズ

SDGs Business Succession and M&A Conference 連携2020 held
お客さま
課題解決サポート

In November 2020, we人材の紹介
held the “SDGs Business人材紹介会社等
Succession
and M&A Conference 2020” jointly with Nihon M&A Center
Inc., a leading M&A player in Japan. At the conference, we
provided the most up-to-date information on 21 topics,
including the latest M&A trends by sector, methods ofaddressing business succession issues, introduction to
TOKYO PRO Market, and joint growth strategies involving
funds. The content was prepared so that the information
would be helpful in tackling a wide range of issues for ourcustomers. The conference was live-streamed and viewed
by more than 8,200 persons from 5,400 companies in
prefectures such as Shiga, Kyoto and Osaka.

SHIGA BANK REPORT 2021

55

Evolving into a problem-solution type financial information services provider

Asset formation for an era of 100-year lifespans
Need for asset formation

Supporting growth of assets

In an era of the 100-year lifespans, asset formation planning and asset

In order to enhance the financial literacy of customers in the region, wemanagement after retirement have become increasingly important. To

are stepping up our activities for raising awareness of the need for asset

prepare for rises in prices and secure sufficient post-retirement assets,management through seminars and consultation at workplaces.

we need to accelerate the shift from savings to asset formation.

We have recommended long-term, diversified and cumulative

Systematic asset formation helps people live comfortably and withinvestments to customers so that they can start building up their assets

peace of mind, and eventually helps revitalize regional communities. As

earlier and more easily. We have proactively recommended customers

a Sustainability Design Company, the Bank is striving to realize a society

to invest in tax-exempt products that are effective in asset formationsuch that all people in the region can live happily.

over the long term, such as investment trusts, defined contribution plans(iDeCo) and NISA. We are also improving customer convenience by

Education for financial literacy
Driving a shift from saving to asset formation”

expanding non-face-to-face channels such as apps and online banking.
In July 2020, the Bank newly opened “Personal,” an asset
management consultation counter, which are also open on holidays

By providing education about money, we are working to create an

at four branches. In branches with both “Personal” and Shigagin Plaza,environment in which the younger generation can develop knowledge

a loan consultation counter, the functions of the latter have beenand powers of judgment regarding asset formation.

integrated into Personal. At all seven branches, we are providing

In fiscal 2020, we held seminars for students of Shiga University,

consultation services concerning matters such as asset management,

Shiga University of Medical Science, and Ritsumeikan University. The

insurance policy reviews, and housing loans, on holidays, thereby

seminars were live-streamed online, a new distribution format that hasestablishing a system to address broad customer needs in a one-stop

become popular amid the COVID-19 crisis, but attracted a high level offashion and providing a meticulous level of service catered to theattention from students. In fact, these seminars saw a lot of questions

needs of each customer.

being received from the audience.
By promoting financial literacy, we will raise people’s awarenessSupport customers in protecting against asset impairmentof the need for earlier asset formation and thus help them to live in
comfort and with peace of mind. We will also contribute to achieving

The Bank of Japan has set an inflation target of 2% a year, and has

the following SDGs: 1. No poverty, and 4. Quality education.

implemented financial policies towards achieving that target. To
prevent the impairment of assets due to inflation, we will help
customers in better managing their assets. The Bank offers a diverse
lineup of products, including investment trusts, life insurance, andfinancial intermediary services, and this allows us to make proposals
concerning asset management that reflect the life plans and ideas ofeach of our customers.

56

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Support customers in taking over assets

Policy for customer-first business operation

By deliberating about and deciding how to transfer assets to

The Bank has developed and implemented a “policy for customer-firstdescendants earlier, you can prevent future troubles. The Bank

business operation” which is aimed at helping facilitate asset formation

has provided consulting services on various issues, such as asset

by customers. This policy was established to realize “customer-firstmanagement, inheritance, asset succession, and effective use of realbusiness operations” in the provision of financial products and services.

estate properties, to cater to the various needs of our customers.

Based on the policy, we will publicly disclose our progress against the

Since April 2020, the Bank itself has been offering trust services. We

policy at regular intervals, and strive to achieve ever better operations.

offer multiple services, such as money trusts (testamentary substitutetrusts), testamentary trusts, and clearing out the belongings of the

1. Best act in the interests of customer

departed so as to sincerely address customers’ concerns about

2. Appropriately manage conflicts of interest

inheritance and asset succession, and provide responsible proposals

3. Clarify fees and commissions

and services in one-stop responsible.

4. Provide important information in an easy-to-understand manner
5. Provide products and services appropriate to each customer

Strengthening consulting capabilities

6. Appropriate framework to motivate all employees

To cater to increasingly diversified and sophisticated customer needs,
an SD (Sustainable Development) Team consisting of AFCs (areafinancial consultants), securities advisors, and insurance advisors,
has provided back-up support for the consulting services offered bybranches. We have been striving to further strengthen our consulting
capabilities and provide sophisticated financial information services
through consultation with each customer, primarily about asset
management, and by running training sessions for branch employees.

STAK EHO LDERS ’VO I CEMr. Koichi Nakamura, CEO, Representative Director, BIOAPATITE, Inc.
The company was established in 2017 and its head office was relocated to Shiga Prefecture in 2019. The company foundgreat value in eggshells, which are food waste we see every day, and has succeeded in manufacturing BIOAPATITE derived from eggshells.
This time we joined the competition for the Shigagin Nonohana Prize, an incentive system for entrepreneurs, andenhanced our management innovation plan jointly with Shiga Bank. As a result, we were awarded the Nonohana Grand
Prize. We will strive to spread the great benefits of eggshells to every corner of the world under the business principlethat we will “contribute to the development of healthcare and life support with eggshells as the ultimate in recycledresources.” Your support will be greatly appreciated.

STAK EHO LDERS ’VO I CE

Research Strategy Promotion Office, Academia-Industry Collaboration Section, Shiga University of Medical Science
Mr. Masahiro Matsuura, Special Contract Professor
We have received lectures on financial literacy from Shiga Bank staff as part of our “Basis for Healthcare Innovation” program
since 2019. We find it quite worthwhile as students have little chance to learn about money.
As many of our students will be engaged in healthcare in the future, we believe it is very important that they think about
insurance, asset formation and cash management. We have entered into a comprehensive partnership agreement with Shiga Bank, and have collaborated with each other in industry-academia-government-finance partnerships. We will continue
to take on various challenges and collaborate with the bank in the future.

SHIGA BANK REPORT 2021

57

CHALLENGES FOR FUTURE INNOVATION

Shifting to sustainable earnings structure
To ensure efficient branch operation, we will consolidate branches, drive a shift to brancheswith specific functions in line with characteristics and demographic trends in each region,
and appropriately allocate personnel to branches. Besides rebuilding our branch network, wewill improve customer convenience and reduce administrative workload at branches throughoperational overhaul. Through these efforts, we will deepen dialogues with the regional
communities and our customers and shift to a sustainable earnings structure.

Channel strategy
Methods of branch operations that suit each region

method helps build an efficient branch network, while limiting any
decline in customer convenience, as the method allows customers

To cater to diversifying customer needs, the Bank is revising the functions

to continue to use the same passbooks and ATM cards even after theand defining the roles of each branch. The Bank is also aiming tobranches are integrated.

strengthen its operating structure and optimize its management resources.
In branch initiatives within Shiga Prefecture, the Bank has taken
measures to further improve services by creating an operating
structure that better meets customer needs, while duly noting

In addition, we have launched in-store agents operated by ourconsolidated subsidiary, The Shigagin Agency Co., Ltd., which handles overthe-counter operations (deposits, transfers, etc.) for large-scale branches.
The launch of the in-store agents has enabled our employees tochanging demographics, regional characteristics, and growth potential.

focus on activities, such as making proposals, and respond to customer

This means a shift from branches offering full banking services toneeds and resolve their issues more carefully than ever before. The

branches with specific functions, including sub-branches and agents.

launch has thus helped the Bank to provide higher value-added

In branch initiatives outside the prefecture, the Bank opened theservices to its customers.

Kyoto Branch in 1938, the Osaka Branch in 1941, and the Tokyo Branch

Through these efforts, we will rebuild our branch network toin 1946, and thus has operated as one of the first “wide-area regional

optimize it, and further enhance our services to our customers.

banks.” As to new branch openings outside the prefecture in recent
years, the Bank has adopted a strategy of opening new branches

Enhancement of non-face-to-face channels

after securing a certain volume of business through sales activities
that make maximum use of local and interpersonal connections

In addition to the strategy for physical branches, we have been striving

and knowledge. The Bank has also opened branches specializing in

to enhance our non-face-to-face channels to drive a shift to online

corporate customers, mainly SMEs.

channels using digital technologies.

While adhering to these basic policies, we are rebuilding ourSpecifically, we offer an account opening app and have beenbranch network to match it to a new era so as to both further improvestriving to enhance online banking, while working to make thecustomer convenience and provide sustainable services.

functions of our ATMs more sophisticated and promote partnerships

Since February 2020, we have been integrating branches withinwith other financial institutions.

branches to improve the efficiency of our branch network and to build

In addition, we will achieve convenience for our customers anda framework that enables the provision of higher added-value services.

improve productivity by reducing workload through expanding API

The branch-in-branch method refers to a location format in which

cooperation with FinTech companies and building next-generation

multiple branches and other facilities coexist within one location. This

Integration via the branch-in-branch method

In-store agent

Personnel incharge of sales(deposit/transfer
and exchange)

Branch managers

Low counter

Personnel in chargeof loans

High counter

Personnel in chargeof customers relations

Personnel in chargeof loans

Low counter

Personnel in chargeof customers relations

B Branch

B Branch

A Branch

BANK

A Branch

BANK
BANK

core systems.

High counter
Outsourcing
to The Shigagin
Agency(Operated bystaff ofThe Shigagin Agency)
Agency manager

Branch managers

B Branch moved
within A Branch*Low counter: Consultation about financing, asset management, etc.
High counter: Acceptance of deposits/withdrawals/transfers (general bank counter operations)58

TOP MESSAGE

Value to beprovided

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATIONWe will efficiently operate our branches, make utmost efforts to resolve the issues of the region and our customers,
and contribute to sustainable development of the regional communities.
We will promote the “Operational Overhaul Project” and improve customer convenience.

Operational overhaul of branches
Measures to reform branches

and a range of paperwork for such as inheritance. In addition, we havelaunched a service that allows customers to use a tablet to open new

To provide services that cater to increasingly diversifying customer

accounts or perform other procedures, as well as purchase financial

needs, we must understand accurately the functions expected of our

instruments including investment trusts and life insurance policies, tobranches and switch our paperwork, facilities and systems to ones thatfurther improve our productivity with ICT.

are better adapted to the needs of the times.
Against this backdrop, the Bank launched the Operational Overhaul

New branch format under the Operational Overhaul Project

Project to drastically reform employees’ awareness about branches,

Layout change

Support office

and is taking measures to improve productivity and enhance theStaff at the general information counterask customers what the purpose of theirvisits is and assign them a counter
according to the purpose.

Administrative operations,conventionally handled by branches,
are consolidated into the support
office.

Measures of operational overhaul

Project sequentially in all branches since April 2019.
With the Project, we are drastically overhauling overall administrative
operations, including deposits, transfer and exchange, handled bybranches, and significantly reducing the amount of administrative

Quick counter(for simple transactions)

We have been implementing initiatives for the Operational Overhaul

Service counter(for complicated transactions)

Consultation desk
(for consultation)satisfaction of both customers and employees.

Generalinformation
counterIntroduction of tablet-basedtransactions
The Bank has introduced tablets at its branches toallow customers to open new accounts or perform
other procedures, such as making
changes to theirregistered information,using the tablets.

workload and its cost by improving productivity, to ultimately achieveeven deeper relations with customers and enhance the level of

Expansion of non-face-to-face transactions

customer service, including a shorter time for customers to wait at

Non-face-to-face transactions allow customers tocomplete transactions using ATMs or smartphones
without the need to visit branches.

branches and increased time for employees to spend on making¥

proposals to customers at counters.
Specifically, we have introduced the “purpose-specific counterssystem” assigning counters according to the purpose of customers’

Reducedvisits, and also have commenced operation of a centralized

paperwork

administrative base (support office) that handles back-office operations

Shortertime
to wait

Improved
convenience

Increasedinteractions
withcustomers

STAK EHO LDERS ’VO I CE

Kunio Murase, Manager, Administration Dept.
The support office is now centrally handling “high-mix low volume” paperwork, which was traditionally considereddifficult to centralize, and thus, has significantly reduced the volume of paperwork and related risk at each branch.
In this way, the support office has helped the branches to spend more time on communication with customers. The
support office, as a “skill center,” also contributes to providing customers with a sense of security and safety. As a missioncritical center expected to support back-office operations after the upcoming implementation of the next-generationcore systems, the support office will also strive to ensure the sustainability of the Bank’s operations, while emphasizing
employee satisfaction.

SHIGA BANK REPORT 2021

59

CHALLENGES FOR FUTURE INNOVATION

Mindset-Work Reforms(Mindset Reform and Work Style Reform)
We will work on mindset and work style reform, in a manner that goes beyond the conventional
way of thinking and framework for a bank, to realize sustainable regional communities. We
have been shifting from the conventional perspective centered on the Bank to one centeredon customers and the overall regional communities, and also have been fostering the type of
personnel who can think and act on their own to help achieve our customers’ dreams. Also, we
have been striving to build a work environment where every one of our employees can unlock
their potential while feeling that their job is both fulfilling and meaningful.

Reforming the ways of thinking and working
To remain sustainable itself, the Bank has taken on the challenge of reforming its ways of thinking and working. Specifically, the Bank has aimed to foster
the type of personnel who can think on their own and realize an organization where every one of our employees can work in a lively fashion and with asense of fulfillment.

Fostering the type of personnel who can think and work on their own
To appropriately respond to increasingly diversified and sophisticatedcustomer needs and provide services beyond customers’ expectations,
we need to have the most updated knowledge and skills and work ina flexible and speedy manner. To this end, we have been training our
employees so that they understand the essence of matters and think
and work on their own. “Mindset-Work” reform should be centered on
customers. At many training sessions including onboarding and rankbased training programs, we have held group work sessions and active
discussions to produce the type of employees who can take matters
into their own hands.
In the current era, in which workstyles and values are diversifying,
we also believe it important to build a work environment that allows
employees to define and realize their career paths by themselves. To
build such a work environment, we have continuously supported our
employees in designing and realizing their career paths, including
supporting their career formation through rank-based training
programs and the “System for Discussion.”
To support their career formation, we provide various learning
opportunities, including seminars for branch and section managers
and “pressure-free plan seminars,” which employees can participate inon their days off, and online seminars called “e-JINZAI for Finance.” In
addition, we have proactively dispatched our employees to external
specialized institutions, and have encouraged them to participate intraining programs of external educational institutions, such as SME
Support Japan, the Graduate School of Shiga University, and the
Graduate School of Management of GLOBIS University.

With future-oriented perspective at the core hift from a Bank-oriented to a customers and societyS
oriented perspective
We have worked to transform our mindset and behaviors, fromproduct-out to market-in, by thoroughly leveraging the “Goal-based
Support” which caters to the needs of the region and our customers
and resolves their issues to help them achieve their dreams.
Demonstrating strengths
in the following fourareas and supporting
customers in achieving
their dreams (goals)

VisionAbility tolisten tocustomers

Ability tostay close tocustomers
Ability tounderstandcustomers

Ability to
makeproposals“Four abilities” required to realize the vision

Guidelines for action and thinking
StanceStaying close to customers

Goal

Customers’ dreams

The bank that customers consult first andthat cares most about customers
close to and thinking together
What it takes to achieve the goal Staying
with customers

What is a main bank?

Scene at a training session

60TOP MESSAGE

Value to beprovided

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATIONWe will see things from the perspectives of customers and the regional communities and provide customers withhigh-quality services catered to their needs.
We will build a work environment in which diverse personnel can fulfill their potential and feel that their job is meaningful.

I ntroducing a performance evaluation system that gives
due credit to those who think and work on their own

Evolving Into a company supportive of diverse
mindsets and workstyles

We believe that fostering the employees who can voluntarily think
and work on their own, rather than passively, in order to resolve theEnhanced System for Discussion

issues of the region and customers will contribute to sustainable

Since this fiscal year, we have added one-on-one meetings to the Systemdevelopment of the regional communities, as well as of our customers

for Discussion so that our employees can consult their supervisors on

and the Bank. We have incorporated a performance evaluation systemvarious topics, including their envisioned careers, jobs, and personalthat gives due credit to those who voluntarily think and work into the

problems. The one-on-one meetings provide “time for employees” to

7th Medium-Term Business Plan. The Bank will improve the literacy

think on their own and talk with their supervisors on a regular, person-to-of its employees so that they can think and work on their own fromperson basis. The supervisors confirm the physical and mental condition,

the perspective of the region and customers, and will also implement

concerns, problems, and interests of their subordinates through suchthe customer-oriented (market-in) “Goal-based Support” to ultimately

subordinate-oriented dialogues and help them address their challenges

evolve into a sustainable organization.

and issues and achieve their goals and growth.

Evolving into a company where employees areencouraged to act voluntarily and take on challenges

We have enhanced welfare benefits and implemented a work

Work-life balanceenvironment supportive of diverse and flexible workstyles so our

Human resources recruitment system

employees can achieve a balance between work and private life while

We believe that for every one of our employees to work whileworking with a sense of satisfaction and fulfillment, and choose their

feeling their job is fulfilling and meaningful, we need to build a work

lifestyle from a variety of alternatives.

environment in which they are highly motivated to take on challenges
and fully display their capabilities.

Since fiscal 2021, we have operated an hour-based annual paid leavesystem in addition to the legally required paid leave systems that wereTo respond to increasingly diversified and sophisticated customer

already in place. In addition, we are working to help our employees

needs and to resolve various issues in the region, we have put in placerealize flexible workstyles that are not limited by work locations, suchan internal recruiting system, which is aimed at developing highly

as working from home using tablets.

specialized human resources. By encouraging employees to voluntarily
and proactively take on challenges through this system, we have been
paving the way for a work environment in which our employees areable to get on their envisioned career path and the Bank can unlock
the potential of diverse talent.
Departments having recruited personnel through the system (selected)
Corporate Business, Personnel Planning,
Regional Promotion Office, Digital Promotion Office,Consulting Division, Finance Division, Global Human Resources,
and System (Next-Generation) Division*Number of employees actually recruited through the system in fiscal 2020: 38

SHIGA BANK REPORT 2021

61

Mindset-Work Reforms (Mindset Reform and Work Style Reform)

Support for childcare and nursing care

Diversity Promotion Committee

We have enhanced our system to support our employees in balancing

The Diversity Promotion Committee has further developed the concept

childcare/nursing care and work.

of active participation by women, and has endeavored to create

The period of our childcare leave is up to three years, which exceeds

workplaces in which everyone can demonstrate their abilities and can

the legally-required period. We have supported continuous career

feel their job and life is fulfilling so that the Bank can ultimately evolve

formation by providing various types of information during childcare

into a company that is sustainable and essential for the growth of theleave, organizing meetings for a smooth return before going backregional communities.

to work from childcare leave, and holding support seminars after
returning from childcare leave.
We also provide a range of nursing care support, including familycare leave for employees with a family member who needs constantnursing care for up to one year as well as paid nursing leave available

To incorporate diverse opinions into the activities of the Committee,
we established the Diversity Promotion Team in July 2020. The
members of the team, who are recruited from branches as volunteers,
have actively exchanged opinions.
In fiscal 2020, the team members led a series of discussions with
employees about issues with and improvement measures for thefor 10 days per year.

System for Discussion. In fact, the team played a significant role in the
introduction of the one-on-one meetings in June 2021.

Business casualAs part of our efforts towards achieving gender equality, we haveofficially adopted a business casual dress code since April 2021.
Specifically, we have worked to foster a flat organizational culture that
rejects the stereotype that men should wear suits and women uniforms
and encourages employees to think more flexibly at work.

STA K EHO LDERS’

VO I CE

Kazuma Tsuji, Assets & Liabilities Managing Dept.
As a mature student, I studied AI and Big Data at the graduate school of Shiga University, and realized how huge thepotential of data is and started to wonder what would be the unique value that only humans can deliver. Shiga Bank
has significant advantages as a regional bank in that the bank has diverse human resources and has gathered the largest volume of data in the region. As a bank having an accurate understanding of its advantages in human resources anddata, the Bank will seek to provide unique services that can inspire customers by leveraging the optimum combinationof human resources and data.

STA K EHO LDERS’

VO I CE

Mariko Kokuryo, Ishibe Branch
The Diversity Promotion Team conducts activities to reflect the real opinions of employees in human resources
development and awareness-raising initiatives. In recent years, employees who are not satisfied with their jobs havetended to leave the Bank. Believing that passiveness is one of the main reasons for this high turnover, we discussed theintroduction of one-on-one meetings, for example. We believe that we can raise their motivation by encouraging themto express opinions on their own.
We will continue to discuss the issues and work to realize a fulfilling work environment.

62

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATIONPOWERSSUPPORTING VALUE CREATIONPOWERS SUPPORTING VALUE CREATION
64

Corporate Governance68

Directors and Executive Officers

70

Message from Outside Director

72

TSUBASA Alliance73

Stakeholder Communication

74

Risk Management

78

Enhancing Legal Compliance

SHIGA BANK REPORT 2021

63

POWERS SUPPORTING VALUE CREATION

Corporate Governance

Basic views on corporate governance
As a regional bank headquartered in Shiga Prefecture, the Bank has amotto which carries on “Sampo yoshi” philosophy, a management
philosophy embraced by Merchants in the Omi region of central
Japan, which means to bring happiness to three sides: being good forthe seller, the buyer, and society. The Bank made the motto “Be toughon ourselves, kind to others and serve society” the starting point forcorporate social responsibility (CSR), making effort to realize mutual
prosperity with the regional communities, all employees, and theenvironment as in the Bank’s Management Principles. For the purposesof ensuring sustainable growth and improvement in corporate value
for the Bank over the mid- and long-term, we will expand andconstantly upgrade our corporate governance standards based on thefollowing basic views.
● Respect shareholder rights and safeguard shareholder equality● Cooperate appropriately with stakeholders● Duly disclose information, including non-financial data, and ensuretransparency and fairness of decision-making● Create an environment for allowing appropriate levels of risk-taking
by management team members● Contribute to sustainable growth and the mid- and long-term
improvement in corporate value, by prioritizing dialogue withshareholders

Overview of corporate governance system
The Bank has adopted the Audit & Supervisory Board system, underwhich the Board of Directors including Outside Directors supervise
management and the Audit & Supervisory Board including Outside
Audit & Supervisory Board Members checks the Board of Directors.

In terms of business operations, centered on the Executive Committee that is a decision-making body for business execution, the Compliance Committee and the ALM Committee have been established andthe Audit & Supervisory Board Members monitor their operational
status.

● Shiga Bank’s corporate governance system (as of June 30, 2021) is shown in the chart below.

General Meeting of Stockholders
Appointment/dismissal

Appointment/dismissal

Board of Directors

Audit &
Inspection

Appointment/
dismissal

Audit & Supervisory Board
Coordination

Executive Committee

Sustainability Committee

Office of Audit &Supervisory
Board Members
Audit & Inspection

Compliance Committee
ALM Committee

Headquarters

64

Coordination

Accounting Auditor

Internal Audit Briefing Sessions

Branches

Internal Audit& Inspection

Coordination

Audit & Inspection Dept.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Organizational structure
1. Board of Directors

status, problem points and issues of departments and branches

The Board of Directors, with nine members, including three fromsubject to auditing. This ensures that risk is minimized, administrative

outside the Bank, meets once a month in principle. At the meetings,

duties are carried out reliably and business management isdecisions are made on important business matters to conduct

appropriate. In addition to continuous internal quality evaluations,business. Audit & Supervisory Board Members attend all such

the Audit & Inspection Department also receives external quality

meetings to monitor the performance of Directors.

evaluations from third-party organizations to maintain and enhance
the quality of internal audits.

2. Audit & Supervisory Board
The Audit & Supervisory Board, composed of four Audit & Supervisory

5. Sustainability Committee

Board Members including two from outside of the Bank, holds a

Chaired by the President, the Sustainability Committee discusses ESG

meeting monthly in principle to resolve, discuss and report the(environment, social, governance) priorities and addresses social

important audit matters such as audit policies, audit plans, audit

challenges for Shiga Bank Group from the medium to long term

methods and division of audit duties.

perspective to design the program to enhance sustainability of ourcommunities, customers and the Group.

3. Executive Committee
The Executive Committee consists of the Chairman, President,

6. Compliance Committee

Deputy President, Senior Managing Directors, and Managing

The Compliance Committee chaired by a Senior Managing Director

Directors. It meets as necessary to make swift decisions about overall

and including the Audit & Supervisory Board Members as counselors

operations, including investment plans, new product development,

considers various issues concerning compliance to social norms, lawsbusiness structural changes, and monitoring the risk environment.

and regulations, and the Bank’s internal rules comprehensively for

Important items related to the execution of business are submitted

the purpose of contributing to execution of sincere and fairto the Board of Directors.

corporate activities.

*The positions of Chairman and Deputy President are currently vacant.

7. ALM Committee
4. Internal Audit System

The ALM Committee chaired by the President conducts reporting,Seeking to conduct its business in a sound and appropriate manner,

analysis and discussion on risks and promotes response to

the Bank established the Audit & Inspection Department tocomprehensive asset liability management (ALM) for the purpose ofundertake internal audits. The Department performs audits of thecontributing to an increase in stable earnings through theBank’s branches to ensure that their internal control systems are

improvement of risk management.

functioning properly, in accordance with annual internal audit plansapproved each year by the Board of Directors.
The internal Audit briefings are held as a rule once a month withthe attendance of the management team including the President of

8. Accounting Auditor
Deloitte Touche Tohmatsu LLC, with which the Bank concluded an
audit agreement conducts audit as an accounting auditor.

the Bank, and hold discussions on reported audit findings and on the

SHIGA BANK REPORT 2021

65

Corporate Governance

Policies on executive compensation, etc.
The compensation of the Bank’s officers is determined in accordance with the following policies and procedures.

