Annual Report

Shinkin Central Bank

2018

Shinkin Central Bank,
the Central Bank for
Shinkin Banks
As the central financial institution in Japan forthe cooperative regional financial institutions,known as shinkin banks, the Shinkin Central Bank
(hereinafter the SCB) occupies a well-establishedposition in Japan’s financial industry. Shinkin banks
currently hold funds totaling some ¥140 trillion(around US$1,326 billion).

Management Philosophy andOperational Policies
Management Philosophy
As the central bank for all shinkin banks, the SCB supports thegrowth of the shinkin bank industry, thereby contributing to economic development throughout Japan.

Operational Policies

1.

Strengthen the corporate base, broaden operational functions,and enhance the credit standing of shinkin banks.

2. Attract stable funds from shinkin banks and diversify funding
sources.

3. Upgrade market operations and develop financial services.
4. Pursue new business to reflect changing financial circumstances.
5. Contribute to regional development and revitalization hand inhand with shinkin banks.

6. Achieve sound management through efficiency, capital adequacy, and strengthened risk management.

7.

Nurture professionals and create an attractive workplace.

8. Enhance public trust in the SCB.

Corporate Data (as of March 31, 2018)
Name:
Established:
Number of employees:
Domestic network:
Overseas network:
Total assets:
Total funds:
Paid-in capital:
Preferred shares:
Capital adequacy ratio(consolidated):
Number of member shinkin banks:Long-term credit ratings:(as of July 31, 2018)

Shinkin Central Bank (SCB)
June 1, 1950
1,202
14
5
¥39,953 billion ($375 billion)¥38,302 billion ($360 billion)¥690 billion ($6,501 million)¥90 billion ($856 million)
30.57%
261
A1 (Moody’s)
A (S&P)
A+ (R&I)
AA (JCR)* The number of employees includes full-time Directors and Corporate Auditors.
Our overseas network includes Shinkin International Ltd., a subsidiary in London.
The total assets and total funds are the average balances for the year ended March
31, 2018.

Financial Highlights (Non-consolidated Financial Summary)Millions of Yen
For the years ended March 31,

2018

2017

Millions of US Dollars*
2016

2018

2017

2016

$2,594$2,531$2,393

For the Fiscal Year
Total income¥275,792 ¥284,018 ¥269,675

Total expenses

213,136

235,680

213,797

2,005

2,100

1,897

Net income (loss)

46,49841,38340,875

437

368

362

Net business profit (loss)

50,53542,65750,321

475

380

446

¥38,552,702 ¥37,257,840 ¥34,887,645$362,746$332,095$309,589

At the Year-end
Total assets
Loans and bills discounted

6,952,659

7,995,390

6,763,822

65,41871,26660,021

Securities

17,137,785

17,204,776

17,839,405

161,251

153,353

158,305

Total liabilities

36,949,667

35,654,367

33,274,483

347,663

317,803295,274

Deposits

30,260,341

29,176,129

27,236,823

284,722260,059

241,696

Debentures

2,714,890

2,952,900

3,055,520

25,544

26,32027,114

1,603,035

1,603,472

1,613,161

15,083

14,292

14,315

Net assets*	‌US dollar amounts are given for convenience only, converted at the rate of ¥112.69, ¥112.19, and ¥106.28 per US$1.00, the prevailing rate as of March 31, 2016, 2017, and 2018,
respectively. Total assets and total funds amounted to ¥39,953 billion ($375 billion) and ¥38,302 billion ($360 billion) of the average balance at the year ended March 31, 2018.

Contents
Financial Highlights (Non-consolidated Financial
Summary) ................................................................................. 1
Message from the President and CEO ............................. 2
Corporate Management and Auditors ............................. 3
Powerful, TSE-listed Financial Institution ........................ 4

Asset Quality ........................................................................ 12
Important Management Indices ........................................ 13
Corporate Governance ...................................................... 14
Strengthening the Compliance System .......................... 15

Management Issues and Strategies .................................... 6

Risk Management .................................................................. 16
Corporate Social Responsibility Activities .................... 19

Helping Recovery Following the Great East Japan
Earthquake and the Kumamoto Earthquake ................... 8

What Are Shinkin Banks? ................................................. 20
Preferred Shares ................................................................. 22

Overseas Networks .............................................................. 9
Business Overview ............................................................. 10

Financial Section .................................................................. 23
Organization / The SCB Group ....................................... 80

Capital Adequacy ................................................................. 11International Directory ..................................................... 81

This material contains certain forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties, while actual results may materiallydiffer from those contained in the forward-looking statements as a result of various factors.
US dollar amounts are converted for convenience only, at ¥106.28 per US$1.00, the prevailing rate on March 31, 2018.