Basic policy
The basic policy on executive compensation of the Bank is to function as an incentive to improve the corporate value consistently. When determining
each executive compensation, it shall be appropriate level based on the individual responsibilities.
More specifically, Director compensation (excluding Outside Directors) comprises of Fixed-amount compensation, basic remuneration; Performance-linked compensation, which is linked to company’s financial results; Stock acquisition rights as share-based compensation stock options,non-monetary compensation.
Compensation for Outside Directors and Audit & Supervisory Board Members responsibilities of which are to supervise the management is composed of Fixed-amount compensation only. Fixed-amount compensation for Audit & Supervisory Board Members are determined based on the
deliberation among the Members in reference to the actual payment.
The above basic policy has been prepared, referring to Outside Directors and Outside Audit & Supervisory Board Members, and then resolved at theBoard of Directors meeting.
Please refer to the securities report for the details including the policy
for determining executive compensation.

1. Compensation for Directors(1) Directors (excluding Outside Directors)
The compensation for Directors consists of the following threecomponents:
1. Fixed-amount compensation
Paid according to the role and responsibility based on the position.
Compensation limit: Up to 225 million yen per year
2. Performance-linked compensation
Paid based on net income attributable to owners of parent in order
to increase the incentive to improve performance.
Compensation limit: Up to 0.45% of net income attributable toowners of parent for the relevant fiscal year, with an annual limit of
75 million yen
3. Stock options as share-based compensation
Paid to increase the incentive to enhance the mid- to long-term
corporate value and share price growth.
Compensation limit: Up to 100 million yen per year66(2) Outside Directors
Fixed-amount compensation is paid in light of the management
supervisory function.
Compensation limit: Up to 35 million yen per year

2. Compensation for Audit & Supervisory Board Members
Fixed-amount compensation is paid to ensure neutrality andindependence.
Compensation limit: Up to 84 million yen per year

3. Procedure for determining compensation(1) Directors
Determined by resolution of the Board of Directors, within the limitsof the amount of compensation set by the General Meeting ofStockholders.
(2) Audit & Supervisory Board Members
Determined by discussions by Audit & Supervisory Board Members,
within the limits of the amount of compensation set by the General
Meeting of Stockholders.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Changes in Number of Officers and Ratio of Outside Officers
Audit & Supervisory Board Member

Directors
2015

Outside

12.5％

2021

50.0％

OutsideTotal
number33.3％

16 persons

OutsideTotal
number9 persons2015

Outside

2021

50.0％

Total
number4 personsTotalnumber4 persons

Increased ratio of Outside Directors

Independent Outside Officers
Name

Position

社外 12.5％
OutsideDirector

Minako Takeuchi

OutsideDirector

Rikiya Hattori

社外

33.0％

取締役
Reason for appointment
She 年
has a wealth of experience and a wide range of insight into
2015

overall management as a Representative Director at TM Future
Corporation and an Outside Director at Nihon M&A Center Inc.
The Bank expects that she will utilize her experience and insight総数
to supervise the management of the Bank from the independent
viewpoint,
while contributing to the sustainable growth of the
名16Bank and higher corporate value.

He has a wealth of experience and a wide range of insight into
finance and corporate management as a Deputy President and a
Deputy Chairman at Sumitomo Mitsui Trust Bank, Limited. The
Bank expects that he will utilize his experience and insight to2021
年 the management of the Bank from the independent
supervise社外取締役のviewpoint, while contributing
to the sustainable growth of the
Bank and higher corporate
value.
比率アップ

Sawaichiro Kamata

OutsideDirector

He has a wealth of experience and a wide range of insight into総数
finance accumulated at the Bank of Japan and the Japan
9名
Securities Dealers Association. The Bank expects that he will utilize
his experience and insight to supervise the management of the
Bank from the independent viewpoint, while contributing to thesustainable growth of the Bank and higher corporate value.

Yasuhito Matsui

Outside Audit& Supervisory
Board Member

professional expertise and a wealth of experience as a lawyer
監査役

Kazukiyo Onishi

社外

Outside Audit％
50.0& Supervisory
Board Member

The rate of attendance at meetings ofBoard of Directors in fiscal 2020

The Bank expects that he will reflect in auditing the Bank his
involved in corporate legal affairs.

2015 年

The Bank expects that he will reflect in auditing the Bank a wealthof experience at the Ministry of Finance and other corporations, aswell as high insight gained through public finance and総数
administration.

● 12 out of 12 regular meetings of theBoard of Directors (attendance ratio:100%)● 10 out of 10 regular meetings of theBoard of Directors (attendance ratio:
100%)● Newly elected in June 2021● 12 out of 12 regular meetings of theBoard of Directors (attendance ratio:100%)● 10 out of 10 regular meetings of theBoard of Directors (attendance ratio:
100%)

4名

2021 年SHIGA BANK REPORT 2021

67

POWERS SUPPORTING VALUE CREATION

Directors and Executive Officers(as of June 25, 2021)

Directors
President & CEO Shojiro Takahashi
April 1979 Joined the Bank
June 2006 General Manager of Business Promotion Dept.
June 2008 Director and General Manager of Business Promotion Dept.
June 2009 Director and General Manager of Kyoto Branch
June 2011 Managing Director
June 2014 Senior Managing Director
June 2015 Deputy President
April 2016 President (current position)

Senior Managing Director Motohiro Nishi

Senior Managing Director & CIO

April 1982 Joined the Bank
June 2011 General Manager of Business Promotion Dept.
June 2013 Director and General Manager of Osaka Branch
April 2016 Director and General Manager of Kyoto Branch
June 2016	Managing Director and General Manager of
Kyoto Branch
June 2019 Managing Director
June 2020 Senior Managing Director (current position)

April 1986 Joined the Bank
June 2015 General Manager of General Planning Dept.
June 2017 Director and General Manager of General Planning Dept.
June 2018 Managing Director
June 2020 Senior Managing Director (current position)

Managing Director & CFO Takahiro Saito

Managing Director and General Manager ofFinancial Markets & International Dept.

April 1983
Joined the Bank
February 2014 General Manager of Credit Supervision Dept.
June 2014	Director and General Manager of Credit
Supervision Dept.
Managing Director (current position)
June 2017

Katsuyoshi Horiuchi

Director and General Manager of Audit & Inspection Dept.

Outside Director Minako Takeuchi

April 1987 Joined the Bank
June 2016 General Manager of Audit & Inspection Dept.
June 2018	Executive Officer and General Manager of Audit &Inspection Dept.
June 2020	Director and General Manager of Audit & Inspection
Dept. (current position)

April 1983
Joined NEC Corporation
December 2002 Retired from NEC Corporation
January 2003 Joined STANTON CHASE INTERNATIONAL
June 2013
Retired from STANTON CHASE INTERNATIONAL
August 2013	Representative Director, TM Future Corporation(current position)
Outside Director, the Bank (current position)
June 2019
June 2020	Outside Director, Nihon M&A Center Inc.
(current position)

Outside Director Rikiya Hattori

Outside Director Sawaichiro Kamata

April 1978	Joined Sumitomo Trust & Banking Co. Ltd.
(currently Sumitomo Mitsui Trust Bank, Limited)
April 2012	Director, Senior Managing Executive Officer,
Sumitomo Mitsui Trust Bank, Limited
April 2013	Deputy President Executive Officer, Sumitomo
Mitsui Trust Holdings, Inc.
Deputy President, Sumitomo Mitsui Trust Bank,
LimitedDeputy President, Sumitomo Mitsui Trust Holdings, Inc.
June 2015
April 2017	Director, Sumitomo Mitsui Trust Holdings, Inc.
Deputy Chairman, Sumitomo Mitsui Trust Bank,
LimitedJune 2017Retired as Director, Sumitomo Mitsui Trust Holdings, Inc.
April 2018
Executive Advisor, Sumitomo Mitsui Trust Bank, Limited
Chairman, Sumitomo Mitsui Trust Panasonic
Finance Co., Ltd.
June 2018	Corporate Auditor, SUMITOMO DENSETSU CO., LTD. (current position)
March 2020	Retired as Executive Advisor, Sumitomo Mitsui Trust Bank, Limited
June 2020
Outside Director, the Bank (current position)
February 2021	Retired as Chairman, Sumitomo Mitsui Trust Panasonic Finance Co., Ltd.

April 1984 Joined Bank of Japan
July 2012 General Manager of Kyoto Branch, Bank of Japan
June 2015 Retired from Bank of Japan
July 2015	Senior Advisor of Policy Making Headquarters, Japan
Securities Dealers Association
July 2017	Joint General Manager of Administration Headquarters(Chief Information Officer and Chief Risk Officer),
Japan Securities Dealers Association
June 2021 Retired from Japan Securities Dealers Association
June 2021 Outside Director, the Bank (current position)

Katsuyuki Nishikawa

68

Shinya Kubota

April 1987 Joined the Bank
June 2014 General Manager of Assets & Liabilities Managing Dept.
June 2017	Executive Officer, General Manager of Business
Promotion Dept.
June 2019 Director and General Manager of Kyoto Branch
June 2021	Managing Director and General Manager of Financial
Markets & International Dept. (current position)

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Audit & Supervisory Board Member
Audit & Supervisory Board Member

Audit & Supervisory Board Member

April 1980 Joined the Bank
June 2010 General Manager of Assets & Liabilities Managing Dept.
June 2011	Director and General Manager of Assets & Liabilities
Managing Dept.
June 2014 Managing Director
June 2018 Audit & Supervisory Board Member (current position)

April 1983 Joined the Bank
June 2013 General Manager of Business Promotion Dept.
June 2014 Director and General Manager of Business Promotion Dept.
June 2015 Managing Director
June 2020 Audit & Supervisory Board Member (current position)

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

April 2000
April 2000
January 2005
April 2005
May 2005
May 2009
May 2012
June 2017

April 1980
Joined the Ministry of FinanceJuly 2014	Director-General of Yokohama Customs, Ministry of
Finance
July 2015
Retired from the Ministry of FinanceOctober2015 Advisor, Aioi Nissay Dowa Insurance Co., Ltd.
Retired as Advisor, Aioi Nissay Dowa Insurance Co., Ltd.
June 2016
June 2016	Audit & Supervisory Board Member, TAKASAGOINTERNATIONAL CORPORATION
June 2020	Retired as Audit & Supervisory Board Member,
TAKASAGO INTERNATIONAL CORPORATION
June 2020	Outside Audit & Supervisory Board Member, theBank (current position)

Kazuyoshi Hayashi

Yasunaga Ono

Yasuhito Matsui

Kazukiyo Onishi

Registered as a Lawyer
Joined Karasuma Law Office
Registered as a lawyer in New York State
Resigned from Karasuma Law Office
Joined Miyake & Partners
Appointed Partner, Miyake & Partners
Registered as a Patent AttorneyOutside Audit & Supervisory Board Member, the Bank
(current position)
January 2019 Retired from Miyake & Partners
February 2019	Partner, NISHIKIBASHI PARTNERS LPC(current position)

Executive Officers
Nobuyuki Tanaka

Hidekazu Toda

Akihisa Hida

Managing Executive
Officer and General
Manager of Credit
Supervision Dept.

Managing Executive
Officer and General
Manager of
Administration
Dept.

Managing Executive Officer andGeneral Manager ofGeneral Planning
Dept.

Yoshinori Endo

Toshihiro Fukuda

Hiroyoshi Inoue

Managing Executive
Officer and General
Manager of Kyoto
BranchExecutive Officer
and General
Manager of
Personnel Affairs
Dept.

Executive Officer
and General
Manager of Head
Office Business
Dept.

Yasuhiko Nakamura

Kazuaki Kataoka

Isokazu Yamamoto

Executive Officer,
General Manager ofTokyo Branch andAdvisor to Financial
Markets &International Dept.

Executive Officer
and General
Manager of General
Affairs Dept.

Executive Officer,
General Manager of
Osaka Branch andGeneral Manager of
Umeda Branch

SHIGA BANK REPORT 2021

69

POWERS SUPPORTING VALUE CREATION

Message from Outside Directors

Outside Director

Minako Takeuchi

Evaluation of the effectiveness of the Bank’s
Board of Directors and my roles and challenges(Establishment of a governance system to enhance
corporate value)
The Bank’s Board of Director has taken various measures to deepen
discussions about important management topics and medium to longterm strategies. Last year, we introduced third-party evaluation toassess the effectiveness of the Board of Directors. Against thisbackdrop, I recognize that my role is to: (1) make suggestions toimprove the effectiveness of the Board of Directors throughmonitoring; (2) provide external expertise, information, and different
perspectives that enable benchmarking against peers from a broader
viewpoint; and (3) make members of the Board of Directors realize thepotential problems behind the apparent problems related to humanresources and organization or corporate culture issues inherent in theagenda items raised at the Board of Directors meetings.
Through this, I want to contribute to developing a flexible and solid
corporate culture in the true sense of the word that will create theBank’s future, and to the improvement of corporate value as acompany that continues to be an indispensable partner to ourcustomers where diverse human resources take active part inoperations.

70

Assessment of the Bank’s sustainability anddigitalization initiatives
Impact of climate change and other environmental issues
on management and our response
Fulfilling our purpose as a company and achieving sustainability bothinternally and externally through ESG management and ourcommitment to the SDGs is our key mission. Decarbonization is not
the only environmental issue. We, as a company rooted in Shiga, deem
it important to protect water resources and biodiversity; therefore, we
are working on this issue in a progressive and comprehensive manner. I
think that the essence of sustainability isn’t just about the environment(E); it is to do with the “Sampo yoshi” corporate approach as describedin our CSR Charter.
That is why this also involves governance (G) and social (S) aspects
such as the promotion of diversity and inclusion, including theempowerment of female workers. Led by the Sustainability Strategy
Office established last year, we are working to implement the
Sustainability Policy, which is the Bank’s DNA, with a sense of mission.
We hope to continue to be a company that has the support of various
stakeholders and improve our corporate value as a result of our sincere
management efforts in these endeavors.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
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VALUE CREATION

Promoting the digitalization of the regional communities

Such process brings about a corporate culture where employees are

I believe that digital transformation (DX) is not about digitizing
information and business processes, but rather about how wetransform our business model into what we seek to be by using thepotential of digital technology. We should accumulate our own
experience before accelerating the digitalization of the communities
and our customers. The spread of COVID-19 has drastically changed
our communication style and how we connect with each otherinternally and externally including our customers. Amid suchenvironment, we have put new creative ideas into practice by trial anderror. We will make maximum use of DX to reconstruct the businessmodel, the way of using information and how we work, irrespective of
the precedent. It is also important to constantly accumulate
experience through the challenge each of us faces, making it our own
knowledge, and then quickly structuring and abstracting it into
organizational knowledge. The Digital Strategy Group and the Digital
Promotion Office were established and put into operation as the pillarof the activities. In today’s uncertain world where there is no single
right answer, we believe that those who try before others, learn fromtheir successes and failures, and quickly turn them into value which we
can offer to our customers will be able to take the lead. We, thus, work
to make such behavior pervasive among the first-line employees.

incentivized to try and the management itself backs them up andpraises a good try. In addition, we urgently need to create anenvironment which truly welcomes the active participation of womenand people with diverse background.

Evaluation and advice on human resource
development to ensure diversity

What Shiga Bank should do for a sustainablecommunity growth
We can play various roles for the local customers to protect ourcommunity environment and vitalize the local economy. Not only theprovision of the products and services such as Sustainability Linked
Loan (SLL), we need to listen to the opinions from the local
stakeholders to provide advisory services catering to our customers inlight of the desirable sustainable future. For example, we can arrange apartnership between our customers and counterparts with whom they
can co-create value or structure the co-working scheme for them. We
also hope to think together with our customers about what is the mostappropriate DX for them, and offer quality advice for DX andmanagement from the viewpoint of the customer’s business tofacilitate co-creating and co-working.
To do so, promoting a corporate culture that encourages each
employee to learn from external sources, “Mindset-Work reforms,” and“go for it” mindset to support them is all the more important.

(Increase and use of human capital)
The human resource strategy should be changed and evolved
constantly. Recently, people appear to be more motivated to work at acompany which contributes to society, and they think more highly ofwhether they can empathize with the purpose of the company, inshort, they can have intrinsic motivation. People have various
motivations, and their skills and careers are diverse as well. Creating aplace where diverse people can exhibit each ability is crucial. The idea
forms the base of purpose-driven management and wellbeing driven
management. I believe that 60-70% of the role of middle management
is to motivate young employees to work enthusiastically witheagerness to grow while developing such young people and creating
the place to allow it.
To do so, communication with juniors is key; therefore, we
implemented a “system for discussion” across the board. Moreover, agoal-setting ability is required for middle management so that they,
together with their subordinates, can establish a goal worthy ofchallenge. The process of moving toward a goal will lead to the growthof people, which in turn will result in the performance and growth ofthe organization collectively. Then, transparent and compelling
evaluations and feedback are required to help the growth of
employees. Middle management and human resource department are
required to improve such PDCA cycle where the growth of employees
leads to a better company.

SHIGA BANK REPORT 2021

71

POWERS SUPPORTING VALUE CREATIONTSUBASA AllianceBusiness development that leverages economies of scale through widespread and large-scale collaborations
The Shiga Bank joined the “TSUBASA Alliance” in May 2019. The purposes are: sustainable growth of the region and improvement of the financial
system; alliance contributing to enhancement of corporate value of the participant bank groups; growth of the top line; and planning and promotionof cost-cutting measures. In December 2020, with the addition of Gunma Bank, the Alliance covers all areas Japan from Hokkaido, the northernmost
prefecture to Okinawa, the southernmost one. Leveraging the insights from the participants and economies of scale, we continue to offer cuttingedge financial services including future-oriented digitalization.

Expanding the network nationwide
October 2015
March 2016

The Chiba Bank, Ltd., the Daishi Bank, Ltd (currently the Daishi
Hokuetsu Bank., Ltd), and the Chugoku Bank, Ltd. formed thealliance.
The Iyo Bank, Ltd., the Toho Bank, Ltd. and North PacificBank,Ltd. joined the alliance.

April 2018

The Hokuetsu Bank, Ltd. joined the alliance.

March 2019

The Musashino Bank, Ltd. joined the alliance.

May 2019

The Shiga Bank, Ltd. Joined the alliance.

April 2020

Bank of The Ryukyus, Ltd. joined the alliance.

December 2020 The Gunma Bank, Ltd. joined the alliance.

Cost reductions/streamlining
Growth of the top line

Consolidating common
functions and indirect
departments

Strengthening sales
capabilities by sharing
know-howHead office location
Branch location

Further productivity
improvements andsophistication ofbusiness

Establishment of the joint venture, “TSUBASA Alliance Corporation”
In July 2020, the TSUBASA Alliance Corporation was establishedthrough joint investment by the participating banks, with the aim ofserving as a platform for the consolidation of common operations andfunctions among each bank. In October 2020, the ALM center, which
engages in the business related to anti-money laundering andprevention of the provision of funds for terrorism was opened within
the company. Concentrating the insights and expertise from eachbank, the ALM center is reinforcing the system in line with requests
from the international society while consolidating redundant
operations.

72

Corporate Profile
Head office location

1-5-5 Nihonbashi Muromachi, Chuo-ku,
Tokyo
店舗所在地
Muromachi Chibagin Mitsui Building

Common stock

10 million yen

Stockholders

10% each(The Chiba Bank, Ltd., The Daishi Hokuetsu Bank, Ltd., The
Chugoku Bank, Ltd., The Iyo Bank, Ltd., The Toho Bank, Ltd.,North Pacific Bank,Ltd., The Musashino Bank, Ltd., The Shiga
Bank, Ltd., Bank of The Ryukyus, Ltd., The Gunma Bank, Ltd.)

Officers

10 Directors(president of each bank takes a seat on the Board)

Date ofestablishment

July 2020

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SPECIAL FEATUREABOUT SHIGA BANKPOWERS SUPPORTING VALUE CREATIONCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Stakeholder Communication
The Shiga Bank strives to build trust and offer better value by recognizing the social issues through continuous communication with many
stakeholders, including our customers, communities, shareholders, and the officers and employees. We aim for sustainable development of the local
community and enhancement of corporate value by valuing transparent and speedy disclosure of information, as well as utilizing opinions andrequests from stakeholders for better management.

Communication with customers

Communication with employees

We improve the quality of products and services by evaluating theopinions and requests from our customers via communication card orother types of questionnaire. Meanwhile, the deep dialogue throughour consulting service helps to solve the customer’s issues. We holdlocal gatherings semi-annually to facilitate interactive dialogue.

We respect human rights, support diverse work styles and put in placea support system toward self-realization so that each and every officer
and employee can display their maximum capabilities feeling high job
satisfaction.

Communication channel
Via communication cards, questionnaires, Customer Consultation
Office, and local gatherings

Communication with communities
We contribute to a more vibrant region by solving social issues
through engagement with local communities, responding to potential
needs and promoting regional branding toward the achievement of asustainable society.
Communication channel
Dialogue toward a Regional Circular and Ecological Sphere, Shigagin
Welfare Fund, Kakehashi, a general information magazine for theregion, culture business and sports promotion

Communication channel
System for discussion; Diversity Promotion Committee; Human
resources recruitment system; Internal reporting system

Communication with shareholders andinvestors
We work to conduct constructive dialogues with shareholders andinvestors and disclose corporation and management informationtransparently for sustainable growth and corporate value enhancement.
Communication channel
Announcement of financial results; General Meeting of Stockholders;
Financial results briefings for the investors; Integrated Report/Annual
Report; Report on the business, etc.

Communication with administrative andeducational bodies, NPO/NGO, etc.

Communication with industrial
associations and peer companies

We realize high-quality solutions by linking new research ideas withlocal needs through our partnerships with administrative agencies andexperts. In addition, we actively carry out cooperation with educational

We aim to grow together while improving convenience andaddressing issues peculiar to the industry by utilizing respective
strengths and through partnerships.

institutions for improving literacy of finance and SDGs.

Communication channel
Alliances with other domestic banks; Business tie-ups with overseas
financial institutions; ATM alliance; FinTech alliance, etc.

Communication channel
Relationship with regulatory authorities; Joint projects and dialogues
among industry, academia, government and finance; Education ofliteracy regarding SDGs and finance

SHIGA BANK REPORT 2021

73

POWERS SUPPORTING VALUE CREATION

Risk Management
Basic views
The risks faced by the Bank in the performance of its operations havebeen growing more complex and diversified.
We are building Internal Rating System and Comprehensive Risk
Management System in order to accurately assess and control risk
using rational criteria without undue reliance on personal intuition or
experience. We have also introduced a “risk appetite framework” thatwill incorporate business strategy in an integrated risk management
model in order to ensure continuous profitability based on reasonablerisk-taking.

■ Process of developing financial targets

Analysis of current status

Risk profile

Profitability/efficiency, etc.

Risk-taking policy
Clarifying risks that can be proactively taken, and risks that need to be minimized

Risk Appetite Framework
The risk appetite framework refers to frameworks for business and risk
management that enable clarification of risk by type and level that the
Bank is prepared to take on, as well as sharing and monitoring of it forthe purposes of accomplishing business strategy and financial targets.
Regarding the formulation of financial targets, the Bank identifies a
risk-taking policy based on current-status analysis and risk profiling,
and confirms the consistency of strategy in the sales and market
departments. Then we carry out various simulations to test thestrategy, and sets target earnings and risk benchmarks. Afterconfirming through stress testing that the plan will remain reasonably
sound under a certain amount of stress, we allocate capital accordingly
and seek out the best balance among earnings, risk, and capital. Stresstesting is also used to originate countermeasures in the event ofstrategy failure.
We monitor financial targets that have been prepared, and every six
months consider revisions to the risk-taking policy and financial
targets. This enables us to clarify the relationship between analysis ofcurrent status and risk profile; risk-taking policy; strategy; and financial
targets. We ensure the effective functioning of the PDCA cycle forachievement of appropriate risk management and strategy attainmentthat can quickly respond to changes in the financial environment.

Glossary

Capital allocation

74

The Bank uses VaR, etc. to quantify the various risks it faces. Amounts ofcapital corresponding to risk amounts (economic capital) are allocatedfor individual categories of risk and for individual departments andother units, within the scope of own capital. At Shiga Bank, businessdepartment and market department are subject to capital allocation
measures.

Stresstesting

Strategy
Confirmation of
consistency withrisk-taking policy

Tolerable level of risk

Capitalallocation(Basel regulations, etc.)
Confirming level of risk
indicators throughstress-testing
Discussion of methodsof controlling risk

Risk controls(Business department)(Market department)(Business department)(Market department)
Simulation
Earnings and riskbenchmarks

Financial targets
Monitoring/PDCA cycle

Review

Outline of Risk Management System
The Shiga Bank’s Board of Directors have established Risk Management
Rules, specified the types of risk that should be managed, and defined
the roles and responsibilities of the sections responsible for those risks.
At the same time, Risk Management Rules prescribe risk management
methods.
Furthermore, “Risk Management Policies” integrated with thefinancial plan are instituted semiannually at the Board of Directors’
meeting after clarifying “risk appetite” in light of the Bank’s strategic
goals and risk status.
These statuses of risk and return are properly managed by having it
reported to management through the ALM Committee, the Meeting ofManaging Directors, and the Board of Directors.

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SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Comprehensive Risk Management■ Capital allocation system

Comprehensive risk management means to appropriately manage
risks by looking at various types of risk as a whole, and comparing
them to capital adequacy which represents the strength of thefinancial institution.
Based on the above, the Bank’s Assets & Liabilities Managing
Department comprehensively identifies and manages all risks.
Additionally, the Bank conducts its business operations so as tocontrol risk within the scope of own capital with an integrative risk
management system (the capital allocation system and internal
capital adequacy assessment process) which measures andmanages various types of risk using such integrated yardsticks as the(maximum) Value at Risk (VaR) formula.

The Bank allocates its own capital to risk generated by holding financial
products such as loans, securities and deposits (credit risk, market risk,etc.) and risk generated from operational execution (operational risk,etc.) by business division and risk category.
Specifically, the Bank controls risk by keeping it within the specified
ratio to both regulatory capital (own capital needed to satisfy capital
adequacy regulations) and economic capital (risk amounts calculatedusing VaR, etc.). In addition, the Bank has created a system thatappropriately complements the capital allocation system by controlling
price change risk in investments in securities by keeping it within a
specified range.

■ Internal capital adequacy assessment process (stress test)

To ensure the present and future soundness of the Bank, we assess
its own capital adequacy under stress events such as deteriorationin gain or loss on valuation of securities due to an increase in credit
costs in a recession period and a rapid change in the financial market,
in light of changes in the external environment and the risk profile of

Glossary

VaR (Value at risk)
VaR uses a statistical technique to measure the losses that could
potentially be incurred in a fixed period of time (for example one year).
The Bank uses risk amounts measured with a confidence interval of
99% and a holding period of one year in its internal management.

the Bank.

Board of Directors■ Risk Management System

Meeting of Audit & Supervisory Board Members /Audit & Supervisory Board Members

Executive Committee

Office of Audit & Supervisory Board Members
Internal Audit Briefing Sessions

Assets &Liabilities
Managing Dept.
Risk
Management
Dept.

Assets & Liabilities Managing Dept.

Risk
categories

Credit Risk

Compliance
Committee

CreditDept.
responsible Supervision
Dept.
for risk

Liquidity
Risk

Financial Markets &International Dept.

Processing
Risk

Information
Technology
Risk

Legal Risk

Computer
Assets & Liabilities
Administration
System Dept. Managing Dept.
Dept.

Branches and Headquarters

Tangible
Asset Risk

Human Risk

GeneralAffairs Dept.

Personnel
Affairs Dept.

Reputational
Risk

GeneralPlanning
Dept.

Compliance

Operational Risk
MarketRisk

Information Security

Administration Dept.

Audit & Inspection Dept. (Internal Audit Dept.)

Information
Security
Committee

ALM Committee

SHIGA BANK REPORT 2021

75

Risk Management

Credit Risk Management System
Credit risk is the risk that the Bank will suffer losses due to theworsening financial conditions of clients, etc.
Recognizing credit risk as the most important risk to business
management from the standpoint of its degree of impact, the Bank
believes that establishing a management system for credit risk, which
accounts for the majority of risk, and rationally controlling the risk
are essential for mutual prosperity with regional communities. Basedon this view, the Bank introduced its own “corporate credit ratingssystem” and has endeavored to improve its credit risk management.

■ Outline of the Corporate Credit Rating System
The Bank implements financial analyses (quantitative evaluations)using statistical rating models based on the financial statements ofthe customers, and decides the corporate credit rating taking into
account qualitative evaluations using the unique screening know-how,and the condition of the company. Based on this Corporate Credit
Rating System, the Bank conducts “Shigagin Ratings Communication
Service” which discloses the ratings of customers and “Shigagin Ratings
Simulation Service” as rational communication tools that connect ourcustomers to the Bank. A shared recognition is reached regarding
issues and risks faced by a business customer, and the Bank provides
proposals to strengthen the management foundation of customers
for sustainable growth and support for compilation of plans for
management improvement.

■ Outline of Credit Risk Management
Changes in the financial status of the customers are reflected aschanges in the credit risk of the Bank through the credit rating system.
In recent years, linkage between the economy and the financial
capital market has deepened on a worldwide scale. Using compilationsof multiple economic scenarios on a global basis, the Bank predicts theextent of impact of such scenarios on the regional economy and on
our business customers. Specifically, we forecast rates of sales growthor decline for individual business customers under these different
economic scenarios, and possible changes in credit rating after a trial
calculation of financial impact. This enables us to manage credit risk
and capital ratio status for the whole Bank. Also, we control the credit
portfolio appropriately to avoid excess credit concentration on large
customers and specific sectors and are working to achieve a levelof pricing (setting of loan rates) duly corresponding to credit risk toensure an appropriate level of returns in relation to the risk.
For organizational aspects, the credit risk control unit independentof the business promotion and credit supervision units has designed
a self- assessment system of credit ratings and conducted various
verification to check the operations of the others and build a solid
operation system.

The Significance and Purpose of the Corporate Credit Rating System
Based on its conviction to adhere to our “responsible management” system, and with the aim of sophisticating credit risk management, theBank introduced its own corporate credit ratings system in December 1998 as a rational communication tool for the Bank and its customers to
use together to raise enterprise value.
Based on its belief that internal ratings system is ultimately a tool for pursuing mutual prosperity with the regional communities, the Bank
recognizes that the building of a solid internal ratings system is essential for consistent implementation of the responsible management
model.
From this viewpoint, the Bank, in adopting Basel II in March 2007, has selected the Foundation Internal Ratings Based-Approach (FIRB).
Under an environment where financial transactions are increasingly diversified and sophisticated, the Bank has proactively committed itself toa credit-based business and its own credit ratings system and wants to contribute on a broad basis to the further development of the regional
communities, through its main business.

Local community development
Activating local economies

Raising enterprisevalue

Improvingfinancial condition
Customers
Strengthening theoperating foundation

76

Perceiving issues andstudying solutions

Stable supply of capital
Coexistence and partners
in prosperity

RatingRatings disclosure as an effective
communications tool

Appropriate risk
evaluation

Raising ability totake risks
Shiga Bank

Upgrading ratingssystems

Raising enterprisevalueTOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Market Risk Management System

Operational Risk Management System

Market risk refers to the risk that the Bank will incur a loss because thevalue of the assets and liabilities it holds changes due to fluctuations ina variety of risk factors in the market, including interest rates, prices of
securities and currency exchange rates.
The Bank strives to secure stable revenues by controlling market
risks within a certain range.
Regarding market risk for overall banking operations, adjustments
are made to financial targets every six months concerning all assets
and liabilities including deposits, loans, and securities, and capital isallocated after consideration of the expected earnings and risk balance.
The amount of interest rate risk is controlled based on the “interest raterisk in the banking book” (IRRBB). Furthermore, in risk measurement the
Bank takes into account the type, size, and characteristics of thepositions held, and uses VaR and sensitivity (duration, BPV) and otherfactors for multiple management.
For the market risks arising from fluctuations in the prices of
securities and other financial instruments, the Bank sets risk tolerance
amounts and other limits so as to ensure that such risks do not have aneffect on the operation of the regulated capital base. For items forwhich limits are set using risk amount measurement methods such as
VaR, the Bank performs back- testing in order to verify that the risk
amounts are being ascertained appropriately, and reports the results ofthe verifications to the ALM Committee.
As a general rule, the organizational system related to market risk
management is divided into the market transaction sector (front office),business management sector (back office), and risk management sector(middle office), each of which checks the operations of the other.
Furthermore, the internal audit department performs audits of the stateof compliance with related laws, related regulations, the operationalplan, and other requirements and reports the audit results to theInternal Audit Briefing Sessions and the Board of Directors.

Operational risk refers to the risk that the Bank will incur a loss due to awork-related accident at the bank, a flaw in the systems of the Bank, orexternal factors such as earthquakes or other disasters.
The Bank has formulated the Operational Risk Management
Regulations, divided operational risk into five kinds of risk: (i) processing
risk, (ii) information technology risk, (iii) legal risk, (iv) tangible asset risk,and (v) human risk, and is carrying out integrated management ofthese risks in the Administration Dept.
In response to cyber-attacks, which are a growing concern in thedigital society, we have created a cross-departmental team in the Bank
(the Shigagin CSIRT※) and are also utilizing external expertise as we
focus on adopting a stronger stance, taking an approach based on
multilayered defense with countermeasures at entrance points, inside,
and exit points.
※CSIRT: Computer Security Incident Response Team

Reputational Risk Management System
Reputational risk is the risk of unexpected tangible or intangible losses
arising for damage to the Bank’s good name due to rumors or slanders
spreading in abnormal circumstances.
The Bank has formulated the “Reputational Risk Management Rules”
and is committed to prior prevention of abnormal situations that could
lead to reputational risk arising.

Liquidity Risk Management System
Liquidity risk is the risk of losses arising due to the necessity of trading
at significantly adverse prices compared with usual levels, due toupheaval in markets causing inability to secure sufficient funding andhindering fund-raising.
Liquidity risk is viewed as a fundamental risk faced by the Bank. We
take measures to ensure accurate understanding of fund-raising andstable fund procurement and investment, and have a basic policy inplace for rigorous risk management that fully emphasizes market
liquidity.
In managing the flows of funds, the fund-raising management
department monitors fund-raising factors including the financial
environment, balance of liquid assets, expected cash outflows, andevents that are expected to have an impact on fund-raising on a daily
basis, and acts as appropriate. In addition, the Assets & Liabilities
Managing Department keeps track of day-to-day risk management by
the fund-raising management department, and ensures appropriate
management of liquidity risk through regular reporting to the ALM
Committee regarding the status of fund-raising. For the liquidity
coverage ratio regulation which is the standard for judging soundnessof the liquidity, the Bank takes appropriate action.
SHIGA BANK REPORT 2021

77

POWERS SUPPORTING VALUE CREATION

Enhancing Legal Compliance
Led by the Legal Affairs Office of the Assets and Liabilities Managing Department, the Bank is building systems for maintaining compliance with laws
and regulations and proper bank management, and is making efforts to foster employees with a heightened awareness of expectations placed by the
public in banks, and with a strong sense of ethics.

Legal compliance system

Managing Department, and reporting to the Legal Compliance
Committee and the Board of Directors.

● Legal compliance system

Discussion and reporting

Administration
Dept.

Customer
Consultation
OfficeWhistle-blowing system established
In order to promote compliance management, we have establishedinternal and external whistle-blowing hotlines (the Legal ComplianceHelp Line and the Harassment Hotline) for employees to contact when
they have discovered a violation of laws, regulations, or rules in theworkplace and cannot discuss their concerns with their superiors orcolleagues.

Board of Directors

Audit & Supervisory Board
Members/ Meeting of Audit &Supervisory Board Members

Executive Committee

Office of Audit & Supervisory
Board Members

Assets & Liabilities
Managing Dept.

Legal Compliance Committee(Bureau: Assets & Liabilities
Managing Dept.)

Legal Affairs Office of
the Assets & Liabilities
Managing Dept.

Compliance Program

Internal Audit Briefing
Sessions

Legal Compliance Help Line

The Bank has stipulated the Code of Conduct based on the CSR
Charter, our management principles. In order to comply with them andto thoroughly comply with laws and regulations, the Board of Directors
formulates a Compliance Program every fiscal year, after deliberationby the Legal Compliance Committee. In addition, we strive to raise theawareness of employees by conducting training at all departments,
branches and affiliates, as well as implementing monitoring to prevent
recurrence of misconduct. Moreover, the PDCA cycle is continuously
implemented through monitoring of the implementation status of
the above program by the Legal Affairs Office of the Assets & Liabilities

Legal checks for new
products and services

Business Promotion Dept.

Compliance Officers(Branches and Departmentsof Head Office)

Audit & Inspection Dept.

Personnel Affairs Dept.

Harassment Hotline

Audit and
instruction

Measures against money laundering
In recent years, measures against money laundering and terrorism
funding (hereinafter referred to as the “unlawful financing”) arebecoming increasingly important. The Bank is taking measures toeffectively prevent more complex and sophisticated form of unlawful
financing by cooperating with related authorities.
In February 2018, the Financial Services Agency developed andannounced the “Guidelines for Anti-Money Laundering and Combating
the Financing of Terrorism” that clarify basic approaches of effective
measures against the unlawful financing taken by financial institutions.
Under the guidelines, banks and other financial institutions are
required to additionally confirm more items than required by the Act
on Prevention of Transfer of Criminal Proceeds, depending on details
and conditions of customer transactions, in addition to items requiredby the said Act and other laws.

■ Major initiatives of the Bank・Launched the “project team for measures against money launderingand the financing of terrorism” for promoting cross-departmental
efforts in July 201878

・Put in place the Money Laundering Countermeasures Office as anexpert supervising organization in the Assets & Liabilities Managing
選任・解任
Department to strengthen a structure for preventing the unlawful
financing in January 2019.
・Revised the “risk evaluation report concerning money laundering”(hereinafter referred to as the “risk evaluation report”) in March 2020・Introduced an illegal transaction detection system related tounlawful financing in April 2020・Introduced a system to evaluate and judge the degree of risks ofunlawful financing based on the Bank’s standards, a system to extract
information that meets specific conditions, and a system to record
the status of measures and information collected during transactionsin October 2020・Commenced regular updating of customer information using theCustomer Information Confirmation Form in January 2021
We are proceeding with measures in sequence to reduce the Bank’srisks from the unlawful financing based on the risk evaluation report, in
addition to improvement of various training systems andencouragement of acquisition of related qualification.

TOP MESSAGE

SPECIAL FEATUREABOUT SHIGA BANKCHALLENGES FORVALUE CREATIONCHALLENGES FOR
FUTURE INNOVATIONPOWER THAT SUPPORTS
VALUE CREATION

Special fraud prevention system

Personal information protection and management

The Bank is taking various measures to protect important deposits ofcustomers from “special fraud” that has become a social problem andoffer safe services.

While advanced information and communication technology
represented by the Internet, social media, cloud services and FinTech
has brought more convenient services, it has also been pointing to
growing importance of appropriate protection and management of
personal information.
We established the “Personal Information Protection Policy” and the“Basic Policy on Handling of Specific Personal Information, etc.” as basic
policies for appropriate and strict handling of personal information.
(These policies are available in Japanese on the Bank’s website.)
Based on these policies, we only use the personal information within
the scope informed through our website and leaflet in advance. In
addition, to prevent leakage of information, we put various safety
management measures in place for administrative procedures andsystem technologies, and regularly review these measures for
improvement.

■ Major examples of initiatives

・The Bank’s employees speaking to customers at bank counters and
ATM areas and observing their facial expressions and behavior
carefully.
・Posting notice on the webpage
・Conducting internal training programs
・Conducting lectures at each branch・Internally commending recipients of a certification of appreciation
for special fraud prevention and sharing good examples of
preventive measures among all branches on a timely manner・Strengthening cooperation with the police and relatedorganizations (study meetings, distribution of fraud alert flyers, use of
automated calls, etc.)
・Adopting the “cashier’s check” plan
・Limiting part of the ATM transfer function
Thanks to these measures, we received seven certifications ofappreciation for special fraud prevention from police stations in Shiga
Prefecture during one year from January to December 2020.

System for listening to the voice of customers
The Bank as a whole is striving to offer and improve customer-oriented
products and services by listening to the various “voice” of customers.

Measures to eliminate anti-social forces
The Bank takes active measures to eliminate anti-social forces,
introducing an “anti-social forces elimination clause” to the Ordinary
Deposit Regulations and other rules together with establishing the“Shiga Bank Anti-social Forces Elimination Regulations.”

System for managing conflict of interest“Managing conflict of interest” refers to appropriately managing
transactions that may cause a conflict of interest in order not to harminterests of customers unfairly as increasingly sophisticated financialtransactions more likely lead to a conflict of interest between
customers and financial institutions.
The Bank executes its business not to harm interests of customers
unfairly, concerning transactions that may cause a conflict of interest“between a customer and the Bank or its affiliate” and “between
customers of the Bank and its affiliates,” in accordance with laws andregulations.

SHIGA BANK REPORT 2021

79

FINANCIAL SECTION

Organization Chart
As of July 1, 2021
Headquarters

General Planning Dept.
Assets & Liabilities
Managing Dept.
Audit & Inspection Dept.

Secretariat

Executive Committee

General Meeting ofStockholders

Board ofDirectors

Representative
Director and President

Senior Managing
Directors

Managing
Directors

General Affairs Dept.
Directors

Head OfficeBusiness Department

Domestic Branches
Sub-Branches

Personnel Affairs Dept.
Business Promotion Dept.
Credit Supervision Dept.
Audit & Supervisory
Board Members

Office of Audit &Supervisory Board Members

Audit & Supervisory Board

Financial Markets &International Dept.

The Shigagin Business
Service Co., Ltd.
The Shigagin Economic &Cultural Center Co., Ltd.
The Shiga DC Card
Co., Ltd.
The Shigagin Lease &Capital Co., Ltd.

Hong Kong Branch

The Shigagin Agency
Co., Ltd.
The Shigagin JCB
Co., Ltd.
The Shiga Home Loan
Guarantee Service Co., Ltd.

Administration Dept.
Computer System Dept.

Consolidated Subsidiary
Company Name
The Shigagin Business Service Co., Ltd.
The Shigagin Economic & Cultural Center Co., Ltd.
The Shiga DC Card Co., Ltd.
The Shigagin Lease & Capital Co., Ltd.

Profile(As of March 31, 2021)
Corporate Name :THE SHIGA BANK, LTD.
Head Office :1-38, Hamamachi, Otsu, Shiga 520-8686, Japan
Established :October 1, 1933
Total Assets :¥7,769.4 billion
Deposits (including negotiable certificates of deposits) : ¥5,467.4 billion
Loans :
¥4,020.2 billion
Common Stock :¥33.0 billion
Employees :1,983
Offices and Branches : 133 (including 25 agents)

80

The Shigagin Agency Co., Ltd.
The Shigagin JCB Co., Ltd.
The Shiga Home Loan Guarantee Service Co., Ltd.

Financial Section

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Five-year Summary
Millions of yen

2021

2020

2019

2018

2017

Total assets¥7,793,748¥6,285,002¥6,115,271¥5,875,040¥5,539,561

Investment securities

1,586,506

1,307,107

1,352,017

1,346,672

1,467,592

Loans and bills discounted

4,001,698

3,859,363

3,779,056

3,618,866

3,461,905

Deposits

5,398,851

4,886,433

4,849,187

4,685,466

4,516,648

Total equity

495,469

375,801

402,227

407,905374,246

Total income

88,496

93,873

98,586

90,537

90,162

Total expenses

75,44476,084

77,58770,644

69,412

Income before income taxes

13,051

17,78820,99819,892

20,749Net income attributable to owners of the parent

11,44812,412

14,681

13,884

14,895¥40.00¥40.00¥42.50¥40.00¥8.00Net income

228.12243.05282.24266.6857.21

Net equity

9,958.46

7,482.34

7,863.37

7,832.18

1,425.41

Capital ratio

17.19%

14.12%

15.68%

16.98%

16.67%

ROE

2.62%

3.19%

3.62%

3.56%

4.18%

As of March 31

Years ended March 31

Per share data (in yen)
Cash dividends

Ratio

Financial review (Consolidated basis)

Balance sheets

The Japanese economy in the fiscal year ended March 31, 2021
struggled with adversity caused by the COVID-19 pandemic both
inside and outside the country. However, the economy was basicallyon a recovery track thanks to the government’s active economic
measures and ongoing monetary easing, and in February 2021, theNikkei Stock Average surged to a historical high in thirty and a halfyears. Economic trends showed extreme opposite outcomes
depending on the business sector. Economic sentiment in the
manufacturing sector, which is highly dependent on external demand,
significantly improved as overseas economies such as in the US andChina recovered in the summer and thereafter. Meanwhile, thenon-manufacturing sector saw a pronounced slowdown in recovery,
weighed down by self-restraint on outings and shortened store
business hours under the state of emergency re-declared in
metropolitan areas across Japan.
Production in Shiga Prefecture’s manufacturing industry is turning
to recovery. On the demand front, while personal spending remains
sluggish for some sectors and products, overall, it is performing steadily
with ongoing recovery. On the other hand, despite signs ofimprovement in housing investments, private capital expendituresand public investment continue to deteriorate.

Total assets at fiscal year-end stood at ¥7,793,748 million, a year-onyear increase of ¥1,508,746 million. With regards to the main
account balance of assets, securities stood at ¥1,586,506 million (anincrease of ¥279,398 million from the end of the previous fiscal
year), and loans and bills discounted totaled ¥4,001,698 million (anincrease of ¥142,335 million from the end of the previous fiscal
year).
In liabilities, total liabilities increased by ¥1,389,078 million fromthe end of the previous fiscal year to ¥7,298,278 million.
With regards to the main account balance of liabilities, deposits
totaled ¥5,398,851 million (an increase of ¥512,417 million from theend of the previous fiscal year), negotiable certificates of deposit¥49,560 million (a decrease of ¥17,123 million from the end of theprevious fiscal year), call money ¥516,077 million (an increase of¥379,691 million from the end of the previous fiscal year), payables
under securities lending transactions ¥272,654 million (an increaseof ¥37,116 million from the end of the previous fiscal year), andborrowed money ¥899,055 million (an increase of ¥447,975 million
from the end of the previous fiscal year).

SHIGA BANK ANNUAL REPORT 2021

81

Total equity amounted to ¥495,469 million, an increase of¥119,667 million from the end of the previous fiscal year.
This is mainly due to year-on-year increases of ¥12,006 million
in retained earnings and ¥92,863 million in net unrealized gains onavailable-for-sale securities.

resulting from an increase in net unrealized gains on available-forsale securities.
Additionally, as the Group consists of a single segment in thebanking business, business results by segment are not provided.

Cash flows
Statements of operations
Regarding income, total income posted a year-on-year decrease of¥2,786 million to ¥86,084 million, mainly due to a decrease ininterest income primarily resulting from a decrease in interest on
loans and discounts. Meanwhile, total expenses increased by ¥18
million from the previous fiscal year to ¥75,014 million, mainly due
to an increase in other expenses primarily resulting from anincrease in provision of allowance for possible loan losses, offsetting
a decrease in fund procurement costs primarily resulting fromdecreases in interest on deposits, interest expenses on securities
lending transactions as well as interest on borrowing andrediscounts.
As a result, the Bank posted income before income taxes forthe fiscal year under review of ¥11,070 million, down ¥2,804 million
year-on-year. Net income attributable to owners of parent was¥11,448 million, down ¥964 million year-on-year.
Furthermore, comprehensive income increased by ¥144,777
million from the previous fiscal year to ¥122,660 million, primarily

Deposits

Loans and bills discounted

The Group’s status of cash flows for the fiscal year under review is
as follows.
Net cash provided by operating activities was ¥1,239,206 million,
an increase in inflow of ¥1,107,945 million year-on-year, mainly due
to increases in deposits, borrowed money and call money, which
are the sources of fund procurement. Net cash used in investing
activities was ¥126,663 million, an increase in outflow of ¥133,390
million year-on-year, mainly due to an increase in purchases of
securities resulting from efforts to efficiently manage investment.
Net cash used in financing activities was ¥34,337 million, an increasein outflow of ¥20,026 million year-on-year, primarily due toredemption of bonds with stock acquisition rights (¥21,392 million)
and repayment of subordinated loans (¥10,000 million).
As a result, cash and cash equivalents as of the end of the fiscal
year under review amounted to ¥2,012,295 million, an increase of¥1,078,207 million year-on-year.

Investment securities

Total income and expenses(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

6,000

4,000

1,600

100

3,000

1,200

5,000

Total income
Total expenses

80

4,000
60
2,000

3,000

800
40

2,000
1,000

400
20

1,000

0

0
2017 2018 2019 2020 2021

82

02017 2018 2019 2020 2021

02017 2018 2019 2020 2021

2017 2018 2019 2020 2021

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
As of March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen

2021

2020

2021

AssetsCash and due from banks (Notes 3 and 32)�������������������������������������������������������������������������������������������������������������
Call loans and bills bought��������������������������������������������������������������������������������������������������������������������������������������������������
Debt purchased�������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Trading securities (Note 4)���������������������������������������������������������������������������������������������������������������������������������������������������
Money held in trust (Note 5)����������������������������������������������������������������������������������������������������������������������������������������������
Investment securities (Notes 4, 12, 20 and 32)�������������������������������������������������������������������������������������������������������
Loans and bills discounted (Notes 7, 12, 13, 32 and 38)�����������������������������������������������������������������������������������
Foreign exchange assets (Note 8)�����������������������������������������������������������������������������������������������������������������������������������
Other assets (Notes 9, 12 and 38)������������������������������������������������������������������������������������������������������������������������������������
Tangible fixed assets (Notes 10, 11, and 14)�������������������������������������������������������������������������������������������������������������
Intangible fixed assets������������������������������������������������������������������������������������������������������������������������������������������������������������
Asset for retirement benefits (Note 30)�����������������������������������������������������������������������������������������������������������������������
Deferred tax assets (Note 31)���������������������������������������������������������������������������������������������������������������������������������������������
Customers’ liabilities for acceptances and guarantees (Notes 20 and 38)���������������������������������������������
Allowance for loan losses�����������������������������������������������������������������������������������������������������������������������������������������������������
Total assets�������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

¥2,013,251
10,0004,218
567
14,476
1,586,506
4,001,698
8,334
98,02147,667
1,855
12,969626
27,246(33,692)
7,793,748¥934,834
4,679
3,805
298
14,424
1,307,107
3,859,363
7,909
97,636
52,843
1,960—
614
27,475(27,952)
6,285,002$18,184,906
90,32638,0995,121
130,756
14,330,286
36,145,768
75,277885,385
430,557
16,755
117,143
5,654
246,102(304,326)
70,397,868

Liabilities
Deposits (Notes 12, 15 and 32)�����������������������������������������������������������������������������������������������������������������������������������������
Negotiable certificates of deposit (Note 32)������������������������������������������������������������������������������������������������������������
Call money and bills sold (Notes 12 and 32)������������������������������������������������������������������������������������������������������������
Payables under securities lending transactions (Notes 12 and 32)������������������������������������������������������������
Borrowed money (Notes 12, 16 and 32)���������������������������������������������������������������������������������������������������������������������
Foreign exchange liabilities (Note 8)�����������������������������������������������������������������������������������������������������������������������������
Bonds with stock acquisition rights (Note 17)��������������������������������������������������������������������������������������������������������
Borrowed money from trust account (Note 18)����������������������������������������������������������������������������������������������������
Other liabilities (Notes 19 and 38)�����������������������������������������������������������������������������������������������������������������������������������
Liability for retirement benefits (Note 30)������������������������������������������������������������������������������������������������������������������
Liability for retirement benefits of directors and Audit & Supervisory Board Members���������������
Liability for reimbursement of deposits����������������������������������������������������������������������������������������������������������������������
Allowance for repayment of excess interest������������������������������������������������������������������������������������������������������������
Reserve for other contingent losses������������������������������������������������������������������������������������������������������������������������������
Deferred tax liabilities (Note 31)���������������������������������������������������������������������������������������������������������������������������������������
Deferred tax liabilities for land revaluation (Note 14)�����������������������������������������������������������������������������������������
Acceptances and guarantees (Notes 20 and 38)���������������������������������������������������������������������������������������������������
Total liabilities������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

5,398,851
49,560516,077
272,654
899,055
303—
166
53,645
143
5
267
20
156
74,522
5,602
27,246
7,298,278

4,886,433
66,683
136,386
235,538
451,079
40
21,766—45,988
1,841
5
379
25
182
28,627
6,747
27,4755,909,200

48,765,703
447,656
4,661,521
2,462,776
8,120,811
2,736
—
1,499
484,554
1,291
45
2,411
180
1,409
673,127
50,600246,10265,922,482

33,076
24,53684
232,289

33,076
24,536131
220,282

298,762
221,624758
2,098,175(9,116)(8,184)(82,341)

195,174
1,634
8,532
9,257
495,469¥7,793,748

102,311(8,351)
11,103894
375,801¥6,285,002

1,762,930
14,75977,066
83,6144,475,377$70,397,868

Equity (Notes 21, 22 and 36)
Common stock, authorized, 100,000,000 shares;
issued, 53,090,081 shares as of March 31, 2021 and 2020�����������������������������������������������������������������������������
Capital surplus�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Stock acquisition rights���������������������������������������������������������������������������������������������������������������������������������������������������������
Retained earnings���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Treasury stock – at cost 3,345,006 shares and 2,882,579 shares
as of March 31, 2021 and 2020, respectively���������������������������������������������������������������������������������������������������������
Accumulated other comprehensive income:Net unrealized gains on available-for-sale securities (Notes 4 and 6)����������������������������������������������
Deferred gains (losses) on derivatives under hedge accounting�������������������������������������������������������
Land revaluation surplus (Note 14)������������������������������������������������������������������������������������������������������������������������
Defined retirement benefit plans���������������������������������������������������������������������������������������������������������������������������
Total equity������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total liabilities and equity����������������������������������������������������������������������������������������������������������������������������������������������������������
See Notes to Consolidated Financial Statements.