1

Message from the President and CEO

The Shinkin Central Bank (the “SCB”) serves
as the central bank for Japan’s 261 shinkinbanks—regional financial institutions, thatspecialize in operations with small andmedium-sized enterprises (SMEs).
Since its establishment in 1950, the SCB
has provided a wide range of financial services
in order to expand the potential of the shinkinbank industry.

Fiscal 2017 Earnings Performance
In fiscal 2017 (ended March 31, 2018), while the
Bank of Japan continued its monetary easing
policy, uncertainty over the future persisted
due to such factors as moves to normalize
monetary policy in Europe and the UnitedStates and increasing geopolitical risks, including the situation on the Korean peninsula.
Amid this difficult business environment,
the SCB made great efforts to turn a consistent profit including global diversified investment and active promotion of loans to business corporations. As a result, ordinary
income amounted to ¥60.6 billion and net
income totaled ¥46.4 billion.

Medium-term Management Plan
Progress
Under this plan, the SCB is working to provide products and services for individuals and2

SMEs, who are the customers of shinkinbanks, and taking steps to contribute to regional revitalization in order to consolidate
the customer relations of shinkin banks.
In fiscal 2017, we focused on promoting
trust products for individual customers to
support the transfer of inheritances and otherassets between generations in response to
the growing demand in recent years. In just alittle over a year after launching the businessin January 2017, the number of shinkin banks
serving as agents to handle trust agreements
now exceeds 130, and there are around 1,600
offices offering these products.
We also provided matching services andheld business meetings for SMEs to expand
their sales channels, and worked on projects
to attract foreign tourists. Additionally, we
have coordinated with government agencies
and foundations to implement measures supporting the projects of shinkin banks and local
companies working on the revitalization of
their home towns with the aim of solving
community issues.
Moreover, we established a new Digital
Innovation Office to enhance support for fintech and digitalization, which are expected tobring significant change in the financial business. In doing so, we have strengthened our
information gathering system and have begun
providing new products and services and developing an efficient operation management
system.

Future Business Strategy
Amid rapid change in the operating environment surrounding shinkin banks, we believe
the required functions of shinkin banks to fulfill
their roles in supporting their communities
will grow ever more diverse and sophisticated.
Envisioning the next five to ten years ofshinkin banks, the SCB has positioned fiscal
2018, the final year of the medium-term management plan, as a “year to establish a sustainable business model and clear a path for the

SCB Medium-term Action Program 2016

Core Plan 1

Core Plan 2

Assist shinkin banks
to enhancetheir customer relations

Assist shinkin banks
to enhance their
management stability

Core Plan 3
Enhance SCB’s
management stability

future in anticipation of the dawn of the era ofshinkin banks”.
Together with shinkin banks, we will workon the measures set forth in the plan to further enhance the presence of shinkin banks intheir communities so that we can continue tocontribute to sustainable regional development.

Hiroyuki Shibata
President and CEO
July 2018

Corporate Management and Auditors

Koji Sato

Chairman of the Board of Directors

Hiroyuki Shibata

President and Chief Executive Officer

Hajime Hioki

Hiroshi Nakahara

Hiroshi Sudo

Chairman of the Board of
Directors (Part-time)

Directors

Shigeharu Obayashi

Naoki Hemmi

Kenichiro Mimuro

Koji Sato

Takehiko Murotani

Masatoshi Takahashi

Hiromichi Chisaka

Toshiyuki Masuda

President and Chief Executive Officer

Hideki Sasaki

Hiroyuki Hashimoto

Hiroyuki Shibata

Takashi Hanaoka

Tatsuo Takeda

Deputy President

Senior Managing Director

Senior Managing Director

Akihide Yokogawa

Deputy President
Hajime Hioki

Director and Executive Advisor(Part-time)

Hiromi Nomura
Masanori Wada

Mitsuo Tanabe

Corporate Auditor

Senior Managing Directors
Hiroshi Nakahara

Directors (Part-time)

Hiroshi Sudo

Masatoshi Masuda

Naoya Okajima

Ikuo Higuchi

Corporate Auditors (Part-time)