SHIGA BANK ANNUAL REPORT 2021

83

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Income
Years ended March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen

2021

2020

2021

Income (Note 37)
Interest income:Interest on loans and discounts�������������������������������������������������������������������������������������������������������������������������������
Interest and dividends on securities���������������������������������������������������������������������������������������������������������������������
Other interest income����������������������������������������������������������������������������������������������������������������������������������������������������
Trust fees
Fees and commissions�����������������������������������������������������������������������������������������������������������������������������������������������������������
Other operating income (Note 23)��������������������������������������������������������������������������������������������������������������������������������
Other income (Note 24)��������������������������������������������������������������������������������������������������������������������������������������������������������
Total income����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

¥34,569
12,154312
216,53915,2109,707
88,496¥36,958
13,152236—
15,621
19,0998,804
93,873$312,248
109,7822,818
18
149,390
137,385
87,679799,349

Expenses
Interest expenses:
Interest on deposits���������������������������������������������������������������������������������������������������������������������������������������������������������
Interest on borrowing and rediscounts��������������������������������������������������������������������������������������������������������������
Other interest expenses������������������������������������������������������������������������������������������������������������������������������������������������
Fees and commissions�����������������������������������������������������������������������������������������������������������������������������������������������������������
Other operating expenses (Note 25)����������������������������������������������������������������������������������������������������������������������������
General and administrative expenses��������������������������������������������������������������������������������������������������������������������������
Other expenses (Note 26)����������������������������������������������������������������������������������������������������������������������������������������������������
Total expenses�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

917
1,023
1,343
4,563
14,257
41,67011,66875,444

2,135
3,237
2,144
4,574
16,424
41,4496,11976,0848,282
9,240
12,13041,215
128,777
376,388
105,392
681,456

Income before income taxes�������������������������������������������������������������������������������������������������������������������������������������������������

13,051

17,788117,884

Income taxes (Note 31)
Current���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferred������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Net income������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Net income attributable to owners of the parent������������������������������������������������������������������������������������������������

6,390(4,787)
11,448¥11,448

5,018
357
12,412¥12,412

57,718(43,239)
103,405$103,405

Yen

Per share information (Note 35)
Basic net income��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Diluted net income��������������������������������������������������������������������������������������������������������������������������������������������������������������������������Cash dividends applicable to the year���������������������������������������������������������������������������������������������������������������������������������

U.S. dollars

2021

2020

2021

¥228.12220.4340.00¥243.05
214.1940.00$2.061
1.991
0.361

See Notes to Consolidated Financial Statements.

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Comprehensive Income
Years ended March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen

Net income������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other comprehensive income (Note 34):
Net unrealized gains (losses) on available-for-sale securities����������������������������������������������������������������
Deferred gains (losses) on derivatives under hedge accounting�������������������������������������������������������
Defined retirement benefit plans���������������������������������������������������������������������������������������������������������������������������
Total other comprehensive income������������������������������������������������������������������������������������������������������������������������������
Comprehensive income����������������������������������������������������������������������������������������������������������������������������������������������������������������
Attributable to
Owners of the parent��������������������������������������������������������������������������������������������������������������������������������������������������������������
See Notes to Consolidated Financial Statements.

84

2021
¥11,4482020¥12,412

2021$103,405

92,863
9,985
8,362
111,212¥122,660(28,302)(4,455)(1,771)(34,529)¥(22,117)

838,795
90,19075,5301,004,534$1,107,939¥122,660¥(22,117)$1,107,939

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Changes in Equity
Years ended March 31, 2021 and 2020

Thousands

Millions of yen
Accumulated
Other Comprehensive Income

Outstanding
number ofshares ofcommon stock
Balance as of April 1, 2019�������������
51,135
Changes during the year:
Net income attributable toowners of the parent������������������Cash dividends, ¥40.00 per
share������������������������������������������������������
Purchase of treasury stock���������
Sales of treasury stock������������������
Reversal of land revaluation
surplus�������������������������������������������������
Other changes����������������������������������
Net change in the year��������������������
Balance as of March 31, 2020�������
Changes during the year:
Net income attributable toowners of the parent������������������Cash dividends, ¥40.00 per
share������������������������������������������������������
Purchase of treasury stock���������
Sales of treasury stock������������������
Reversal of land revaluation
surplus�������������������������������������������������
Other changes����������������������������������
Net change in the year��������������������
Balance as of March 31, 2021�������

Commonstock¥33,076

Deferredgains
Netunrealized (losses) on
Definedgains on derivatives
Stock
Land retirement
available- under
Capital acquisition Retained Treasury for-salehedge revaluation benefit
rightsearnings
stock
surplusplans
securities accounting surplus¥24,536¥129 ¥209,664¥(5,921) ¥130,613¥(3,895)¥11,357¥2,665

12,412

12,412(2,045)(936)(2)(2,045)(2,287)22(2,287)24254
850,207—33,076—
24,5362
2
131

10,618220,282(2,262)(8,184)(28,302)(28,302)102,311(4,455)(4,455)(8,351)

(254)
(254)
11,103(1,771)(1,771)894

11,448(4)
25
49,745—¥33,076—¥24,536

2,571
(47)
(47)
12,006¥84 ¥232,289

254(34,781)(26,426)
375,801

11,448(2,008)
(487)

Total
equity¥402,227(2,008)(1,003)67(1,003)71
92,863(932)
92,863¥(9,116) ¥195,174

9,985
9,985
¥1,634(2,571)(2,571)¥8,5328,362
8,362¥9,257

2,571
108,593
119,667¥495,469

Thousands of U.S. dollars (Note 1)
Accumulated
Other Comprehensive Income

Balance as of March 31, 2020........
Changes during the year:
Net income attributable toowners of the parent������������������Cash dividends, $0.36 pershare������������������������������������������������������
Purchase of treasury stock���������
Sales of treasury stock������������������
Reversal of land revaluation
surplus�������������������������������������������������
Other changes����������������������������������
Net change in the year��������������������
Balance as of March 31, 2021�������

Commonstock$298,762

Deferredgains
Netunrealized (losses) on
Definedgains on derivatives
Stock
Land retirement
available- under
Total
Capital acquisition Retained Treasury for-salehedge revaluation benefit
equityrightsearnings
stock
surplusplans
securities accounting surplus$221,624$1,183 $1,989,720$(73,922) $924,135$(75,431) $100,289$8,075 $3,394,463

103,405

103,405(18,137)(36)—$298,762—$221,624

23,222(424)(424)
108,445$758 $2,098,175(18,137)(9,059)605(9,059)641
838,795(8,418)
838,795$(82,341) $1,762,930

90,19090,190$14,759(23,222)(23,222)$77,066

23,22275,530980,877
75,530 1,080,905$83,614 $4,475,377

See Notes to Consolidated Financial Statements..

SHIGA BANK ANNUAL REPORT 2021

85

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
Years ended March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen

2021

2020

2021

¥13,051
2,445
316
5,739
(25)
(12,969)(1,698)¥17,788
2,829
949
777
(13)
—
30

$117,884
22,0842,854
51,838(225)(117,143)(15,337)

(0)
(111)
(4)
(47,036)3,284(2,174)(82)(1)(2,297)(142,335)
512,417(17,123)457,975(209)(5,733)379,691
37,116
(424)
263
166
47,017(3,785)
20,371
1,243,843(4,637)
1,239,206

(3)
(123)
(4)
(50,347)
7,516(4,348)(167)
1(4,862)(80,306)
37,246(18,272)
93,599(128)
161
86,397
16,542715(53)—
51,653(7,109)(12,647)
137,824(6,564)
131,260(0)(1,002)(36)(424,857)
29,663(19,636)(740)(9)(20,747)(1,285,656)
4,628,461(154,665)
4,136,708(1,887)(51,783)
3,429,599
335,254(3,829)2,375
1,499
424,686(34,188)
184,003
11,235,145(41,884)
11,193,261

Investing activities:
Purchases of securities�����������������������������������������������������������������������������������������������������������������������������������������������������������
Proceeds from sales of securities�������������������������������������������������������������������������������������������������������������������������������������
Proceeds from redemptions of securities������������������������������������������������������������������������������������������������������������������
Decrease in money held in trust��������������������������������������������������������������������������������������������������������������������������������������
Purchases of tangible fixed assets����������������������������������������������������������������������������������������������������������������������������������
Proceeds from sales of tangible fixed assets������������������������������������������������������������������������������������������������������������
Purchases of intangible fixed assets������������������������������������������������������������������������������������������������������������������������������
Net cash provided by (used in) investing activities������������������������������������������������������������������������

(866,123)
586,382
148,908—(1,094)
5,927(663)(126,663)(486,914)
259,858
228,043
1,014(1,270)
6,463
(468)
6,726

(7,823,349)
5,296,558
1,345,027—(9,881)53,536(5,988)(1,144,097)

Financing activities:
Repayment of subordinated loans���������������������������������������������������������������������������������������������������������������������������������
Redemption of bonds with stock acquisition rights�������������������������������������������������������������������������������������������
Purchases of treasury stock�������������������������������������������������������������������������������������������������������������������������������������������������
Proceeds from sales of treasury stock��������������������������������������������������������������������������������������������������������������������������
Dividends paid����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Net cash used in financing activities���������������������������������������������������������������������������������������������������������
Foreign currency translation adjustments on cash and cash equivalents���������������������������������������������
Net increase in cash and cash equivalents��������������������������������������������������������������������������������������������������������������������Cash and cash equivalents, beginning of year�����������������������������������������������������������������������������������������������������������Cash and cash equivalents, end of year (Note 3)������������������������������������������������������������������������������������������������������

(10,000)(21,392)(1,003)67(2,008)(34,337)
1
1,078,207
934,088¥2,012,295(10,000)—(2,287)22(2,045)(14,310)(1)
123,674
810,413¥934,088(90,326)(193,225)(9,059)605(18,137)(310,152)
99,739,020
8,437,250$18,176,271

Operating activities:
Income before income taxes���������������������������������������������������������������������������������������������������������������������������������������������
Depreciation���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Losses on impairment of long-lived assets���������������������������������������������������������������������������������������������������������������
Increase in allowance for loan losses����������������������������������������������������������������������������������������������������������������������������
Decrease in reserve for other contingent losses���������������������������������������������������������������������������������������������������
Increase in asset for retirement benefits���������������������������������������������������������������������������������������������������������������������
Increase (decrease) in liability for retirement benefits���������������������������������������������������������������������������������������
Decrease in liability for retirement benefits of directors andAudit & Supervisory Board Members�������������������������������������������������������������������������������������������������������������������������
Decrease in liability for reimbursement of deposits��������������������������������������������������������������������������������������������
Decrease in allowance for repayment of excess interest���������������������������������������������������������������������������������
Interest income��������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Interest expense�������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Gains on sales and write-down of investment securities��������������������������������������������������������������������������������
Gains on money held in trust��������������������������������������������������������������������������������������������������������������������������������������������
Foreign exchange losses (gains)��������������������������������������������������������������������������������������������������������������������������������������
Gains on disposals of fixed assets – net����������������������������������������������������������������������������������������������������������������������
Net increase in loans and bills discounted����������������������������������������������������������������������������������������������������������������
Net increase in deposits��������������������������������������������������������������������������������������������������������������������������������������������������������
Net decrease in negotiable certificate of deposits����������������������������������������������������������������������������������������������
Net increase in borrowed money (excluding subordinated loans)�����������������������������������������������������������
Net increase in due from banks (excluding deposits in Bank of Japan)��������������������������������������������������
Net decrease (increase) in call loans and others����������������������������������������������������������������������������������������������������
Net increase in call money and bills sold�������������������������������������������������������������������������������������������������������������������
Net increase in payables under securities lending transactions�����������������������������������������������������������������
Net decrease (increase) in foreign exchange assets��������������������������������������������������������������������������������������������
Net increase (decrease) in foreign exchange liabilities��������������������������������������������������������������������������������������
Net increase in borrowed money from trust account���������������������������������������������������������������������������������������
Interest received (cash basis)���������������������������������������������������������������������������������������������������������������������������������������������
Interest paid (cash basis)�������������������������������������������������������������������������������������������������������������������������������������������������������
Other�������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Income taxes – paid����������������������������������������������������������������������������������������������������������������������������������������������������������������
Net cash provided by operating activities��������������������������������������������������������������������������������������������

See Notes to Consolidated Financial Statements.

86

The Shiga Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
Years ended March 31, 2021 and 2020

1. Basis of presenting consolidated financial
statements
The accompanying consolidated financial statements have been preparedbased on the accounts maintained by THE SHIGA BANK, LTD. (the “Bank”) andits significant subsidiaries (together the “Group”) in accordance with theprovisions set forth in the Companies Act of Japan, the Japanese Financial
Instruments and Exchange Act, and the Japanese Banking Act and in
conformity with accounting principles generally accepted in Japan, which
are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
Certain items presented in the consolidated financial statements
submitted to the Director of the Kanto Finance Bureau in Japan have been
reclassified in these accounts for the convenience of readers outside Japan.
Amounts in yen of respective accounts included in the accompanying
consolidated financial statements and notes thereto are stated in millions ofyen by discarding fractional amounts less than ¥1 million. Therefore, total or
subtotal amounts do not necessarily tie in with the aggregation of suchaccount balances.
Amounts in U.S. dollars are included solely for the convenience of readers
outside Japan. The rate of ¥110.71 to U.S.$1, the rate of exchange at March
31, 2021, has been used in translation. The inclusion of such amounts is notintended to imply that Japanese yen amounts have been or could be readily
converted, realized or settled in U.S. dollar amounts at this rate or any otherrates.

2. Summary of significant accounting policies(a) Principles of consolidation
The accompanying consolidated financial statements for the years ended
March 31, 2021 and 2020 include the accounts of the Bank and sevenconsolidated subsidiaries and the Bank and nine consolidated subsidiaries,
respectively.
The consolidated subsidiaries’ respective fiscal periods end March 31 forthe years ended March 31, 2021 and 2020.
The Bank has four other nonconsolidated subsidiaries in 2021 and 2020,
in which investments are not accounted for by the equity method because
their net income (the portion corresponding to the Bank’s equity), retained
earnings (as above) and accumulated other comprehensive income (asabove) have no material impact on the Group’s financial position or businessperformance.
All significant intercompany transactions have been eliminated inconsolidation. All material unrealized profit included in assets resulting fromtransactions within the Group is eliminated.

(b) Cash equivalents
For the purpose of reporting cash flows, cash and cash equivalents aredefined as cash and due from the Bank of Japan.

(c) Trading securities
Trading securities held by the Bank are stated at fair value at the fiscal year
end (cost of sales, in principle, is computed by the moving-average method).

(d) Investment securities
i. Marketable securities held for trading purposes are stated at fair value (costof sales, in principle, is computed by the moving-average method).
Securities held to maturity are stated at amortized cost (straight-line
method) using the moving-average method. Securities available-for-sale forwhich current value can be estimated are stated at fair value at the fiscal year
end. Securities whose fair value cannot be reliably determined are stated atcost using the moving-average method. Valuation gains/losses on securities
available for sale are included in net assets, net of income taxes (cost of sales,in principle, is computed by the moving-average method).
ii. Marketable securities included in money held in trust by the Bank aretreated as trust assets and are stated at fair value at the fiscal year-end.

(e) Derivatives and hedging activities
Under the Accounting Standards for Financial Instruments, derivatives arestated at fair value unless they are used for hedging purposes.

i. Interest rate risk hedges
The Bank applies deferred hedge accounting to hedge transactions againstinterest rate risk arising from financial assets and liabilities which includes themethod of designating hedging instruments to hedged items as well as themethod stipulated in “Treatment for Accounting and Auditing of Applicationof Accounting Standard for Financial Instruments in Banking Industry” (JICPA
Industry Committee Practical Guidelines No. 24, October 8, 2020).
With regard to the assessment of hedge effectiveness, for the hedges
that offset the fluctuations in the fair value of fixed interest rates classified asavailable-for-sale securities, interest rate swaps are assigned to hedged items
collectively by bond type as the hedging instrument. The Bank designates
the hedges so as to ensure that the important conditions related to thehedged items and hedging instruments are largely identical; therefore thehedges are considered to be highly effective, and the assessment of theeffectiveness is based on the similarity of the conditions.
With regard to the effectiveness of cash flow hedges, hedge effectiveness is assessed by verifying the relationship of the interest rate fluctuation
factors of the hedged items and the hedging instruments.
ii. Currency exchange risk hedges
Regarding the hedge accounting method applied to hedging transactions
against currency exchange risk arising from assets and liabilities in foreign
currencies, the Bank applies deferred hedge accounting stipulated in“Accounting and Auditing Concerning Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry Committee Practical
Guidelines No. 25, October 8, 2020).
The Bank assesses the effectiveness of exchange swaps executed toreduce the risk of changes in currency exchange rates with fund swap
transactions by verifying that there exist foreign currency positions of thehedging instruments corresponding to the foreign currency monetaryclaims and debts to be hedged.
Fund swap transactions are foreign exchange transactions that arecontracted for the purpose of lending or borrowing funds in different
currencies. These transactions consist of spot foreign exchange eitherbought or sold and forward foreign exchange either bought or sold.

(f ) Bills discounted
Bills discounted are accounted for as financial transactions in accordancewith JICPA Industry Committee Practical Guidelines No. 24. The Bank has
rights to sell or pledge bank acceptances bought, commercial bills discounted, documentary bills and foreign exchanges bought without restrictions.

(g) Tangible fixed assets (except for lease assets)
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation for buildings and equipment of the Bank is computed
using the declining-balance method at a rate principally based on theestimated useful lives of the assets. However, buildings purchased on or after
April 1, 1998 (excluding fittings and equipment), and fittings and equipment
and structures purchased on or after April 1, 2016, are depreciated using thestraight-line method.
The range of useful lives is principally from 3 to 50 years for buildings andfrom 3 to 20 years for equipment.
Depreciation of tangible fixed assets owned by subsidiaries is computed
principally using the declining-balance method over the estimated useful
lives of the assets.
Under certain conditions such as exchanges of fixed assets of similarkinds and sales and purchases resulting from expropriation, Japanese tax
acts permit companies to defer the profit arising from such transactions by
reducing the cost of the assets acquired or by providing a special reserve inthe equity section. The Bank adopted the former treatment and reduced thecost of the assets acquired by ¥3,538 million ($31,957 thousand) and ¥3,538
million at March 31, 2021 and 2020, respectively.

iii. Beneficiary rights included in “debt purchased” are stated using the same
methods described in (i) above.
SHIGA BANK ANNUAL REPORT 2021

87

(h) Long-lived assets
The Group reviews its long-lived assets for impairment whenever events orchanges in circumstances indicate the carrying amount of an asset or asset
group may not be recoverable. An impairment loss would be recognized if
the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use
and eventual disposition of the asset or asset group. The impairment loss
would be measured as the amount by which the carrying amount of theasset exceeds its recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of the asset or
the net selling price at disposition.
Accumulated impairment losses are directly deducted from the respective fixed assets.

(i) Intangible fixed assets (except for lease assets)
Depreciation for intangible fixed assets is computed under the straight-line
method. Development costs for internally used software are capitalized anddepreciated using the straight-line method over the estimated useful lives of
5 years.

(j) Lease assets
Lease assets in “Tangible fixed assets” or “Intangible fixed assets” of thefinance leases other than those that were deemed to transfer the ownershipof the leased property to the lessee are computed under the straight-line
method over the lease term with zero residual value unless residual value isguaranteed by the corresponding lease contracts.

(k) Allowance for loan losses
Allowance for loan losses of the Bank is provided as detailed below, pursuant
to internal rules for write-offs and allowances.
For debtors who are legally bankrupt (bankrupt, under special liquidation, or subject to legal bankruptcy proceedings) or virtually bankrupt (in asimilar situation), an allowance is provided based on the amount of claims,
after the write-off stated below, net of amounts expected to be collected
through disposal of collateral or execution of guarantees. For loans to
debtors who are likely to go bankrupt, an allowance is provided for theamount considered to be necessary based on an overall solvency assessment performed for the amount of such loans, net of amounts deemed
collectible through disposal of collateral or execution of guarantees, using
the following methods.
(i) For large debtors with credit exposure above a certain amount, anallowance is provided for the non-protected amount, net of an
estimate of the amount collectible through cash flow based on acomprehensive assessment of the debtor’s situation (cash flow
deduction method).
(ii) For loans to debtors other than (i), an allowance is provided for the
expected losses for the subsequent three years. Expected losses are
determined based on the average loan loss ratio over a certain periodof time calculated using historical loan loss experience over three
years, with required adjustments for future forecasts and others.
For loans to other debtors, with regard to debtors who are recognized ashaving good business conditions and no particular problems with theirfinancial conditions (hereinafter, “normal debtors”) and debtors who require
careful management (hereinafter, “debtors on close watch”) such as debtors
that have problems with loan terms, debtors with performance issues,
debtors with weak or unstable business conditions, and debtors that haveproblems with their financial conditions, an allowance is provided for the
expected losses for subsequent one year. Among the debtors on close
watch, for debtors whose loans are in need of management (restructuredloans and loans that are delinquent for three months or more), an allowance
is provided for the expected losses for the subsequent three years. Expected
losses are determined based on the average loan loss ratio over a certain
period of time calculated using historical loan loss experience over one yearor three years, with required adjustments for future forecasts and others.
*Necessary revision and determination method of the expected loss ratio
due to future forecasts, etc.
		 The expected loss ratio used in the calculation of the allowance isdetermined by comparing the average value of the most recent threecalculation periods with the long-term average value that takes into
account the business cycle. The average of the three most recent

88calculation periods is calculated after reviewing the current situation,
future forecasts, and other necessary adjustments.
All loans are assessed by the branches and the operating divisions basedon the Bank’s internal rules for self-assessment of assets. The Asset Assessment Division, which is independent from the branches and the operating
divisions, subsequently conducts audits of their assessments, and anallowance is provided based on the audit results.
For collateralized or guaranteed claims to debtors who are legallybankrupt or virtually bankrupt, the amount deemed unrecoverable, which isthe amount of claims exceeding the estimated value of collateral or guarantees, has been written off and amounted to ¥9,584 million ($86,568 thousand) and ¥10,906 million as of March 31, 2021 and 2020, respectively.
Allowance for loan losses of the Bank’s consolidated subsidiaries isprovided based on historical loan loss experience in addition to amounts
deemed necessary based on estimation of the collectability of specificclaims.

(l) Retirement and Pension Plans
The Bank has a contributory funded pension plan and lump-sum severance
payment plan. Consolidated subsidiaries have unfunded lump-sum severance payment plans.
The projected benefit obligations are attributed to periods on a benefit
formula basis. Past service costs are amortized on a straight-line basis over
10 years within the average remaining service period.
Actuarial gains and losses are amortized on a straight-line basis over 10
years within the average remaining service period from the fiscal year following the respective fiscal year in which the difference is recognized.
Consolidated subsidiaries adopt a simplified method where the amountto be required for voluntary termination at the fiscal year end is recorded as
projected benefit obligations in the calculation of their liability for retirement
benefits and retirement benefit costs.

(m) Liability for retirement of directors and Audit & Supervisory
Board Members
Consolidated subsidiaries provide Liability for retirement benefits of directors
and Audit & Supervisory Board Members at the amount required if they all
retired at the fiscal yearend, calculated based on the internal rules of theGroup.

(n) Liability for reimbursement of deposits
Liability for reimbursement of deposits that were derecognized as liabilities
under certain conditions is provided for losses on the future claims ofwithdrawal based on historical reimbursement experience.

(o) Allowance for repayment of excess interest
Allowance for repayment of excess interest is provided at the estimatedamount based on payment experience that the Bank’s consolidated
subsidiaries may be required to refund upon customers’ claims.

(p) Reserve for other contingent losses
The Bank provides reserves for contingent liabilities not covered by otherreserves in an amount deemed necessary based on estimated losses in the
future.

(q) Foreign currency transactions
Receivables and payables in foreign currencies and foreign branch accounts
are translated into Japanese yen principally at the rates prevailing at thebalance sheet dates.

(r) Accounting for leases
In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard
for Lease Transactions,” which revised the previous accounting standard forlease transactions.

i. As lessee
Finance lease transactions are capitalized by recognizing lease assets andlease obligations in the balance sheet.

ii. As lessor
Under the previous accounting standard, finance leases that were deemed
to transfer ownership of the leased property to the lessee were to be treatedas sales. However, other finance leases were permitted to be accounted for
as operating lease transactions if certain “as if sold” information is disclosed in
the notes to the lessor’s financial statements. The revised accounting
standard requires that all finance leases that are deemed to transfer ownership of the leased property to the lessee should be recognized as leasereceivables and all finance leases that are deemed not to transfer ownershipof the leased property to the lessee should be recognized as investments inleases.
Lease revenue and lease costs are recognized over the lease period.

(s) Income taxes
The provision for income taxes is computed based on the pretax income
included in the consolidated statements of income. The asset and liability
approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Deferred taxes
are measured by applying currently enacted tax rates to the temporary
differences.

(t) Appropriations of retained earnings
The consolidated statements of changes in equity reflect the appropriation
resolved by the general shareholders’ meeting when duly resolved and paid.

(u) Per share information
Basic net income per share is computed by dividing net income attributable
to common shareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could
occur if securities were exercised or converted into common stock. Diluted
net income per share of common stock assumes full conversion of theoutstanding convertible notes and bonds at the beginning of the year (or at
the time of issuance) with an applicable adjustment for related interest
expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying consolidated
statements of income are dividends applicable to the respective fiscal years,
including dividends to be paid after the end of the fiscal year.

(v) Significant accounting estimates
Items for which the amount was recorded in the consolidated financial
statements for the current fiscal year based on accounting estimates, andwhich may have a significant impact on the consolidated financial statements for the following fiscal year, are as follows.

Allowance for loan losses(1) Amounts recorded in the consolidated financial statements for the year
ended March 31, 2021
Allowance for loan losses ¥33,692 million ($304,326 thousand)(2) Information that contributes to an understanding of the content ofsignificant accounting estimates for identified items
i. Calculation method
The method of calculating the allowance for loan losses is described in “(k)Allowance for loan losses” in “2. Summary of significant accounting policies.”
In addition, based on the following assumptions, in order to prepare for
expected losses due to such impacts, the Bank has recorded an allowance
for loan losses by revising the debtor classifications based on the current
deterioration in business performance and estimates related to impacts thatare not yet reflected in financial information.
ii. Major assumptions
The major assumption is the “future forecasts of business environments ofthe borrower in determining the debtor classifications.” It is set based on theindividual evaluation of each debtor’s ability to earn income. In addition,
assumptions regarding the impact of the novel coronavirus infection that
may have a significant impact on the “future forecasts of business environments of the borrower in determining the debtor classifications” are as
follows.
Assumptions regarding the impact of novel coronavirus infections
Since the end of September 2020, the Group has been making accounting
estimates for the allowance for loan losses, etc. based on the assumptionthat the spread of the novel coronavirus infection would continue to be aconstraint on various economic activities and that the economy would only
enter a full-scale recovery phase in April 2021 or later.
However, based on the recognition that the spread of the novel coronavirus infection was not yet under control as of the end of March 2021, theGroup has revised its assumptions regarding the impact of the novel coronavirus infection as follows.
Assumptions regarding the impact of novel coronavirus infections as of theend of March 2021
The spread of the novel coronavirus infection continues to be a constraint on various economic activities, and the economy will only enter afull-scale recovery phase in April 2022 or later.
iii. Impacts on the consolidated financial statements for the following fiscal
year
The Group conducts strict self-assessment and takes measures such as
setting aside an allowance for loan losses as deemed necessary. However,
due to the high degree of uncertainty in the above assumptions, changes in
the assumptions used for the initial estimates due to changes in the performance of individual borrowers or other factors, as well as the future spreadof the novel coronavirus infection and its impact on the economy, may havea significant impact on the allowance for loan losses in the consolidated
financial statements for the following fiscal year (ending March 31, 2022) andthereafter.
In addition, the uncertainty may grow even greater when the determination of the debtor classifications depends on future forecasts of businessenvironments, such as the business improvement plan of the borrower.

(w) New accounting pronouncements“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29
issued in March 2020)“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30 issued in March 2021)(1) Summary
ASBJ developed a comprehensive accounting standard for revenue recognition. Revenue is recognized by applying the following five steps:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations under the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the separate performance obligations under the contract
Step 5: Recognize revenue when performance obligations are satisfied or as
they are satisfied(2) Effective date
The Group expects to apply the new standard and guidance effective fromthe beginning of the year ending March 31, 2022.
(3) Effects of application of the standard and guidance
The effects of the application of the standard and guidance are immaterial.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30
issued in July 2019)“Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31 issued in July 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10
issued in July 2019)“Implementation Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19 issued in March 2020)(1) Summary
ASBJ developed and issued “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (hereinafter, “Fair Value Measurement Standard etc.”) to
enhance comparability of the requirements between the Japanese accounting standards and international accounting standards.
Fair Value Measurement Standard etc. is applied to the fair value offinancial instruments as defined in the “Accounting Standard for Financial
Instruments.”

SHIGA BANK ANNUAL REPORT 2021

89

In addition, “Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” was revised to include a note on the breakdown of
the fair value of financial instruments by level.

(2) Held-to-maturity securities
Held-to-maturity securities as of March 31, 2021 were as follows:
Millions of yen
2021(2) Effective date
The Group expects to apply the new standards and guidance effective fromthe beginning of the year ending March 31, 2022.
(3) Effects of application of the standards and guidance
The impact of the application of the standard and guidance is immaterial.

(x) Changes in presentation
Changes in accordance with the application of the “AccountingStandard for Disclosure of Accounting Estimates”
The “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ
Statement No. 31 issued in March 2020) has been applied to the consolidated financial statements for the current fiscal year, and notes regarding
significant accounting estimates have been included in the “2. Summary ofsignificant accounting policies.”
However, in accordance with the transitional treatment set forth in theprovision of Paragraph 11 of the said accounting standard, the content
related to the previous consolidated fiscal year is not disclosed.

3. Cash and cash equivalents
The reconciliation of “Cash and cash equivalents” and “Cash and due frombanks” in the consolidated balance sheets at March 31, 2021 and 2020, is asfollows:

2021¥934,834 $18,184,906(746)(8,635)¥934,088 $18,176,271

4. Securities
Securities at March 31, 2021 and 2020 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Japanese government bonds������������ ¥319,781
Japanese local government
bonds�������������������������������������������������������������
255,705
Japanese corporate bonds������������������
348,263
Corporate stocks����������������������������������������
350,016
312,738
Other securities�������������������������������������������
Total������������������������������������������������������������� ¥1,586,506

2020

2021

¥255,059$2,888,456

215,571360,114202,949
273,412¥1,307,107

2,309,682
3,145,723
3,161,557
2,824,839$14,330,286

Securities lent under unsecured loan (bond lending transactions) amounted
to ¥16,159 million ($145,957 thousand) are included in Japanese government bonds of securities at March 31, 2021.
Fair value and other information on securities at March 31, 2021 and 2020
were as follows. Securities include “Trading securities” and trust beneficiaryright under “Debt purchased,” in addition to “Investment securities,” which arepresented on the consolidated balance sheet.

Securities(1) Trading securities
Thousands of
U.S. dollars

Millions of yen
2021

2021

2020
Losses included in loss
during the fiscal year

Trading securities���������������������������������������
90

¥(0)

Fair value not exceeding consolidatedbalance sheet amount:
Japanese government bonds���������
Japanese local government
bonds�����������������������������������������������������������
Japanese corporate bonds����������������
Others�������������������������������������������������������������
Subtotal��������������������������������������������������������
Total�����������������������������������������������������������������

¥0

$(0)

Fair value

Difference¥ 6,000¥ 6,027

¥26

—
—
—
¥ 6,000———¥ 6,027

—
—
—
¥26

¥14,011¥13,815¥(195)———
14,011¥20,011———
13,815¥19,842

—
—
—
(195)
¥(168)

Thousands of U.S. dollars
2021

2021

2020

2021

Fair value exceeding consolidatedbalance sheet amount:
Japanese government bonds���������
Japanese local government
bonds�����������������������������������������������������������
Japanese corporate bonds����������������
Others�������������������������������������������������������������
Subtotal��������������������������������������������������������

Thousands of
U.S. dollars

Millions of yen

Cash and due from banks�������������������� ¥2,013,251(956)
Other due from banks����������������������������Cash and cash equivalents��������� ¥2,012,295

Consolidatedbalance sheet
amountFair value exceeding consolidatedbalance sheet amount:
Japanese government bonds���������
Japanese local government
bonds�����������������������������������������������������������
Japanese corporate bonds����������������
Others�������������������������������������������������������������
Subtotal��������������������������������������������������������
Fair value not exceeding consolidatedbalance sheet amount:
Japanese government bonds���������
Japanese local government
bonds�����������������������������������������������������������
Japanese corporate bonds����������������
Others�������������������������������������������������������������
Subtotal��������������������������������������������������������
Total�����������������������������������������������������������������

Consolidatedbalance sheet
amountCost$54,195$54,439

$234

—
—
—
$54,195———$54,439

—
—
—
$234

$126,555$124,785$(1,761)———
126,555$180,751———
124,785$179,225———(1,761)$(1,517)

Unrealized
gains (losses)

No securities were classified as held to maturity as of March 31, 2020.

(3) Available-for-sale securities
Available-for-sale securities as of March 31, 2021 and 2020 were as follows:

Thousands of U.S. dollars
2021

Millions of yen

Consolidatedbalance sheet
amount2021
Consolidatedbalance sheet
amountCost

Consolidated balance sheet
amount exceeding cost:
Stocks�������������������������������������������������������������� ¥337,422 ¥62,427
534,519
527,462
Bonds:�������������������������������������������������������������
Japanese government bonds���155,255
151,698
Japanese local government
bonds�����������������������������������������������������
142,816
141,823
Japanese corporate bonds����������
236,447
233,940
171,664
166,305
Others�������������������������������������������������������������
Subtotal�������������������������������������������������������� ¥1,043,606 ¥756,195
Consolidated balance sheet
amount not exceeding cost:
Stocks�������������������������������������������������������������� ¥8,830 ¥9,372
369,220
373,157
Bonds:�������������������������������������������������������������
Japanese government bonds���
144,515
147,430
Japanese local government
112,889
113,326
bonds�����������������������������������������������������
Japanese corporate bonds����������
111,815
112,399
137,330
143,974
Others�������������������������������������������������������������
515,381526,504
Subtotal��������������������������������������������������������
Total����������������������������������������������������������������� ¥1,558,987 ¥1,282,700

Unrealized
gains (losses)¥274,994
7,056
3,556
993
2,507
5,359
¥287,410¥(541)(3,937)(2,915)(437)(584)(6,644)(11,123)¥276,287

Millions of yen

Consolidated balance sheet
amount exceeding cost:
Stocks�������������������������������������������������������������� ¥184,305
Bonds:�������������������������������������������������������������
599,935
Japanese government bonds���
192,935
Japanese local government
bonds�����������������������������������������������������
156,305
Japanese corporate bonds����������
250,693
125,837
Others�������������������������������������������������������������
Subtotal�������������������������������������������������������� ¥910,077
Consolidated balance sheet
amount not exceeding cost:
Stocks�������������������������������������������������������������� ¥14,790
Bonds:�������������������������������������������������������������
230,810
Japanese government bonds���62,124
Japanese local government
bonds�����������������������������������������������������
59,266
Japanese corporate bonds����������
109,420
143,935
Others�������������������������������������������������������������
389,536
Subtotal��������������������������������������������������������
Total����������������������������������������������������������������� ¥1,299,614

Unrealized
gains (losses)

Consolidated balance sheet
amount exceeding cost:
Stocks�������������������������������������������������������������� $3,047,800 $563,878 $2,483,912
Bonds:������������������������������������������������������������� 4,828,100
4,764,357
63,734
Japanese government bonds��� 1,402,357
1,370,228
32,119Japanese local government
bonds����������������������������������������������������� 1,290,000
1,281,031
8,969Japanese corporate bonds���������� 2,135,732
2,113,088
22,644
1,502,167
48,405
Others������������������������������������������������������������� 1,550,573
Subtotal�������������������������������������������������������� $9,426,483 $6,830,412 $2,596,061
Consolidated balance sheet
amount not exceeding cost:
Stocks�������������������������������������������������������������� $79,757 $84,653 $(4,886)
Bonds:������������������������������������������������������������� 3,335,019
3,370,580(35,561)
Japanese government bonds��� 1,305,347
1,331,677(26,330)
Japanese local government
bonds����������������������������������������������������� 1,019,682
1,023,629(3,947)
Japanese corporate bonds���������� 1,009,981
1,015,256(5,275)1,300,460(60,012)
Others������������������������������������������������������������� 1,240,448
4,755,704(100,469)
Subtotal�������������������������������������������������������� 4,655,234
Total����������������������������������������������������������������� $14,081,718 $11,586,125 $2,495,592(4) Bonds classified as held to maturity were not sold for the years ended
March 31, 2021 and 2020.
(5) Available-for-sale securities sold

2020
Consolidatedbalance sheet
amountCost

Millions of yen

Cost

Unrealized
gains (losses)¥43,671
589,374
186,981¥140,633
10,5605,954

154,967
247,425
121,462¥754,508

1,338
3,268
4,375
¥155,569

2021
Sales
amountStocks��������������������������������������������������������������������
Bonds:�������������������������������������������������������������������
Japanese government bonds���������
Japanese local government
bonds�����������������������������������������������������������
Japanese corporate bonds����������������
Others�������������������������������������������������������������������
Total�����������������������������������������������������������������

Gains onsales

Losses onsales¥21,189
383,233
365,295¥5,375
536
338

¥277
460
364

10,024
7,913
126,636¥531,059

25
172
2,213
¥8,125—95
3,671¥4,409

Millions of yen
2020¥18,486
233,457
63,534¥(3,695)(2,646)(1,409)59,583110,339
151,230
403,174¥1,157,682

(317)
(919)
(7,295)(13,637)¥141,931

SalesamountStocks��������������������������������������������������������������������
Bonds:�������������������������������������������������������������������
Japanese government bonds���������
Japanese local government
bonds�����������������������������������������������������������
Japanese corporate bonds����������������
Others�������������������������������������������������������������������
Total�����������������������������������������������������������������

Gains onsales

Losses onsales¥6,484
44,26643,159¥2,161
322
301

¥834
—
—

—
1,106
139,775¥190,526

—
20
4,143
¥6,627——
1,160¥1,995

SHIGA BANK ANNUAL REPORT 2021

91

Thousands of U.S. dollars

Thousands of U.S. dollars

2021

2021
Gains (losses)
included in
Consolidated profit (loss)
balance sheet
duringamountthe fiscal year

Sales
amountStocks�������������������������������������������������������������������� $191,391
Bonds:������������������������������������������������������������������� 3,461,593
Japanese government bonds��������� 3,299,566
Japanese local government
90,542bonds�����������������������������������������������������������
Japanese corporate bonds����������������
71,475
Others������������������������������������������������������������������� 1,143,853
Total����������������������������������������������������������������� $4,796,847

Gains onsales

Losses onsales$48,550
4,841
3,053

$2,502
4,154
3,287

225
1,553
19,989$73,389—
858
33,158$39,824(6) Reclassification of investment securities due to change in intent ofholding
There were no reclassifications of investment securities due to change in
intent of holding for the years ended March 31, 2021 and 2020.
(7) Impairment losses on securities
For available-for-sale securities with market quotations (other than securities
whose fair value cannot be reliably determined), in cases where the fair value
has fallen substantially from the acquisition cost and there is believed to be
little likelihood of a recovery in the acquisition cost level, said securities areshown on the balance sheets at fair value and the difference between thefair value and the acquisition cost is posted as a loss (hereinafter “impairment
loss”).
Impairment losses amounted to ¥1,580 million ($14,271 thousand) which
consisted of stocks of ¥1,574 million ($14,217 thousand) and bonds of ¥5
million ($45 thousand); and ¥277 million which consisted of stocks of ¥227
million and bonds of ¥50 million; as of March 31, 2021 and 2020, respectively.
In addition, the Bank recognizes that fair value has fallen significantly
based on standards that have been set out in the self-assessment standards
for assets by the issuing companies of securities. The details are as follows:
The Bank recognizes that the fair value of available-for-sale securities oflegally bankrupt debtors, virtually bankrupt debtors, or debtors who arelikely to go bankrupt, has fallen significantly when the fair value of such
instruments as of the consolidated balance sheet date has decreased fromthe acquisition cost. For debtors on close watch, the Bank recognizes thatthe fair value has fallen significantly when the fair value as of the consolidated balance sheet date has decreased 30% or more from the acquisitioncost. For normal debtors, it recognizes this when the fair value as of theconsolidated balance sheet date has fallen 50% or more from the acquisition
cost or when the fair value as of the consolidated balance sheet date has
fallen 30% or more from the acquisition cost and the market prices remain
below certain levels.
Debtors on close watch are defined as those who will require close monitoring in the future and normal debtors are defined as those other thanlegally bankrupt debtors, virtually bankrupt debtors, debtors who are likely
to go bankrupt, or debtors on close watch.

5. Money held in trust(1) Money held in trust classified as trading
Millions of yen
2021
2020
Gains (losses)
Gains (losses)
included inincluded in
Consolidated profit (loss) Consolidated profit (loss)
balance sheet
duringbalance sheet
duringamountthe fiscal year
amountthe fiscal year

Money held in trustclassified as trading������

92¥14,476¥(78)¥14,424¥116

Money held in trustclassified as trading������

$130,756$(704)(2) No money held in trust was classified as held to maturity.
(3) No other money held in trust (other than money held in trust for trading
purposes and money in trust held to maturity).

6. Net unrealized gains/losses on available-forsale securities
Available-for-sale securities were valued at market and net unrealized gains/losses on valuation were as follows:
Millions of yen

Net unrealized gains on
investment securities���������������������������
Deferred tax liabilities�����������������������������
Noncontrolling interests�����������������������
Net unrealized gains onavailable-for-sale securities���������������

Thousands of
U.S. dollars

2021

2020

2021

¥275,998(80,824)—¥141,643(39,331)—$2,492,981(730,051)—¥195,174¥102,311$1,762,930

7. Loans and bills discounted
Loans and bills discounted at March 31, 2021 and 2020, consisted of thefollowing:
Millions of yen
2021

Bills discounted������������������������������������������� ¥6,689
Loans on bills������������������������������������������������
80,025Loans on deeds������������������������������������������� 3,570,766
344,217
Overdrafts�������������������������������������������������������
Total������������������������������������������������������������� ¥4,001,698

Thousands of
U.S. dollars
2021

2020

¥9,462
93,026
3,362,284
394,589¥3,859,363$

60,419722,834
32,253,328
3,109,177$36,145,768

Loans in legal bankruptcy totaled ¥259 million ($2,339 thousand) and ¥213
million as of March 31, 2021 and 2020, respectively. Nonaccrual loans totaled¥45,486 million ($410,857 thousand) and ¥37,196 million as of March 31,
2021 and 2020, respectively. Loans in legal bankruptcy are loans in which theinterest accrual is discontinued (excluding the portion recognized as bad
debts) based on management’s judgment of the collectability of principal orinterest resulting from the delay in payments of interest or principal for aconsiderable period of time and other factors. Nonaccrual loans are loans inwhich the interest accrual is discontinued, other than loans in legal bankruptcy and loans granting deferral of interest payment to the debtors infinancial difficulties to assist them in their recovery.
Past due loans (three months or more) as to principal or interest payments totaled ¥136 million ($1,228 thousand) and ¥177 million as of March
31, 2021 and 2020, respectively. Loans classified as loans in legal bankruptcy
and nonaccrual loans are excluded.
Restructured loans totaled ¥25,563 million ($230,900 thousand) and¥16,000 million as of March 31, 2021 and 2020, respectively. Such restructured loans are loans on which creditors grant concessions (e.g., reduction of
the stated interest rate, deferral of interest payments, extension of maturity
dates, waiver of the face amount, or other concessive measures) to thedebtors to assist them in recovering from financial difficulties and eventually
being able to pay creditors. Loans classified as loans in legal bankruptcy,
nonaccrual loans and past due three months or more are excluded.
The total face value of bills discounted at March 31, 2021 and 2020 was¥6,750 million ($60,970 thousand) and ¥9,523 million, respectively.

8. Foreign exchanges

9. Other assets

Foreign exchange assets and liabilities at March 31, 2021 and 2020, consistedof the following:

Other assets at March 31, 2021 and 2020, consisted of the following:

Millions of yen

Assets:Due from foreign
correspondents����������������������������������
Foreign bills of exchange
purchased����������������������������������������������
Foreign bills of exchange
receivable�����������������������������������������������
Total�������������������������������������������������������
Liabilities:
Foreign bills of exchange sold�����
Accrued foreign bills of
exchange�����������������������������������������������
Total�������������������������������������������������������

2021

2020

2021

¥7,715¥6,946$69,686

0

0

0

618
¥8,334962¥7,909

5,582$75,277

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Prepaid expenses���������������������������������������
Accrued income�����������������������������������������
Derivatives�����������������������������������������������������
Other (Note 12)�������������������������������������������
Total�������������������������������������������������������������

2021

2020

2021

¥151
3,666
9,171
85,032¥98,021

¥54
3,957
3,398
90,226¥97,636$1,363
33,113
82,838768,060$885,385

10. Tangible fixed assets
Tangible fixed assets at March 31, 2021 and 2020, consisted of the following:

¥142

¥33

$1,282

160
¥303

6
¥40

1,445
$2,736

Thousands of
U.S. dollars

Millions of yen

Buildings���������������������������������������������������������
Land�������������������������������������������������������������������
Construction in progress����������������������
Other�����������������������������������������������������������������
Total�������������������������������������������������������������

2021

2020

2021

¥14,019
31,665—
1,983¥47,667¥14,648
35,735134
2,325¥52,843$126,628
286,017—
17,911$430,557

Accumulated depreciation on tangible fixed assets at March 31, 2021 and2020 amounted to ¥46,516 million ($420,160 thousand) and ¥46,473 million,
respectively.

11. Long-lived assets
The Group recognized impairment losses for the years ended March 31, 2021 and 2020, as follows:
The Bank groups assets by the methods described in the “Overview of asset groups and grouping method” below. Subsidiaries group their assets by unit, which
periodically manages profit and loss. The Bank wrote down the carrying amounts to the recoverable amounts and recognized impairment losses of ¥316 million($2,854 thousand) and ¥949 million for the years ended March 31, 2021 and 2020, respectively since the carrying amounts of the assets held by the above
branches and other exceeded the sum of the undiscounted future cash flows.
The recoverable amounts of these assets were the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the
net selling price at disposition.
The discount rate used for computation of the present value of future cash flows was 5% and the net selling price was determined by quotations from realestate appraisal information, less estimated costs to dispose.
Impairment losses
Thousands of
U.S. dollars

Millions of yen
Location

Description

Classification

Shiga Prefecture
Business assets
Land, buildings and equipment����������������
Outside of Shiga
Prefecture
Business assets
Land, buildings and equipment����������������
Total�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

2021

2020

2021

¥316

¥636

$2,854

—
¥316

312
¥949

—
$2,854

Impairment losses are included in other expenses (Note 26).

Overview of asset groups and grouping method(1) Outline of asset groups
i. Idle assets
Stores, former company housing sites, etc.
ii. Operating assets
Assets used for business purposesiii. Common assets
Assets related to the entire bank (headquarters, office centers, dormitories, company housing, etc.)(2) Methods of groupingi. Idle assets
Grouping as independent assets.
ii. Operating assets
For the year ended March 31, 2021

Grouping is done by store groups or store units that constitutefull-banking functions (*).
For the year ended March 31, 2020
In principle, grouping is done on a branch-by-branch basis. However,sub-branches that have a strong complementary relationship withmother branches are grouped together with mother branches.
(*) In line with the consolidation of business branch functions such as
financing operations by region, the method of grouping has beenchanged from the current consolidated fiscal year to store groups or
store units that constitute full-banking functions.
iii. Common assets
Grouping of the entire bank as a whole.

SHIGA BANK ANNUAL REPORT 2021

93

12. Assets pledged
Assets pledged as collateral and related liabilities at March 31, 2021 and2020, were as follows:
Thousands of
U.S. dollars

Millions of yen

Investment securities������������������������������
Loans and bills discounted������������������
Other assets (investments inleases) ������������������������������������������������������������

2021¥696,661
889,0932020¥616,236
231,3072021$6,292,665
8,030,828

412

629

3,721

Millions of yen

Thousands of
U.S. dollars

Related liabilities

2021

2020

2021

Deposits����������������������������������������������������������
Call money and bills sold����������������������
Payables under securities lendingtransactions������������������������������������������������
Borrowed money���������������������������������������

¥25,048—¥25,049
18,501$226,248—

272,654893,235

235,538
437,738

2,462,776
8,068,241

In addition, other assets (deposits to central counterparty) of ¥34,332 million($310,107 thousand) and ¥41,071 million at March 31, 2021 and 2020,
respectively.
Other assets include guarantee deposits of ¥394 million ($3,558 thousand) and ¥461 million at March 31, 2021 and 2020, respectively.

Method of revaluation
The fair values were determined by applying appropriate adjustments forland shape and analysis on the appraisal specified in Article 2-3 of the
Enforcement Ordinance of the Act of Land Revaluation effective March 31,
1998.

15. Deposits
Deposits at March 31, 2021 and 2020, consisted of the following:
Millions of yen
2021

Current deposits����������������������������������������� ¥230,158
Ordinary deposits�������������������������������������� 2,966,522
Deposits at notice�������������������������������������
68,359Time deposits���������������������������������������������� 2,016,827
116,984
Other deposits���������������������������������������������
Total������������������������������������������������������������� ¥5,398,851

2020

2021

¥196,966
2,521,215
35,6062,021,652
110,993¥4,886,433$2,078,926
26,795,429
617,460
18,217,207
1,056,670$48,765,703

16. Borrowed money
At March 31, 2021 and 2020, the weighted-average interest rates applicable
to borrowed money were 0.03% and 0.43%, respectively.
Borrowed money at March 31, 2021 and 2020, consisted of the following:
Millions of yen

13. Overdrafts and commitment lines
Overdraft agreements and commitment line agreements are agreementsthat oblige the Group to lend funds up to a certain limit agreed in advance.
The Group makes the loans upon the request of an obligor to draw down
funds under such loan agreements as long as there is no breach of thevarious terms and conditions stipulated in the relevant loan agreements. The
unused commitment balance relating to these loan agreements at March
31, 2021 and 2020 amounted to ¥1,069,313 million ($9,658,684 thousand)and ¥959,236 million, respectively, and the amounts of unused commitments whose original contract terms are within one year or unconditionallycancelable at any time were ¥973,892 million ($8,796,784 thousand) and¥896,110 million at March 31, 2021 and 2020, respectively. In many cases, theterm of the agreement expires without the loan ever being drawn down.
Therefore, the unused loan commitment will not necessarily affect future
cash flows. Conditions are included in certain loan agreements that allow
the Group to decline the request for a loan draw down or to reduce theagreed limit amount where there is due cause to do so, such as when there
is a change in financial conditions or when it is necessary to do so in order toprotect the Group’s credit. The Group takes various measures to protect its
credit. Such measures include having the obligor pledge collateral to theGroup in the form of real estate, securities, etc. on signing the loan agreements or, in accordance with the Group’s established internal procedures,confirming the obligor’s financial condition, etc. at regular intervals.

14. Land revaluation
Under the “Act of Land Revaluation,” promulgated on March 31, 1998 (final
revision on May 30, 2003), the Bank elected a one-time revaluation of its
own-use land to a value based on real estate appraisal information as ofMarch 31, 2002. The resulting land revaluation surplus represented unrealized appreciation of land and was stated, net of income taxes, as a component of equity. There was no effect on the consolidated statement ofincome. Continuous readjustment is not permitted unless the land value
subsequently declines significantly such that the amount of the decline invalue should be removed from the land revaluation surplus account andrelated deferred tax liabilities. At March 31, 2021 and 2020, the carrying
amount of the land after the above one-time revaluation exceeded the fairvalue by ¥8,242 million ($74,446 thousand) and ¥9,898 million, respectively.

94

Thousands of
U.S. dollars

Subordinated loans����������������������������������
Borrowing from banks and other����
Total�������������������������������������������������������������

Thousands of
U.S. dollars

2021

2020

2021

¥—
899,055¥899,055¥10,000
441,079¥451,079$—8,120,811$8,120,811

Annual maturities of borrowed money at March 31, 2021 were as follows:Year ending March 312022��������������������������������������������������������������������������������������������������
2023��������������������������������������������������������������������������������������������������
2024��������������������������������������������������������������������������������������������������
2025��������������������������������������������������������������������������������������������������
2026��������������������������������������������������������������������������������������������������
2027 and thereafter����������������������������������������������������������������
Total��������������������������������������������������������������������������������������������

Millions of yen

Thousands of
U.S. dollars¥786,116
41,63935,40332,271
89
3,534¥899,055$7,100,677
376,108
319,781291,491
803
31,921$8,120,811

17. Bonds

21. Equity(1) Capital stock and capital surplus

Bonds at March 31, 2021 and 2020, consisted of the following:Thousandsof U.S. dollars

Millions of yen
2021

Convertible bonds
with stockacquisition rights(*)������������������������������

¥—

2021

2020

Interest rate

Due—

June 23, 2020$—

¥21,766(*)	The above convertible bonds with stock acquisition rights were redeemed on June23, 2020. The description of the said bonds was as follows:

Description of bonds���������������������������������������� Unsecured convertible bonds withstock acquisition rights, payable inEuro/U.S. dollars, due June 23, 2020
(subordinated bonds with nonviability write-off clause)Class of shares to be issued��������������������������� Ordinary shares of common stock
Issue price for stock acquisition rights��� —Exercise price of shares������������������������������������ $29.159
Total amount of debt securities issued������ $200,000 thousand
Total amount of shares issued byexercising stock acquisition rights��������� —Percentage of shares with stockacquisition rights����������������������������������������������� 100%
Exercise period of stock acquisitionrights������������������������������������������������������������������������� From April 7, 2015 to June 9, 2020
Content and amount of assets in casestock acquisition rights are exercisedby contributions of non-cash assets����� At the time of exercise of the respective stock acquisition rights, thebonds pertaining to the stockacquisition rights shall be contributed, and the price of such bonds
shall be the same amount as theirface value.

18. Borrowed money from trust accountPrincipal amounts of trusts with a principal compensation agreement at
March 31, 2021 were ¥166 million ($1,499 thousand).

19. Other liabilities
Other liabilities at March 31, 2021 and 2020, consisted of the following:
Millions of yen

Accrued income taxes����������������������������
Accrued expenses�������������������������������������
Unearned income�������������������������������������
Derivatives�����������������������������������������������������
Other�����������������������������������������������������������������
Total�������������������������������������������������������������

Thousands of
U.S. dollars

2021

2020

2021

¥3,677
3,519
8,881
10,56127,005¥53,645¥1,876
4,688
8,893
15,107
15,421¥45,988$33,212
31,78580,21895,393
243,925$484,554

20. Acceptances and guarantees
All contingent liabilities arising from acceptances and guarantees arereflected in “Acceptances and guarantees.” As a contra account, “Customers’
liabilities for acceptances and guarantees,” is shown as an asset representing
the Bank’s right of indemnity from the applicants.
The amounts of “Acceptances and guarantees” and “Customers’ liabilities
for acceptances and guarantees” amounting to ¥23,516 million ($212,410
thousand) and ¥27,537 million as of March 31, 2021 and 2020, respectively,
were set off because those which were relevant to corporate bonds and theguaranteed bonds were held by the Bank itself.

The Bank implemented a 1-for-5 reverse stock split on October 1, 2018. As aresult, the number of shares of common stock issued decreased from
265,450 thousand shares to 53,090 thousand shares. The numbers of sharesin the consolidated statement of changes in equity are calculated on theassumption that the reverse stock split was implemented on April 1, 2017.

(2) Companies Act
Japanese companies are subject to the Companies Act of Japan (the“Companies Act”). The significant provisions in the Companies Act that affectfinancial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during
the fiscal year in addition to the year-end dividend upon resolution at theshareholders’ meeting. For companies that meet certain criteria such as: (1)having a Board of Directors, (2) having independent auditors, (3) having an
Audit & Supervisory Board, and (4) the term of service of the directors isprescribed as one year rather than two years of normal term by its articles ofincorporation, the Board of Directors may declare dividends (except for
dividends-in-kind) at any time during the fiscal year if the company hasprescribed so in its articles of incorporation. However, the Bank cannot do so
because it does not meet all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind(non-cash assets) to shareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of thecompany so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The
limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.
(b) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% (20% for banks
pursuant to the Banking Act) of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (acomponent of capital surplus), depending on the equity account charged
upon the payment of such dividends, until the total of the aggregate
amount of legal reserve and additional paid-in capital equals 25% (100% forbanks pursuant to the Banking Act) of common stock. Under the Companies
Act, the total amount of additional paid-in capital and legal reserve may bereversed without limitation. The Companies Act also provides that common
stock, legal reserve, additional paid-in capital, other capital surplus andretained earnings can be transferred among the accounts under certain
conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stockand dispose of such treasury stock by resolution of the Board of Directors.
The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders that is determined by a specificformula. Under the Companies Act, stock acquisition rights are presented asa separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury
stock. Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisition rights.

(3) Appropriations of retained earnings
The following appropriation of retained earnings at March 31, 2021 will be
proposed at the Bank’s ordinary general shareholders’ meeting held on June25, 2021.

Cash dividends (dividend amount per share:¥22.5 ($0.203))��������������������������������������������������������������������������

Millions of yen

Thousands of
U.S. dollars¥1,119$10,107

SHIGA BANK ANNUAL REPORT 2021

95

22. Stock options
The stock options outstanding as of March 31, 2021, are as follows:
Persons
granted2013 Stock
Option2 directors

1,980 shares

August 20,
2013¥1($ 0.01)

From August21, 2013 toAugust 20,
2043

2014 Stock
Option3 directors

2,660 shares

August 20,
2014¥1($ 0.01)

From August21, 2014 toAugust 20,
2044

Description

Exercise
price

Exerciseperiod2015 Stock
Option3 directors

2,620 shares

August 20,
2015¥1($ 0.01)

From August21, 2015 toAugust 20,
2045

2016 Stock
Option3 directors

4,240 shares

August 19,
2016¥1($ 0.01)

From August20, 2016 toAugust 19,
2046

2017 Stock
Option4 directors

August 18,
2017¥1($ 0.01)

From August19, 2017 toAugust 18,2047

4,460 shares2018 Stock
Option4 directors

4,580 shares

August 20,
2018¥1($ 0.01)

From August21, 2018 toAugust 20,
2048

2019 Stock
Option5 directors

6,400 shares

August 20,
2019¥1($ 0.01)

From August21, 2019 toAugust 20,
2049

2020 Stock
Option6 directors

7,900 shares

August 20,
2020¥1($ 0.01)2017 Stock
Option2018 Stock
OptionApril 1, 2020—Outstanding
GrantedCanceled
VestedMarch 31, 2021—Outstanding

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

VestedApril 1, 2020—Outstanding
VestedExercised
Canceled
March 31, 2021—Outstanding

8,680—(4,440)
—
4,240

8,140
—
(3,680)
—
4,460

8,200
—
(3,620)—4,580

Year Ended March 31, 2021

Number ofoptions
granted (*)

Date ofgrant2016 Stock
OptionFrom August21, 2020 toAugust 20,
2050

Non-vested

2019 Stock
OptionYear Ended March 31, 2021

Non-vested
April 1, 2020—Outstanding
GrantedCanceled
VestedMarch 31, 2021—Outstanding

2,670
—
—
(2,670)
—

—
7,900
—
(5,925)
1,975

VestedApril 1, 2020—Outstanding
VestedExercised
Canceled
March 31, 2021—Outstanding

8,010
2,670
(4,280)
—
6,400

—
5,925
—
—
5,925

(*)	The number of options granted has been restated, as appropriate, to reflect a 1-for-5
reverse stock split on October 1, 2018.

2013 Stock
OptionExercise price

The stock option activity is as follows:2013 Stock
Option2014 Stock
Option2015 Stock
OptionAverage stock price at exercise (*)

Year Ended March 31, 2021

Fair value price at grant date (*)

Non-vested

96

April 1, 2020—Outstanding
GrantedCanceled
VestedMarch 31, 2021—Outstanding

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

VestedApril 1, 2020—Outstanding
VestedExercised
Canceled
March 31, 2021—Outstanding

4,780—(2,800)
—
1,980

5,860
—
(3,200)
—
2,660

5,760
—
(3,140)—2,6202020 Stock
Option¥1($ 0.01)¥2,460($22.22)¥2,640($23.85)2016 Stock
OptionExercise price
Average stock price at exercise (*)
Fair value price at grant date (*)¥1($ 0.01)¥2,460($22.22)¥2,365($21.36)

2014 Stock
Option¥1($ 0.01)¥2,460($22.22)¥2,945($26.60)2017 Stock
Option¥1($ 0.01)¥2,460($22.22)¥2,785($25.16)2015 Stock
Option¥1($ 0.01)¥2,460($22.22)¥3,170($28.63)2018 Stock
Option¥1($0.01)¥2,460($22.22)¥2,800($25.29)

2019 Stock
OptionExercise price
Average stock price at exercise (*)
Fair value price at grant date (*)¥ 1($ 0.01)¥2,460($22.22)¥2,204($19.91)

26. Other expenses

2020 Stock
OptionOther expenses for the years ended March 31, 2021 and 2020, consisted of
the following:¥1($ 0.01)¥—($—)¥2,359($21.31)(*)	Average stock price at exercise and fair value price at grant date have been restated,
as appropriate, to reflect a 1-for-5 reverse stock split on October 1, 2018.

The Assumptions Used to Measure the Fair Value of the 2020 Stock Option
Estimate method:
Volatility of stock price:
Estimated remaining outstanding period:
Estimated dividend:
Risk free interest rate:

Thousands of
U.S. dollars

Millions of yen

Black-Scholes option-pricing model
27.250%3 years and 0 months¥40.00 ($0.36) per share
0.122% negative

Provision of allowance for loan
losses��������������������������������������������������������������
Losses on sales of stocks and othersecurities�������������������������������������������������������
Charge-off of loans and bills
discounted��������������������������������������������������
Losses on devaluation of stocks
and other securities�������������������������������
Losses on disposal of fixed assets���
Losses on impairment oflong-lived assets��������������������������������������
Other�����������������������������������������������������������������
Total�������������������������������������������������������������

2021

2020

2021

¥7,459¥2,172$67,374

823

998

7,433

660

1,052

5,961

1,575
113

243
139

14,226
1,020

316
720
¥11,668

949
563¥6,1192,854
6,503$105,392

23. Other operating income
Other operating income for the years ended March 31, 2021 and 2020,
consisted of the following:
Millions of yen

Gains on foreign exchangetransactions-net���������������������������������������
Gains on sales of bonds�������������������������
Gains on redemption of bonds��������
Gains on derivative financial
instruments�������������������������������������������������
Other�����������������������������������������������������������������
Total�������������������������������������������������������������

Thousands of
U.S. dollars

2021

2020

2021

¥701
2,603
50

¥532
4,611
—

$6,331
23,511451

250
11,604¥15,210—
13,955¥19,099

2,258
104,814$137,385

24. Other income
Other income for the years ended March 31, 2021 and 2020, consisted of thefollowing:
Millions of yen

Gains on sales of stocks andother securities�����������������������������������������
Recovery of claims previously
charged-off�������������������������������������������������
Other�����������������������������������������������������������������
Total�������������������������������������������������������������

2020

2021

¥5,542¥2,381$50,058366
3,798¥9,707395
6,027¥8,804

3,305
34,305$87,679

25. Other operating expenses
Other operating expenses for the years ended March 31, 2021 and 2020,
consisted of the following:

Losses on sales of government
bonds�������������������������������������������������������������
Amortization of bonds���������������������������
Expenses on derivatives otherthan for hedging�������������������������������������
Other�����������������������������������������������������������������
Total�������������������������������������������������������������

Gains (losses) related to bonds for the years ended March 31, 2021 and 2020,
consisted of the following:Thousands of
U.S. dollars

Millions of yen

Gains (losses) related to bonds
including Japanese government
bonds:
Gains on sales of bonds�������������������
Gains on redemption ofbonds�������������������������������������������������������
Losses on sales of bonds����������������
Losses on devaluation ofbonds�������������������������������������������������������
Total�������������������������������������������������������
Gains (losses) on derivatives:
Gains (losses) related to bonds������

2021

2020

2021

¥2,603¥4,611$23,511

50(3,617)—(1,354)451(32,670)(5)¥(968)¥250¥(718)(50)¥3,207¥(2,137)¥1,069(45)$(8,743)$2,258$(6,485)

Thousands of
U.S. dollars

2021

Millions of yen

27. Gains (losses) related to bonds

Thousands of
U.S. dollars

2021

2020

2021

¥3,6175¥1,354—$32,670
45—
10,634¥14,257

2,137
12,932¥16,424—
96,052$128,77728. Gains (losses) related to stocks and othersecurities
Gains (losses) related to stocks and other securities for the years ended
March 31, 2021 and 2020, consisted of the following:Thousands of
U.S. dollars

Millions of yen

Gains (losses) related to stocks
and other securities:
Gains on sales of stocks andother securities�����������������������������������
Losses on sales of stocks andother securities�����������������������������������
Losses on devaluation of stocks
and other securities�������������������������
Gains related to stocks and othersecurities������������������������������������������������������

2021

2020

2021

¥5,542¥2,381$50,058

(823)

(998)

(7,433)(1,575)(243)(14,226)¥3,143¥1,140$28,389

SHIGA BANK ANNUAL REPORT 2021

97

29. Leases
LessorOne subsidiary leases certain equipment and other assets.
As stated in Note 2 (r) ii, finance lease transactions other than those inwhich ownership is fully transferred to the lessee are accounted for in asimilar manner to ordinary sales and transactions, effective from the year
ended March 31, 2009.
Investments in leases included in other assets on the balance sheets asof March 31, 2021 and 2020 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Gross lease receivables��������������������������
Unguaranteed residual values�����������
Unearned interest income�������������������
Investments in leases������������������������������

2021

2020

2021

¥15,936428(1,355)¥15,008¥17,388463(1,557)¥16,294$143,943
3,865(12,239)$135,561

Maturities of lease receivables for finance leases that are deemed totransfer ownership of the leased property to the lessee are as of March
31, 2021 are as follows:
Millions of yen

Thousands of
U.S. dollars

¥413
390
278
84
62
0

$3,730
3,522
2,511
758
560
0

2022��������������������������������������������������������������������������������������������������
2023��������������������������������������������������������������������������������������������������
2024��������������������������������������������������������������������������������������������������
2025��������������������������������������������������������������������������������������������������
2026��������������������������������������������������������������������������������������������������
2027 and thereafter����������������������������������������������������������������

Maturities of gross lease receivables related to investments in leases asof March 31, 2021 are as follows:2022��������������������������������������������������������������������������������������������������
2023��������������������������������������������������������������������������������������������������
2024��������������������������������������������������������������������������������������������������
2025��������������������������������������������������������������������������������������������������
2026��������������������������������������������������������������������������������������������������
2027 and thereafter����������������������������������������������������������������

Millions of yen

Thousands of
U.S. dollars¥5,141
4,100
3,065
2,033
982
612

$46,436
37,033
27,684
18,3638,870
5,527

1. Defined benefit plan (except for the plan adopting the simplified method)(1) The changes in defined benefit obligation for the years ended March
31, 2021 and 2020, were as follows:

Balance at beginning of year�������������
Current service cost���������������������������
Interest cost��������������������������������������������
Actuarial losses��������������������������������������
Benefits paid�������������������������������������������
Prior service cost����������������������������������
Balance at end of year����������������������������

2021

Due within one year��������������������������������
Due after one year������������������������������������
Total�������������������������������������������������������������

2021

¥3
5
¥9

2020

2021

¥47,549
1,727
204
374
(2,497)—¥47,358$427,766
15,536
1,833
11,453(26,601)—$429,997

Thousands of
U.S. dollars

Millions of yen

Balance at beginning of year�������������
Expected return on plan
assets��������������������������������������������������������
Actuarial gains (losses)���������������������
Contribution from theemployer������������������������������������������������
Benefits paid�������������������������������������������
Balance at end of year����������������������������

2021

2020

2021

¥45,648¥45,861$412,320

737
13,782890(1,540)6,657
124,487

1,750(1,342)¥60,575

1,773(1,336)¥45,648

15,807(12,121)$547,150(3) Reconciliation between the liability (asset) recorded in the consolidated balance sheet and the balances of defined benefit obligationand plan assets:
Millions of yen

Funded defined
benefit obligation�����������������������������������
Plan assets������������������������������������������������������
Net liability (asset) arising fromthe balance sheet�����������������������������������

$27
54
$81

Liability for retirement benefits��������
Asset for retirement benefits��������������
Net liability (asset) arising fromthe balance sheet�����������������������������������

2020¥47,605(60,575)¥47,358(45,648)$429,997(547,150)¥(12,969)¥1,710$(117,143)

The Bank and consolidated subsidiaries have either funded or unfunded
defined benefit plans. The Bank’s funded defined benefit corporate pension
plan (contract type) provides lump-sum or annuity payments, the amountsof which are determined based on the length of service and certain otherfactors. The Bank’s lump-sum severance payment plan, which became afunded plan as a result of setting a retirement benefits trust, provides
lump-sum payments determined based on the length of service, position,and certain other factors. As of October 1, 2017, the Bank has transferred apart of its funded defined benefit corporate pension plan to a defined
contribution plan. The consolidated subsidiaries’ unfunded lump-sum
severance payment plans are based on a simplified method in the calculation of their liability for retirement benefits and retirement benefit costs.
98

2021

Thousands of
U.S. dollars

2021

2020

¥—
12,969¥1,710—$—
117,143¥(12,969)¥1,710$(117,143)

2021(4) The components of net periodic benefit costs for the years ended
March 31, 2021 and 2020, were as follows:
Millions of yen

30. Retirement benefit plans

Thousands of
U.S. dollars

2021

Millions of yen

Thousands of
U.S. dollars

2020

¥3
6
¥9

2021

¥47,358
1,720
203
1,268
(2,945)—¥47,605(2) The changes in plan assets for the years ended March 31, 2021 and2020, were as follows:

The minimum rental commitments under noncancelable operatingleases as of March 31, 2021 and 2020, were as follows:

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Service cost���������������������������������������������������
Interest cost��������������������������������������������������
Expected return on plan assets��������
Recognized actuarial gains��������������������
Amortization of prior service cost���Net periodic benefit costs��������������������

Thousands of
U.S. dollars

2021

2020

2021

¥1,720
203
(737)
(488)
—
¥697

¥1,727
204
(890)
(632)
—
¥408

$15,536
1,833(6,657)(4,407)—$6,295

(5) Amounts recognized in other comprehensive income (before income
tax effect) in respect of defined retirement benefit plans for the years
ended March 31, 2021 and 2020, were as follows:
Thousands of
U.S. dollars

Millions of yen

Prior service cost����������������������������������������
Actuarial losses (gains)���������������������������
Total��������������������������������������������������������������������

(2) Reconciliation between the liability recorded in the consolidatedbalance sheet and the balances of defined benefit obligation and plan
assets:

2021

2020

¥—
(12,024)¥(12,024)

¥—
2,547
¥2,5472021$—(108,608)$(108,608)

2021

Unfunded defined benefit
obligation����������������������������������������������������
Net liability arising from thebalance sheet��������������������������������������������

(6) Amounts recognized in accumulated other comprehensive income(before income tax effect) in respect of defined retirement benefit
plans as of March 31, 2021 and 2020, were as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service cost������
Unrecognized actuarial gains������������
Total��������������������������������������������������������������������

2021

2020

2021

¥—
(13,310)¥(13,310)¥—(1,285)¥(1,285)$—(120,224)$(120,224)

2021

2020

(7) Plan assets:a. Components of plan assets

Thousands of
U.S. dollars

Millions of yen
2020

¥143

¥130

$1,291¥143¥130$1,291Thousands of
U.S. dollars

Millions of yen
2021

Liability for retirement benefits��������
Net liability arising fromthe balance sheet�����������������������������������

2020

2021

¥143

¥130

$1,291¥143¥130$1,291(3) Net periodic benefit costs recognized in the simplified method for theyears ended March 31, 2021 and 2020, were ¥21 million ($189 thousand) and ¥22 million, respectively.

3. Defined contribution plan
13%
62
8
17
100%

Bonds�����������������������������������������������������������������������������������������������
Stocks�����������������������������������������������������������������������������������������������Cash and cash equivalents�������������������������������������������������
General accounts����������������������������������������������������������������������
Total���������������������������������������������������������������������������������������������������

16%
53
10
21
100%

(Note) Total plan assets included retirement benefits trust of 53% and 45%, for the years
ended March 31, 2021 and 2020, respectively, mainly consisting of 5 stocks, which wereset for a corporate pension plan and a lump-sum payment plan.

The Bank’s required contribution to the defined contribution plan for theyears ended March 31, 2021 and 2020 were ¥329 million ($2,971 thousand)and ¥326 million, respectively.

31. Income taxes
The tax effects of significant temporary differences that resulted in deferred
tax assets and liabilities at March 31, 2021 and 2020, were as follows:
Thousands of
U.S. dollars

Millions of yen

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering theallocation of plan assets and the long-term rates of return which are
expected currently and in the future from the various components of theplan assets.
(8) Assumptions used for the years ended March 31, 2021 and 2020, wereset forth as follows:
2021

Discount rate�������������������������������������������������������������������������������
Expected rate of return on plan assets
Plan assets (except for retirement benefits
trust)�����������������������������������������������������������������������������������������
Plan assets (retirement benefits trust)�������������������
Estimated rate of salary increase�������������������������������������

2020

0.43%

0.43%

2.96%
0.00%
4.10%

3.58%
0.00%
4.10%

2. Defined benefit plan adopting the simplified method(1) The changes in defined benefit obligation adopting the simplified
method for the years ended March 31, 2021 and 2020, were as follows:
Thousands of
U.S. dollars

Millions of yen
2021

Balance at beginning of year�������������
Net periodic benefit costs��������������
Benefits paid�������������������������������������������
Contribution to the plan�����������������
Balance at end of year����������������������������

2021

¥130
21
(8)
—
¥143

2020

¥121
21
(12)
—
¥130

2021

$1,174189(72)—$1,291

Deferred tax assets:
Allowance for loan losses���������������
Devaluation of stocks and othersecurities������������������������������������������������
Liability for retirement
benefits���������������������������������������������������
Depreciation�������������������������������������������
Accrued enterprise tax���������������������
Deferred losses on derivatives
under hedge accounting�������������
Other�����������������������������������������������������������
Less valuation allowance(Note)��������������������������������������������������������
Total�������������������������������������������������������
Deferred tax liabilities:
Reserve for advancedepreciation of fixed assets��������
Net unrealized gains onavailable-for-sale securities���������
Defined retirement benefit
plans����������������������������������������������������������
Deferred gains on derivatives
under hedge accounting�������������
Total�������������������������������������������������������
Net deferred tax liabilities�����������

2021

2020

2021

¥11,763¥10,201$106,250

5,178

4,979

46,770

2,495
1,837
272

3,222
1,496
179

22,536
16,592
2,456

—
1,984

3,656
1,934

—
17,920(11,659)¥11,871(13,785)¥11,885(105,311)$107,226

(175)

(175)

(1,580)(80,824)(39,331)(730,051)(4,052)(391)(36,600)(715)(85,767)¥(73,896)—(39,898)¥(28,013)(6,458)(774,699)$(667,473)

Note: The valuation allowance decreased by ¥2,125 million ($19,194 thousand). Thisdecrease was mainly due to the fact that the Bank recognized tax losses on a portion ofvaluation allowances related to loans and impaired securities that were written off orreserved for in prior years, following sales etc. of such assets.

SHIGA BANK ANNUAL REPORT 2021

99

A reconciliation of the effective income tax rate reflected in the accompanying consolidated statement of income to the statutory tax rate for the years
ended March 31, 2021 and 2020, were as follows:
2021

Statutory tax rate����������������������������������������������������������������������
(Reconciliation)
Permanent differences excluded fromtaxable income such as dividend income�������
Changes in valuation allowance�������������������������������
Others����������������������������������������������������������������������������������������
Effective income tax rate�����������������������������������������������������

2020

30.4%

—

(1.9)%(16.2)%(0.1)%
12.2%

—
—
—
—

The information for the year ended March 31, 2020 was not presented
because the difference was less than or equal to 5% of the statutory tax rate.

32. Financial instruments and related
disclosures
1. Overall situation concerning financial instruments(1) Basic policy for financial instruments
As a regional financial institution with its main business base in Shiga
Prefecture, the Group provides financial services centered on banking
operations.
The Group’s main operations are to extend loans to customers in its
business area, and make investments in securities by mainly using funds thatare received as deposits from customers and those that are obtained
through the financial market.
To carry out these operations, the Group has financial assets and financial
liabilities that are largely subject to interest rate volatility. To prevent adverse
effects from such interest rate volatility, the Group conducts Asset Liability
Management (ALM), the comprehensive management of assets andliabilities.
(2) Nature and extent of risks arising from financial instruments
The financial assets held by the Group are primarily loans to customers
within its business area and are subject to credit risk of incurring losses whenthe value of such assets declines or disappears due to deterioration in thefinancial condition of its customers. The Group’s domestic loan portfolio
attempts to distribute risk by industry sector to eliminate its exposure tocredit risk caused by changes in the business environment in certain
industries.
The Group holds investment securities, primarily comprised of bonds,
corporate stocks and investment trusts, for the following purposes: to sellthem to customers, for purely investment purposes, and for strategic
investment. These are subject to market risk of incurring potential losses due
to fluctuations of interest rates, foreign exchange rates, stock markets andothers, and the credit risk of the issuers.
Foreign currency-denominated loans and bonds are subject to foreignexchange risk in addition to the risks as described above. They are managed
to reduce foreign exchange risk by procuring foreign currency funds throughcurrency swaps, repurchase transactions, or call transactions.
Financial liabilities are primarily deposits from customers and borrowed
money. Borrowed money is — under certain conditions, such as when theGroup is unable to access the market — subject to risks that losses are
incurred due to an inability to secure required funds or being forced to raise
funds at significantly higher than normal interest rates. Moreover, some of
the Group’s borrowings are made at variable interest rates and are subject torisks of losses from increasing fund procurement costs associated with risinginterest rates.
To respond to customer needs and hedge market risks for assets andliabilities, the Group uses derivative transactions, including interest rate
swaps, currency swaps, currency options, and forward exchange contracts.
For some of these transactions, the Group applies hedge accounting basedon internal regulations that comply with the “JICPA Practical Guidelines for
Financial Instruments” and the Group’s own hedging policies.
To obtain short-swing profits, the Group transacts bond futures contracts,bond options, and stock price index futures trading after setting position
limit and loss limits amounts.
These derivative transactions include market risk as well as credit risk.
100(3) Risk management for financial instruments(i) Credit risk management
Recognizing credit risk as the most important risk to business managementfrom the standpoint of its impact, the Group has established regulations andstandards pertaining to such risk. It has also developed a debtor rating
system based on a Foundation Internal Ratings-based approach and has
built a credit risk management system appropriate to its needs.
Notably, the Group has developed a rating system that involves asset
self-assessments. Under this system, for example, the Business Management
Department reports the results of its own asset ratings at meetings such as
the Meeting of Managing Directors.
With respect to individual credit management, the Group has instituted
its “Basic Rules of Loan Business,” in which it has clearly defined the way of
thinking and a code of conduct to which all employees involved in the loanbusiness should adhere. It has also established basic procedures to follow
when making credit decisions or managing credit, along with putting inplace a system that enables executives and employees to make credit
decisions in accordance with the principles of public benefit, security,
profitability, liquidity, and growth potential. More specifically, the Group has
developed and is operating a credit management system that handles credit
assessment, credit limits, credit information management, and internalratings; sets guarantees and collateral; and deals with problem debts ofcompanies (or corporate groups) or individual projects. This credit management system is being implemented in every bank branch and the Credit
Supervision Department.
With respect to extending credit to overseas debtors, the Group manages it by setting a credit limit for each country at the Meeting of Managing
Directors each fiscal year, after taking into account the foreign currency
conditions and the political and economic situation of the country in which
the debtor resides.
With respect to conducting market transactions for securities or other
instruments, a limit is set semiannually at the Meeting of Managing Directors
for bond issuer credit risk and counterparty risk for derivative and financialtransactions, and the credit status and the market prices are managed on adaily basis. The Group has established a system in which reports about thoserisks are routinely given to the Meeting of Managing Directors.
(ii) Market risk management
The Group has compiled a set of Market Risk Management Rules with thegoal of upgrading market risk management, strengthening internal controls,and ensuring sound management. To achieve stable profits, the Groupinstitutes a financial plan and risk management policy semiannually and is
working to build an appropriate risk management system.
1) Interest rate risk management
As interest rate risk inevitably arises in banking business operations, theGroup manages all assets and liabilities (including off-balance transactions),
such as deposits, loans, and securities, in a comprehensive manner through
ALM.
Along with the aforementioned Market Risk Management Rules, theGroup has established standards for risk management methods andreporting procedures. The Group conducts monitoring through such models
as Value at Risk (VaR) and the maturity ladder approach, and reports to the
ALM Committee on a regular basis.
2) Exchange rate risk management
For exchange rate volatility risk, the Group sets position limits at the Meetingof Managing Directors to manage positions that are subject to exchange
rate risk. The Group controls positions by using derivative transactions,
including foreign currency transactions and currency swaps.
The Group establishes an acceptable level of risk using VaR and manages
the level of risk on a daily basis so that it stays within an acceptable range.
3) Price volatility risk management
To rigorously manage price volatility risk for transactions, including securities,
the Group has divided the organization into a market transaction sector,
business management sector, and risk management sector.
For market transactions including securities, the Group takes into
account overall Group risk and return, based on a financial plan and a risk
management policy, and formulates a business management plan in themarket sector.
When making investments, the Group calculates position amounts,
gains, and losses as well as VaR and Basis Point Value (BPV) based on theabovementioned policy and plan. The extent to which the Group complies

with the established acceptable risk limit and other risk limits is monitored
on a daily basis and is reported to management.
4) Derivative transaction management
With respect to derivative transactions, the divisions concerned with theexecution of transactions, the evaluation of hedge effectiveness, andbusiness management have been separated, and an internal checking
system has been established. Because a majority of the Group’s derivativetransactions are performed for the purposes of hedging and cover transactions to customer transactions, the Group manages them so that asset andliability risks and market risks are offset with each other.
5) Quantitative information regarding market risks
Regarding market risks, the Group measures the quantitative risk of interest
rate risks and stock price volatility risks through VaR, a statistical method.
Principally by reporting these risks to the ALM Committee and otherorganizations on a regular basis, the Group ensures appropriate monitoringand management. In calculating the risk amounts, the Group adopts ahistorical simulation method (a holding period of one year, a confidence
interval of 99%, and an observing period of two years).
Interest rate risks
The Group measures interest rate risks of all its assets and liabilities,
including loans, securities and deposits, and derivative transactions.
The Group’s interest rate risk amounts stood at ¥19,765 million($178,529 thousand) as of March 31, 2021 and ¥9,213 million as of March
31, 2020.
Regarding liquid deposits, such as ordinary deposits, the Grouphandles some as deposits that remain with the Group for an extended
period and manages them by allocating them to each period category
based on an internal model.
Stock price volatility risks
The Group holds certain shares for strategic investment and purely
investment purposes. The volatility risk amounts of the prices of suchshares stood at ¥79,335 million ($716,601 thousand) as of March 31, 2021,
and ¥45,345 million as of March 31, 2020.
Backtesting
To verify the appropriateness of the risk amounts that are measured
through VaR, the Group carries out backtesting in which VaR is comparedwith gains and losses. In this way, the Group analyzes the effectiveness of
the risk measurement method. However, because VaR statisticallymeasures the amounts based on the historical market volatility, results
may vary due to assumptions, measuring methods, and other factors. In
addition, risks may not be able to be appropriately captured when themarket environment changes drastically.
Interest rate risks and stock price volatility risks that are held by the
Bank’s consolidated subsidiaries are excluded from the calculation of themarket risk amount as the impact from such risks on the Group is limited.
(iii) Liquidity risk management related to financing
The Group has compiled a set of Liquidity Risk Management Rules under abasic policy of clearly understanding its cash position and ensuring stablefinancing. In this way, it strives to establish an appropriate risk management
system.
With respect to daily financing, the Group monitors and manages thefinancial environment, the balance of realizable current assets, the expectedamount of cash outflows, and other such factors. The Group reports thefinancing situation and other related matters to the ALM Committee on aregular basis.

2. Fair value of financial instruments
Fair value and the consolidated balance sheet amount as of March 31, 2021
and 2020, are shown below. Immaterial accounts on the consolidatedbalance sheet are not included in the table below. Some instruments, suchas unlisted stocks, whose fair value cannot be reliably determined, are notincluded in the table below (see Note 2).
Millions of yen
2021
Consolidatedbalance sheet
amountFair value

Cash and due from banks������������������������ ¥2,013,251 ¥2,013,251
Investment securities
Held-to-maturity securities���������������
20,011
19,842Available-for-sale securities��������������� 1,556,937 1,556,937—
Loans and bills discounted���������������������� 4,001,698
Allowance for loan losses (*1)����������
(32,909)—3,968,789 3,992,558
Assets total��������������������������������������������������������� 7,558,989 7,582,590
Deposits�������������������������������������������������������������� 5,398,851 5,399,054
49,56049,562
Negotiable certificates of deposit�������
Call money and bills sold��������������������������
516,077
516,077
Payables under securities lending
272,654272,654transactions����������������������������������������������������
899,055
899,095
Borrowed money�������������������������������������������
Liabilities total�������������������������������������������������� 7,136,198 7,136,444
Derivative transactions (*2)
Deferred hedge accounting is(3,739)(3,739)not applied�����������������������������������������������
Deferred hedge accounting is
2,350
2,350
applied���������������������������������������������������������
Derivative transactions total������������������� ¥(1,389) ¥(1,389)

Difference

¥—
(168)
—
—
—
23,76923,600
203
2
—
—
40
245

—
—
¥—

Millions of yen
2020
Consolidatedbalance sheet
amountFair value

Cash and due from banks������������������������ ¥934,834 ¥934,834
Investment securities
Held-to-maturity securities���������������
——1,299,561
Available-for-sale securities��������������� 1,299,561
Loans and bills discounted���������������������� 3,859,363—(27,412)—
Allowance for loan losses (*1)����������
3,831,950
3,859,117
Assets total��������������������������������������������������������� 6,066,346
6,093,513
Deposits�������������������������������������������������������������� 4,886,433
4,886,683
Negotiable certificates of deposit�������
66,683
66,685
Call money and bills sold��������������������������
136,386
136,386
Payables under securities lendingtransactions����������������������������������������������������
235,538
235,538
451,079
451,088
Borrowed money�������������������������������������������
Liabilities total�������������������������������������������������� 5,776,121
5,776,382
Derivative transactions (*2)
Deferred hedge accounting is
not applied�����������������������������������������������
298
298
Deferred hedge accounting is(12,007)(12,007)
applied���������������������������������������������������������
Derivative transactions total������������������� ¥(11,709) ¥(11,709)

Difference

¥—
—
—
—
—
27,16627,166
249
2
—
—
8
260

—
—
¥—

SHIGA BANK ANNUAL REPORT 2021

101Thousands of U.S. dollars
2021
Consolidatedbalance sheet
amountFair value

Cash and due from banks������������������������ $18,184,906 $18,184,906
Investment securities
Held-to-maturity securities���������������
180,751
179,225
Available-for-sale securities��������������� 14,063,201 14,063,201
Loans and bills discounted���������������������� 36,145,768—
Allowance for loan losses (*1)����������
(297,254)—
35,848,514 36,063,210
Assets total��������������������������������������������������������� 68,277,382 68,490,560
Deposits�������������������������������������������������������������� 48,765,703 48,767,536
Negotiable certificates of deposit�������
447,656
447,674
Call money and bills sold�������������������������� 4,661,521
4,661,521
Payables under securities lendingtransactions���������������������������������������������������� 2,462,776
2,462,776
8,121,172
Borrowed money������������������������������������������� 8,120,811
Liabilities total�������������������������������������������������� 64,458,477 64,460,699
Derivative transactions (*2)
Deferred hedge accounting is(33,772)(33,772)
not applied�����������������������������������������������
Deferred hedge accounting is
21,226
21,226applied���������������������������������������������������������
Derivative transactions total������������������� $(12,546) $(12,546)

Difference$—(1,517)———
214,696
213,169
1,833
18
—
—
361
2,212

—
—
$—

(*1)	General allowance for loan losses and specific allowance for loan losses provided to“Loans and bills discounted” are separately presented in the above table.
(*2)	Derivative transactions recorded in “Other assets” and “Other liabilities” are aggregated and shown herein. Assets and liabilities attributable to the derivativetransactions are totally offset and the net liability position as a consequence ofoffsetting would be represented with brackets.

(Note 1) Valuation method of financial instruments
Assets(1) Cash and due from banks
As fair values of cash and due from banks without maturity approximatebook values, the Group deems the book values to be the fair values. Since
contractual terms of cash and due from banks with maturities are short (i.e.,less than one year) and fair values of these instruments approximate bookvalues, the Group deems the book values to be the fair values.
(2) Securities
Fair values of securities that have market prices are based on their market
prices.
With respect to those without market prices, the Group uses the present
value that is calculated by discounting the future cash flows of the principal
based on contracts, using an interest rate obtained by adjusting interest
rates available in the interbank market in accordance with categories ofinternal ratings and terms, taking into account the credit risk premium andthe liquidity risk premium.
Fair value information for securities by classification is included in Note 4“Securities.”(3) Loans and bills discounted
As fair values of loans and bills discounted with short contractual terms (i.e.,less than one year) approximate book values, the Group deems the bookvalues to be the fair values.
Regarding loans with long contract terms (i.e., one year or longer), thosewith floating interest rates reflect the market rate in the short term. Consequently, unless the credit conditions of borrowers have not significantly
changed after the execution of the loans, the book value of the loans ispresented as the fair value, as the fair value approximates the book value.
With respect to fair values of loans with long contract terms with fixedinterest rates, the Group uses the present value that is calculated by discounting the future cash flows of the principal based on contracts, using aninterest rate obtained by adjusting interest rates available in the interbank
market in accordance with categories of internal ratings and terms, taking

102

into account the credit risk premium and the liquidity risk premium. Meanwhile, the fair value of certain loans (including consumer loans) is calculatedby discounting the future cash flows of the principal based on contracts,
using an interest rate considered to be applicable in cases when similarloans are executed.
With respect to claims against legally bankrupt debtors, virtually bankrupt debtors and debtors who are likely to go bankrupt (potentially bankrupt
debtors), since credit losses are calculated based on the present value of the
expected future cash flows or the estimated amounts that the Group would
be able to collect from collateral and guarantees, fair values approximate theconsolidated balance sheet amount net of the currently expected credit loss
amount, and the Group thus deems such amounts to be fair value.
Regarding loans, for those without a fixed maturity due to loan characteristics such as limiting loans to within the value of collaterals, the Groupdeems the book value to be the fair value, since the fair value is expected toapproximate the book value based on the estimated repayment period,
interest rate, and other conditions.
Liabilities(1) Deposits and (2) Negotiable certificates of deposit
For demand deposits, the Group deems the payment amounts required on
the consolidated balance sheet date (i.e., book values) to be the fair value.
The fair value of time deposits and negotiable certificates of deposit withshort deposit terms (i.e., less than one year) approximate the book value, and
the Group deems the book value to be the fair value. With respect todeposits with long deposit terms (i.e., one year or longer), the Group uses
the present value calculated by discounting future cash flows of theprincipal based on contracts, using the interest rate that would apply to
newly accepted deposits in accordance with the categories of deposit terms.
(3) Call money and bills sold and (4) Payables under securities lendingtransactions
Since contractual terms of these instruments are short (i.e., less than oneyear) and fair values of these instruments approximate book values, theGroup deems the book values to be the fair values.
(5) Borrowed money
As the fair value of borrowed money with short contractual terms (i.e., lessthan one year) approximates the book value, the Group deems the bookvalue to be the fair value.
Regarding borrowed money with long contractual terms (i.e., one year or
longer), for floating rate borrowings, the book value is presented as the fairvalue, because the fair value approximates book value. This is because thefloating rate borrowings reflect the market interest rate in a short period andthere has been no significant change in our credit conditions or in the credit
conditions of our consolidated subsidiaries before or after the borrowings
were made. With respect to fixed rate borrowings, the Group uses thepresent value calculated by discounting the future cash flows of theprincipal based on contracts, using an interest rate obtained by adjusting
interest rates available in the interbank market in accordance with categories
of terms, taking into account the Bank’s credit risk premium.
Meanwhile, fair values of borrowings of consolidated subsidiaries arecalculated by discounting the future cash flows of the principal based oncontracts, using interest rates considered to be applicable in cases when thesimilar borrowings are made.
Derivatives
Fair value information for derivatives is included in Note 33 “Fair value
information on derivative transactions.”

(Note 2) Financial instruments whose fair value cannot be reliably determined
The following instruments are not included in “Available-for-sales securities” in the above table showing the fair value of financial instruments.
Consolidated balance sheet amountMillions of yen

Unlisted stocks (*1) (*2)���������������������������������������������������������������������
Investment in capital of partnership and others (*3)�����
Total��������������������������������������������������������������������������������������������������������

Thousands of U.S. dollars

2021

2020

2021

¥3,765
5,792¥9,557¥3,853
3,692¥7,545$34,00752,316$86,324(*1) Fair value of unlisted stocks is exempt from disclosure because they do not have a market price and their fair value cannot be reliably determined.
(*2) Impairment losses for unlisted stocks amounted to ¥0 million ($0 thousand) and ¥15 million for the years ended March 31, 2021 and 2020, respectively.
(*3)	Fair value of investment in capital of partnership and others is exempt from disclosure because partnership assets are composed of unlisted stock and others and their fair value
cannot be reliably determined.

(Note 3) Maturity analysis for financial assets and securities with contractual maturities
Millions of yen
2021

Due from banks�������������������������������������������������������������������������������������
Investment securities�������������������������������������������������������������������������
Held-to-maturity securities���������������������������������������������������������
Japanese government bonds������������������������������������������������
Japanese local government bonds�������������������������������������
Japanese corporate bonds�������������������������������������������������������
Available-for-sale securities���������������������������������������������������������
Japanese government bonds������������������������������������������������
Japanese local government bonds�������������������������������������
Japanese corporate bonds�������������������������������������������������������
Others����������������������������������������������������������������������������������������������������
Loans and bills discounted (*)������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������

1 year or less

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

Over 10 years¥1,973,224
89,331————
89,331—
12,60944,10032,620870,617¥2,933,173¥—
142,386————
142,386
4,000
33,59642,17462,615
793,717¥936,104¥—
114,864————
114,864
12,00025,39335,486
41,984
601,858¥716,723¥—71,452————
71,452—
34,71423,443
13,295408,177¥479,630¥—262,438————
262,438
40,000132,966
17,60071,871
412,527¥674,966¥—519,743
20,00020,000——499,743
238,000
15,237183,220
63,284
844,164¥1,363,907

Millions of yen
2020

Due from banks�������������������������������������������������������������������������������������
Investment securities�������������������������������������������������������������������������
Held-to-maturity securities���������������������������������������������������������
Japanese government bonds������������������������������������������������
Japanese local government bonds�������������������������������������
Japanese corporate bonds�������������������������������������������������������
Available-for-sale securities���������������������������������������������������������
Japanese government bonds������������������������������������������������
Japanese local government bonds�������������������������������������
Japanese corporate bonds�������������������������������������������������������
Others����������������������������������������������������������������������������������������������������
Loans and bills discounted (*)������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������

1 year or less

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

Over 10 years¥896,491—————
133,595
21,00042,85733,59136,145929,566¥1,959,653

¥—
—
—
—
—
—
169,407—
32,521
68,554
68,331
764,871¥934,279

¥—
—
—
—
—
—
113,101
16,00018,60523,812
54,683
557,557¥670,658

¥—
—
—
—
—
—
59,717—21,453
27,861
10,402
372,416¥432,133

¥—
—
—
—
—
—
142,653
10,00086,887
23,60022,166
361,766¥504,419

¥—
—
—
—
—
—
439,099
199,000
11,450180,005
48,643807,786¥1,246,886

SHIGA BANK ANNUAL REPORT 2021

103

Thousands of U.S. dollars
2021
1 year or less

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

Over 10 years

Due from banks������������������������������������������������������������������������������������� $17,823,358
Investment securities�������������������������������������������������������������������������
806,891—
Held-to-maturity securities���������������������������������������������������������
Japanese government bonds������������������������������������������������
—Japanese local government bonds�������������������������������������
——Japanese corporate bonds�������������������������������������������������������
Available-for-sale securities���������������������������������������������������������
806,891—
Japanese government bonds������������������������������������������������
113,892
Japanese local government bonds�������������������������������������
Japanese corporate bonds�������������������������������������������������������
398,338
294,643
Others����������������������������������������������������������������������������������������������������
7,863,941
Loans and bills discounted (*)������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������� $26,494,201$—1,286,116————
1,286,116
36,130303,459
380,941565,576
7,169,334$8,455,460$—1,037,521————
1,037,521
108,391
229,365
320,531379,225
5,436,347$6,473,877$—645,397————645,397—
313,557
211,751
120,088
3,686,902$4,332,309$—
2,370,499————
2,370,499
361,304
1,201,029
158,973
649,182
3,726,194$6,096,703$—4,694,634
180,652
180,652——
4,513,982
2,149,760
137,629
1,654,954
571,619
7,625,002$12,319,636(*)	Loans in legal bankruptcy, virtual bankruptcy, and potential bankruptcy amounting to ¥45,746 million ($413,205 thousand) and ¥37,409 million, and, loans and bills discounted
without contractual maturities amounting to ¥24,889 million ($224,812 thousand) and ¥27,988 million are excluded from the table above as of March 31, 2021 and 2020.

(Note 4) Maturity analysis for bonds, borrowed money, and other interest-bearing liabilities
Millions of yen
2021

Deposits (*)�����������������������������������������������������������������������������������������������
Negotiable certificates of deposit����������������������������������������������
Call money and bills sold�����������������������������������������������������������������
Payables under securities lending transactions����������������
Borrowed money����������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������

1 year or less

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

Over 10 years¥5,073,145
49,560516,077
272,654786,116¥6,697,554¥306,591———
77,043¥383,634¥19,114———
32,360¥51,475

¥—
—
—
—
94
¥94

¥—
—
—
—
3,440
¥3,440

¥—
—
—
—
—
¥—

Millions of yen
2020

Deposits (*)�����������������������������������������������������������������������������������������������
Negotiable certificates of deposit����������������������������������������������
Call money and bills sold�����������������������������������������������������������������
Payables under securities lending transactions����������������
Borrowed money����������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������

1 year or less

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

Over 10 years¥4,541,372
66,683
136,386
235,538
345,883¥5,325,863¥323,574———
41,701¥365,276¥21,486———
63,483¥84,969

¥—
—
—
—
11
¥11

¥—
—
—
—
—
¥—

¥—
—
—
—
—
¥—

Thousands of U.S. dollars
2021

Deposits (*)�����������������������������������������������������������������������������������������������
Negotiable certificates of deposit����������������������������������������������
Call money and bills sold�����������������������������������������������������������������
Payables under securities lending transactions����������������
Borrowed money����������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������
(*) Demand deposits are included in “1 year or less.”

104

1 year or less

1 to 3 years

3 to 5 years

5 to 7 years

7 to 10 years

Over 10 years$45,823,728
447,656
4,661,521
2,462,776
7,100,677$60,496,377$2,769,316———
695,899$3,465,215$172,649———
292,295$464,953

$—
—
—
—
849
$849

$—
—
—
—
31,072$31,072

$—
—
—
—
—
$—

33. Fair value information on derivativetransactions(2) Currency-related transactions
Millions of yen
2021

Derivative transactions to which hedge accounting is not applied
The following is the fair value information for derivative transactions towhich hedge accounting is not applied at March 31, 2021 and 2020.
The contractual value of swap agreements and the contract amounts offorward exchange contracts, option agreements and other derivatives do
not necessarily measure the Bank’s exposure to market risk.
(1) Interest-rate-related transactions
Millions of yen
2021
Contractual
value dueContractual after one
value
year

Net
unrealized
Fair value gains (losses)

Contractual
value dueContractual after one
value
year

Over-the-counter:
Currency swap���������������������������������� ¥29,632
Forward exchange contracts:
Sold���������������������������������������������������� 110,070
5,289
Bought���������������������������������������������
Currency options:99,602
Sold����������������������������������������������������
99,602
Bought���������������������������������������������
Total��������������������������������������������� ¥—Over-the-counter:
Interest rate swap
Receivable fixed rate/pay
floating rate��������������������������������������
Receivable floating rate /pay
fixed rate���������������������������������������������
Total���������������������������������������������

¥8,481¥8,370

¥26

¥26

9,256
¥—

9,256
¥—

(41)
¥(14)

(41)
¥(14)

Contractual
value dueContractual after one
value
year

Net
unrealized
Fair value gains (losses)

Over-the-counter:
Interest rate swap

Total���������������������������������������������

¥326
7,509
¥—

¥217

¥8

¥8

Contractual
value dueContractual after one
value
year

(4,026)284(4,026)284

62,97762,977¥—(3,320)3,434¥(3,724)

(309)
1,017
¥(3,130)

Contractual
value dueContractual after one
value
year

Over-the-counter:
Currency swap����������������������������������
Forward exchange contracts:
Sold����������������������������������������������������
Bought���������������������������������������������
Currency options:Sold����������������������������������������������������
Bought���������������������������������������������
Total���������������������������������������������

¥29,222

¥699

¥699

44,22534,599

—
—

(25)
100

(25)
100

83,72083,720¥—

50,74250,742¥—(2,240)
2,240
¥774

1,005
(415)
¥1,365

Thousands of U.S. dollars
2021

Net
unrealized
Fair value gains (losses)$76,605$75,602

$234

$234

83,605$—83,605$—(370)$(126)(370)$(126)

Notes: 1.	The above transactions were revalued at the end of each of the years and therelated gains and losses are reflected in the accompanying consolidated
statements of income.
		 2.	The fair values of the above derivatives are principally based on quoted
market prices, such as those of Tokyo Financial Exchange Inc., 		
or discounted values of future cash flows.

Net
unrealized
Fair value gains (losses)¥49,142

Over-the-counter:
Currency swap���������������������������������� $267,654 $230,087
Forward exchange contracts:
Sold���������������������������������������������������� 994,219—
Bought���������������������������������������������
47,773—Currency options:Sold���������������������������������������������������� 899,665 568,846
Bought��������������������������������������������� 899,665 568,846
Total��������������������������������������������� $— $—(484)¥(476)Over-the-counter:
Interest rate swap

Total���������������������������������������������

—
—

(484)
¥(476)

7,509
¥—

2021

Receivable floating rate /pay
fixed rate���������������������������������������������

¥(96)

Contractual
value dueContractual after one
value
year

Thousands of U.S. dollars

Receivable fixed rate/pay
floating rate��������������������������������������

¥(96)

2020

2020

Receivable floating rate /pay
fixed rate���������������������������������������������

¥25,473

Millions of yen

Millions of yen

Receivable fixed rate/pay
floating rate��������������������������������������

Net
unrealized
Fair value gains (losses)

Net
unrealized
Fair value gains (losses)$(867) $(867)(36,365)
2,565(36,365)
2,565(29,988)(2,791)31,0179,186$(33,637) $(28,272)

Notes: 1.	The above transactions were revalued at the end of each of the years and therelated gains and losses are reflected in the accompanying consolidated
statements of income.
		 2. Fair value is calculated using discounted cash flows.

(3) Stock-related transactions are not performed.
(4) Bond-related transactions are not performed.
(5) Financial product-related transactions are not performed.
(6) Credit derivative transactions are not performed.

SHIGA BANK ANNUAL REPORT 2021

105

Derivative transactions to which hedge accounting is applied

34. Comprehensive income

The following is the fair value information for derivative transactions towhich hedge accounting is applied at March 31, 2021 and 2020.
The contract amounts do not necessarily measure the Bank’s exposure tomarket risk:

The components of other comprehensive income for the years ended March
31, 2021 and 2020, were as follows:(1) Interest-rate-related transactions

Hedgeditems

AvailablePrinciple treatment
for-saleInterest rate swap:
Receivable floating rate/ securities
pay fixed rate����������������������� (bonds) ¥272,712 ¥272,712

2020

The amount arising during
the period����������������������������������������������

¥136,490¥(35,917)$1,232,860

Reclassification adjustments toprofit or loss������������������������������������������

(2,135)(4,353)(19,284)

134,355(41,492)¥92,863(40,271)
11,969¥(28,302)

1,213,576(374,780)$838,795

The amount arising during
the period����������������������������������������������

¥14,363¥(7,240)$129,735

Reclassification adjustments toprofit or loss������������������������������������������

(5)

834

(45)

14,357(4,371)¥9,985(6,406)
1,950¥(4,455)

129,681(39,481)$90,190

The amount arising during
the period����������������������������������������������

¥12,513¥(1,914)$113,025

Reclassification adjustments toprofit or loss������������������������������������������

(488)

(632)

(4,407)

The amount of tax effect����������������
Total�������������������������������������������������������

12,024(3,661)¥8,362(2,547)775¥(1,771)

108,608(33,068)$75,530

Total other comprehensive
income����������������������������������������������

¥111,212¥(34,529)$1,004,534

Net unrealized gains (losses) on
available-for-sale securities:

Millions of yen
2021
Contractual
value dueContractual after one
value
year

2021

Thousandsof U.S.
dollars
2021

Millions of yen

Fair value

Before adjustments to tax
effect���������������������������������������������������������
¥2,350

The amount of tax effect����������������
Total�������������������������������������������������������

Millions of yen

Hedgeditems

AvailablePrinciple treatment
for-saleInterest rate swap:
Receivable floating rate/ securities
pay fixed rate����������������������� (bonds)

2020
Contractual
value dueContractual after one
value
year

¥193,794¥193,794

Deferred gains (losses) on derivatives
under hedge accounting:Fair value¥(12,007)

The amount of tax effect����������������
Total�������������������������������������������������������

Thousands of U.S. dollars

Hedgeditems

2021
Contractual
value dueContractual after one
value
year

AvailablePrinciple treatment
for-saleInterest rate swap:
Receivable floating rate/ securities
pay fixed rate����������������������� (bonds) $2,463,300 $2,463,300

Defined retirement benefit plans:
Fair value$21,226

Notes: 1. Deferred hedge accounting is mainly applied.
		 2.	The fair values of the above derivatives are principally based on quoted
market prices, such as those of Tokyo Financial Exchange Inc., or discounted
values of future cash flows.

(2) Currency-related transactions are not performed.
(3) Stock-related transactions are not performed.
(4) Bond-related transactions are not performed.

106

Before adjustments to tax
effect���������������������������������������������������������

Before adjustments to tax
effect���������������������������������������������������������

35. Net income per share
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2021 and 2020, is as follows:

For the year ended March 31, 2021
Basic EPS:
Net income attributable to common shareholders�������������������������������������
Effect of dilutive securities:
Warrants�����������������������������������������������������������������������������������������������������������������������������������
Diluted EPS:
Net income for computation��������������������������������������������������������������������������������������
For the year ended March 31, 2020
Basic EPS:
Net income attributable to common shareholders�������������������������������������
Effect of dilutive securities:
Warrants�����������������������������������������������������������������������������������������������������������������������������������
Diluted EPS:
Net income for computation��������������������������������������������������������������������������������������

Millions of yen
Net Income Attributableto Owners of the Parent

Thousands of shares
Weighted-Average
Shares¥11,448

50,183Yen

U.S. dollars
EPS¥228.12$2.061$1.991

1,752¥11,448

51,935¥220.43¥12,41251,067¥243.05

6,880¥12,41257,947¥214.19

36. Subsequent event
Appropriation of retained earnings
The following appropriation of retained earnings will be authorized at the ordinary general shareholders’ meeting to be held on June 25, 2021:
Millions of yen

Thousands of U.S. dollars

Cash dividends,¥22.5 ($0.203) per share��������������������������������������������������������������������
¥1,119$10,107¥1,119$10,107
Total��������������������������������������������������������������������������������������������������������
Acquisition of treasury stock
At a meeting of the Board of Directors held on May 14, 2021, the Bank resolved the matter related to acquisition of treasury stock in accordance with theprovisions of Article 156 of the Companies Act, as applied mutatis mutandis pursuant to Article 165, Paragraph 3 of the same Act.
1. Reasons for the acquisition of treasury stock
The Bank will repurchase its own shares in order to increase shareholder value through the return of profits to shareholders
2. Details of matters related to the acquisition(1) Type of shares to be acquired: Common stock(2) Total number of shares to be acquired: 500 thousand shares (upper limit)(3) Total cost of stock acquisition: 1 billion yen ($9,032 thousands) (upper limit)(4) Period of acquisition of treasury stock: From May 19, 2021 to July 30, 2021
(5) Method of acquisition: Market purchase on the Tokyo Stock Exchange

37. Segment information
For the years ended March 31, 2021 and 2020
Because the Group has only one segment, banking, the description is not presented.
Related Information(1) Information about services
Lending services

Operating income from external customers����������������������

¥34,933
Lending services

Operating income from external customers����������������������

¥37,299
Lending services

Operating income from external customers����������������������

$315,536

Millions of yen
2021
Securities investment Fees and commissions

Other

Total

¥20,348¥16,542¥14,260¥86,084

Other

Total

¥20,145¥15,621¥15,804¥88,871

Other

Total

$183,795$149,417$128,804$777,563

Millions of yen
2020
Securities investment Fees and commissions
Thousands of U.S. dollars
2021
Securities investment Fees and commissions(2) Information about geographical areas(a) Operating income
Operating income from external domestic customers exceeded 90% of total operating income on the consolidated statements of income for the years ended
March 31, 2021 and 2020; therefore geographical operating income information is not presented.
(b) Tangible fixed assets
The balance of domestic tangible fixed assets exceeded 90% of the total balance of tangible fixed assets on the consolidated balance sheets as of March 31,
2021 and 2020; therefore, geographical tangible fixed assets information is not presented.

(3) Information about major customers
Operating income to a specific customer did not reach 10% of total operating income on the consolidated statements of income for the years ended March 31,
2021 and 2020; therefore, major customer information is not presented.
SHIGA BANK ANNUAL REPORT 2021

107

38. Related party transactions
Transactions of the Bank with related parties for the year ended March 31, 2021, were as follows:
Related party

Misao Daido

Category

Director or relative

Description of transactions

Lending operation loan, net ofcollection�����������������������������������������������
Interest receipts������������������������������������
Commission receipts, etc.��������������
Lending operation loan, net ofcollection�����������������������������������������������

Transaction amountMillions
Thousands ofof yenU.S. dollars

¥(0)
0
0

$(0)
0
0

Loans����������������������
Other assetss�����

¥33
0

$298
0

(1)

(9)

14

126

0
0

0
0

Loans����������������������
Otherliabilities�������������

0

0

9

81

Loans����������������������
Otherliabilities�������������

13

117

0

0

Loans����������������������
Other assets�������
Customers’
liabilities for
acceptancesandguarantees........ 
Acceptancesandguarantees........ 
Otherliabilities�������������

66
10

596
90

10

90

10

90

0

0

Loans����������������������
Otherliabilities�������������

88

794

0

0

Company in which director or
relative has the majority ofInterest receipts������������������������������������
the voting rights
Commission receipts, etc.��������������
Lending operation loan, net ofcollection�����������������������������������������������
Company in which director or
relative has the majority ofInterest receipts������������������������������������
the voting rights
Commission receipts, etc.��������������
Lending operation loan, net ofcollection�����������������������������������������������
Guarantee of payment���������������������

0
0

0
0

(10)
—

(90)
—

Lease income�����������������������������������������

1

9

Interest receipts������������������������������������
Company in which director or Guarantee commission
relative has the majority ofreceipts����������������������������������������������������
KUSANEN CO., LTD. the voting rights
Commission receipts, etc.��������������
Lending operation loan, net ofcollection�����������������������������������������������
Company in which director or
Takagi Building
relative has the majority ofInterest receipts������������������������������������
Co., Ltd.
the voting rights
Commission receipts, etc.��������������

0

0

0
0

0
0

28

252

0
0

0
0

Taiyo & Co.

Albatross Co., Ltd.

Accounts nameYear-end balance
Millions
Thousands ofof yenU.S. dollars

Transactions of the Bank with related parties for the year ended March 31, 2020, were as follows:

Related party

Misao Daido

Taiyo & Co.

108

Category

Description of transactions

Lending operation loan, net ofcollection�����������������������������������������������
Interest receipts������������������������������������
Director or relative
Commission receipts, etc.��������������
Lending operation loan, net ofCompany in which director or collection�����������������������������������������������
Interest receipts������������������������������������
relative has the majority ofCommission receipts, etc.��������������
the voting rights
Lending operation loan, net ofcollection�����������������������������������������������
Guarantee of payment���������������������

Transaction
amountMillions of yen

Year-endbalance
Accounts name Millions of yen

¥ (2)
0
0

Loans����������������������
Other assets........

¥34
0

(4)
0
0

Loans.......................
Other liabilities..

15
0

10
(36)

Loans.......................
Other assets........
Customers’
liabilities for
acceptancesandguarantees........
Acceptancesandguarantees........
Otherliabilities..............

77
11

Lease income�����������������������������������������

4

Interest receipts������������������������������������
Company in which director or Guarantee commission
relative has the majority ofreceipts����������������������������������������������������
KUSANEN CO., LTD. the voting rights
Commission receipts, etc.��������������

0
0
0

10
10
0

SHIGA BANK ANNUAL REPORT 2021

109

110

SHIGA BANK ANNUAL REPORT 2021

111

112

Composition of Capital Disclosure (Capital ratio of the fiscal year ended March 31, 2020, Basel III)

Capital ratio (consolidated)(Appended Form 2 of Supplementary Provision of the Notification of Japanese Financial Services Agency No. 7, 2014)
Millions of yen, %CC1: Composition of regulatory capital (consolidated)aBasel III
Template
No..
Items
Common Equity Tier 1 capital: instruments and reserves
1a+2-1c-26 Directly issued qualifying common share capital plus related capital surplus and retained earnings
1aof which: capital and capital surplus
2of which: retained earnings
1cof which: treasury stock (-)
26
of which: national specific regulatory adjustments (earnings to be distributed) (-)
of which: other than above
1b
Subscription rights to common shares
3
Accumulated other comprehensive income and other disclosed reserves
5
Common share capital issued by subsidiaries and held by non-controlling interests (amount allowed in group Common Equity Tier 1)
6
Common Equity Tier 1 capital: instruments and reserves (A)Common Equity Tier 1 capital: regulatory adjustments
8+9
Total intangible fixed assets (excluding those relating to mortgage servicing rights)
8of which: goodwill (including those equivalent)
9of which: other intangibles other than goodwill and mortgage servicing rights
10
Deferred tax assets that rely on future profitability excluding those arising from temporary differences
11
Deferred gains or losses on derivatives under hedge accounting
12
Shortfall of eligible provisions to expected losses
13
Securitization gain on sale
14
Gains and losses due to changes in own credit risk on fair valued liabilities
15
Asset for retirement benefits
16
Investments in own shares (excluding those reported in the Net assets section)
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
19+20+21 Amount exceeding the 10% threshold on specified items
19
of which: significant investments in the common stock of financials
20of which: intangible fixed assets relating to mortgage servicing rights
21
of which: deferred tax assets arising from temporary differences
22
Amount exceeding the 15% threshold on specified items
23
of which: significant investments in the common stock of financials
24of which: intangible fixed assets relating to mortgage servicing rights
25
of which: deferred tax assets arising from temporary differences
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)Common Equity Tier 1 capital (CET1)
29
Common Equity Tier 1 capital (CET1) ((A)-(B)) (C)Additional Tier 1 capital: instruments
Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which:
31a classified as equity under applicable accounting standards
31b Subscription rights to Additional Tier 1 instruments
30
Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which:classified as liabilities under applicable accounting standards
32
Qualifying Additional Tier 1 instruments plus related capital surplus issued by
special purpose vehicles and other equivalent entities
Additional Tier 1 instruments issued by subsidiaries and held by non-controlling interests (amount allowed in group Additional Tier 1)
34-35
33+35
Eligible Tier 1 capital instruments subject to transitional arrangements included in Additional Tier 1 capital: instruments
33
of which: instruments issued by bank and its special purpose vehicles
35of which: instruments issued by subsidiaries
36
Additional Tier 1 capital: instruments (D)Additional Tier 1 capital: regulatory adjustments
37
Investments in own Additional Tier 1 instrument
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
Significant investments in the capital of banking, financial andinsurance entities that are outside the scope of regulatory consolidation
40

b

c

Year ended
Year ended
March 31, 2021 March 31, 2020

Reference toTemplate
CC2279,667
57,613
232,289
9,116
1,119
—
84
214,598—494,350

268,582
57,613(6)+(7)220,282
(8)
8,184
(9)
1,129
—
131
(14)
105,957 (10)+(11)+(12)+(13)—374,671

1,283
—
1,283
—
—
11,385
—
—
9,020
0
—
—
—
—
—
—
—
—
—
—
—
21,689

1,359
—
1,359
—
—
8,998
—
—
—
0
—
—
—
—
—
—
—
—
—
—
—
10,357472,660

364,314

—
—

—
—

—

—

—

—

—
—
—
—
—

—
—
—
—
—

—
—
—

—
—
—

—

—

(1)
(3)
(11)

(2)

SHIGA BANK ANNUAL REPORT 2021

113

Millions of yen, %CC1: Composition of regulatory capital (consolidated)aBasel III
Template
No..
Items
42
Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deduction
43
Additional Tier 1 capital: regulatory adjustments (E)Additional Tier 1 capital
44
Additional Tier 1 capital ((D) – (E)) (F)Tier 1 capital (T1 = CET1 + AT1)
45
Tier 1 capital (T1 = CET1 + AT1) ((C)+(F)) (G)Tier 2 capital: instruments and provisions
Directly issued qualifying Tier 2 instruments plus related capital surplus of which:classified as equity under applicable accounting standards
Subscription rights to Tier 2 instruments
46
Directly issued qualifying Tier 2 instruments plus related capital surplus of which:classified as liabilities under applicable accounting standards
Qualifying Tier 2 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities
48-49 Tier 2 instruments issued by subsidiaries and held by non-controlling interests (amount allowed in group Tier 2)
47+49 Eligible Tier 2 capital instruments subject to transitional arrangements included in Tier 2: instruments and provisions
47of which: instruments issued by bank and its special purpose vehicles
49of which: instruments issued by subsidiaries
50
Total of general allowance for credit losses and eligible provisions included in Tier 2
50aof which: provision for general allowance for credit losses
50bof which: eligible provisions
51
Tier 2 capital: instruments and provisions (H)Tier 2 capital: regulatory adjustments
52
Investments in own Tier 2 instruments
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
55
Significant investments in the capital banking, financial and insurance entities that are outside the scope of regulatory consolidation
57
Tier 2 capital: regulatory adjustments (I)Tier 2 capital (T2)58
Tier 2 capital (T2) ((H)-(I)) (J)Total capital (TC = T1 + T2)
59
Total capital (TC = T1 + T2) ((G)+(J)) (K)Risk weighted assets
60
Risk weighted assets (L)Capital ratio (consolidated)
61
Common Equity Tier 1 capital ratio (consolidated) ((C)/(L))
62
Tier 1 capital ratio (consolidated) ((G)/(L))
63Total capital ratio (consolidated) ((K)/(L))
64
CET1 specific buffer requirement65of which: capital conservation buffer requirement66of which: countercyclical buffer requirement67
of which: G-SIB/D-SIB additional requirement
68
CET1 available after meeting the minimum capital requirements
Regulatory adjustments
72
Non-significant investments in the capital of other financials that are below the thresholds for deduction (before risk weighting)73
Significant investments in the common stock of other financials that are below the thresholds for deduction (before risk weighting)74
Intangible fixed assets relating to 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)
Provisions included in Tier 2 capital: instruments and provisions
76
Provisions (general allowance for credit losses)
77
Cap on inclusion of provisions (general allowance for credit losses)
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”)
78
79
Cap for inclusion of provisions in Tier 2 under internal ratings-based approach
Capital instruments subject to transitional arrangements
82
Current cap on AT1 instruments subject to phase out arrangements
Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)(if the amount is negative, report as “nil”)
83
84
Current cap on T2 instruments subject to transitional arrangements
Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)(if the amount is negative, report as “nil”)
85

114

b

c

Year ended
Year ended
March 31, 2021 March 31, 2020
—
—

—
—

—

—

472,660

364,314

—
—

—
—

—
—
—
—
—
—
245
245
—
245

1,000
—
—
10,00010,000—
91
91—
11,092

—
—
—
—
—

—
—
—
—
—

245

11,092472,905

375,4072,749,871

2,657,243

17.18
17.18
17.19
2.50
2.50
0.00

13.71
13.71
14.12
2.50
2.50
0.00

9.19

6.12

27,327506——

23,774
666
—
—

245
469

91
515

—
15,320—13,589

—

—

—
6,000

—
12,000——

Reference toTemplate
CC2

(5)

(4)

(4)

Matters concerning the disclosure of leverage ratio

1. Matters concerning the composition of consolidated leverage ratio
Millions of yen
Corresponding CorrespondingLine # on
Line # on
International International
Template
Template(Table 1)(Table 2)Item
On-balance sheet exposures1
On-balance sheet exposures before deducting adjustment items
1a1
Total assets reported in the consolidated balance sheet
1b
2
Amount of assets of subsidiaries that are not included in the scope of the leverage ratio on a consolidated basis (-)
Amount of assets of subsidiaries that are included in the scope of the leverage ratio on a consolidated basis (except those
1c7included in the total assets reported in the consolidated balance sheet)
1d
3
Amount of assets that are deducted from the total assets reported in the consolidated balance sheet (-)
2
7
Amount of adjustment items pertaining to Tier 1 capital (-)
3
Total on-balance sheet exposures (A)Derivative transaction exposures
Replacement cost associated with derivatives transactions, etc. (with the 1.4 alpha factor applied)
4
Replacement cost associated with derivative transactions, etc.
Add-on amount for potential future exposure associated with derivatives transactions, etc. (with the 1.4 alpha factor applied)
Add-on amount associated with derivative transactions, etc.
Amount of receivables arising from providing cash margin in relation to derivative transactions, etc.
The amount of receivables arising from providing collateral, provided where deducted from the consolidated balance
sheet pursuant to the operative accounting framework
6
Amount of receivables arising from providing cash margin, provided where deducted from the consolidated balance
sheet pursuant to the operative accounting framework
7
Amount of deductions of receivables (out of those arising from providing cash variation margin) (-)
Amount of client-cleared trade exposures for which a bank or bank holding company acting as clearing member is not
8
obliged to make any indemnification (-)
9
Amount of adjusted effective notional amount of written credit derivatives
10
Amount of deductions from effective notional amount of written credit derivatives (-)
11
4
Total exposures related to derivative transactions (B)Repo transaction exposures
12
Amount of assets related to repo transactions, etc.
13
Amount of deductions from repo transactions, etc. (-)
14
Amount of counterparty risk exposure for repo transactions, etc.
15
Amount of agent transaction exposures
16
5
Total exposures related to repo transactions, etc. (C)Other off-balance sheet exposures
17
Notional amount of off-balance sheet transactions
18
Amount of adjustments for conversation to in relation to off-balance sheet transactions
19
6
Total exposures related to off-balance sheet transactions (D)Consolidated leverage ratio
20
The amount of capital (Tier 1 capital) (E)21
8
Total exposures ((A) + (B) + (C) + (D)) (F)22
Consolidated leverage ratio ((E) / (F))
Consolidated leverage ratio including deposits in Bank of Japan
Total exposures (F)Amount of deposits in Bank of Japan
Total exposures including deposits in Bank of Japan (F’)
Consolidated leverage ratio or Basel III leverage ratio including deposits in Bank of Japan ((E) / (F’))
5

FY2020FY20195,780,730
5,821,480—

6,243,056
6,285,002———

40,75021,6895,759,040

41,945
10,357
6,232,699——

10,999

3,472

—

—

10,6684,332

8,558
11,071

—

—

—

—

—

—

—
—
25,999——23,102

—
—
803

—
—
1,741

803

1,741

1,079,529
911,196
168,333

961,561
818,184
143,376472,660
5,954,178
7.93%

364,3146,400,920
5.69%

5,954,178
1,972,267
7,926,445
5.96%

—
—
—
—

 orresponding Line # on International Template, Table 1 refers to that in Table 1 and Table 2 in the rule text of “Basel III leverage ratio framework and disclosure requirements” publishedCby the Basel Committee on Banking Supervision on January 12, 2014.

2. Reasons for any significant disparities in consolidated leverage ratio compared to the previous fiscal year (if any)
Not applicable.

SHIGA BANK ANNUAL REPORT 2021

115

Stock Information
As of March 31, 2021

Major shareholders
Number of shares held(Thousand shares)

As a percentage of
total number of issued shares(excluding treasury stock) (%)

The Master Trust Bank of Japan, Ltd. (Trust account)

2,822

5.67

NORTHERN TRUST CO. (AVFC) RE SILCHESTER INTERNATIONAL INVESTORSINTERNATIONAL VALUE EQUITY TRUST (Managing agent, The Hongkong andShanghai Banking Corporation Limited Tokyo Branch)

1,805

3.62

Nippon Life Insurance Company

1,610

3.23

Meiji Yasuda Life Insurance Company

1,599

3.21

Custody Bank of Japan, Ltd. (Trust account)

1,539

3.09

Employee Stock Ownership of Shiga Bank

1,195

2.40

Sompo Japan Insurance Inc.

1,180

2.37

NORTHERN TRUST CO. (AVFC) RE U.S. TAX EXEMPTED PENSION FUNDS(Managing agent, The Hongkong and Shanghai Banking Corporation Limited
Tokyo Branch)

999

2.00

JP MORGAN CHASE BANK 385781 (Managing agent, Settlement & Clearing
Services Department of Mizuho Bank, Ltd.)

612

1.23

Custody Bank of Japan, Ltd. (Trust account 5)

605

1.21

13,970

28.08

Total

Number of shares held by type of shareholder (Thousand shares)
Government (incl. Local governments)
127 (0.02%)
Individuals and others
138,997 (26.30%)
Financial institutions
169,424 (32.06%)
Foreigners
107,243 (20.29%)

Other corporations
105,258 (19.92%)
Note: Figures in parentheses represent voting rights as a percentage of the total voting rights held by each shareholder segment.

116

Securities houses
7,427 (1.41%)

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