Managing Directors

Hiroshi Hiramatsu

Rinichi Hoshi

Norihiro Takano

Takashi Abe

Minoru Kondo

Keisuke Izutsu

Tetsuji Hara

Masamichi Narita

Yuzuru NishinoKazuo Kobayashi

Akio Okuyama

Norikazu Shibuya(As of July 31, 2018)3

Powerful, TSE-listed Financial Institution
The SCB has the dual roles of serving as
the central financial institution forshinkin banks, and an independent
financial institution.
The SCB is the central financial institution in
Japan for the nationwide network of shinkinbanks, comprising 261 banks and 7,347 branches.
Japan’s shinkin banks have an extremely
important role in the financial industry, holding around ¥140 trillion ($1,326 billion) in deposits (refer to page 20 “What Are Shinkin
Banks?”).
We provide various financial products
and services, and use the abundant funds deposited from nationwide shinkin banks to invest in marketable securities in the financial
markets and to provide loans to operatingcompanies and so forth.
Here we explain the two main roles of
the SCB.

The Roles of the SCB
The Role as a Central Bank
(1) Supplementing Shinkin Banks’ Operations
Japan’s 261 shinkin banks play a key role insupporting regional economies by lending tolocal organizations and SMEs.
However, individual shinkin banks
throughout Japan are sometimes restricted inperforming their banking functions because of
their scale and limitations on their businessarea.
To address this issue, the SCB and its
seven subsidiaries work together as a groupto provide various financial products and services to shinkin banks. In this way, the SCB
supplements services that shinkin banks cannot perform easily or efficiently on an individual basis, and enables shinkin banks to respond rapidly to changes in their management
environment, such as diversification and increasing sophistication of customers’ needs
and intensifying competition from other business categories.
Specifically, the SCB provides shinkinbanks with various deposit and loan products
so that they can respond to their customers’
needs and enhance their competitiveness. We
also provide a variety of services to shinkinbanks to support their initiatives on the key
measures of “SMEs”, “individuals”, and “communities” (refer to page 7 “Assist Shinkin
Banks to Enhance Their Customer Relations”).
The SCB also acts as a clearing house
among shinkin banks in the same way that the
Bank of Japan acts as a clearing house among4

Shinkin Bank
Shinkin Bank
Shinkin Bank
Shinkin Bank
Shinkin Bank
Total assets: ¥38,552 billion ($362 billion)
Domestic network: 14
Overseas network: 5
Number of employees: 1,202
Number of member shinkin banks: 261

Shinkin Bank
Number of shinkin banks: 261
Total assets: ¥154,668 billion ($1,455 billion)
Number of branches: 7,347
Number of employees: 108,475
Number of members: 9,242,088(As of March 31, 2018)banks. In addition, the SCB’s role includes acting as a clearing house among shinkin banks
and other financial institutions and making
lump sum payments of public utilities charges
received by shinkin banks.
Furthermore, we provide support forshinkin banks’ risk management, including
consultations on fund management, and assists with their human resource developmentby providing training and so forth.
(2) Maintaining and Improving Stability of
the Shinkin Bank Industry
The SCB performs the role of a consultant forshinkin banks, and operates the “Shinkin BankManagement Reinforcement System”. We also
strive to prevent deterioration of shinkin banks

by providing management analysis for eachshinkin bank and information to aid in resolution of their management issues. If a shinkinbank should come to require financial support
despite these measures, we shall conduct capital injection in an effort to maintain and improve stability of the shinkin bank industry.
Japanese financial institutions have experienced several major crises including the issue of the disposal of bad assets following thecollapse of the bubble economy and the global
financial crisis triggered by the Lehman Brothers bankruptcy. During such unstable periods
for the financial system, however, the SCB
played a crucial role in maintaining stability ofthe shinkin bank industry and contributed tothe soundness of the financial system in Japan.

The Shinkin Bank Management Reinforcement System
Management analysis system
Objective quantitative and qualitative analyses arecarried out on the management status of shinkin banks.

Management advisory system

ShinkinCentralBank

Discussions on management are carried out to address
overall management and individual management themesof shinkin banks.

Capital reinforcement system
Shinkin banks that require capital reinforcement raise
additional capital as subordinated loans or preferredshares.

Shinkinbanks

The Role as an Independent Financial Institution(1) Comprehensive Financial Services
ProviderThe SCB conducts deposit-related operations, lending operations and foreign exchange
operations—the core functions of a financial
institution—and issues debentures.
We also fulfill our role as a “comprehensive financial services provider” by undertaking, either by itself or through its subsidiaries,
auxiliary operations such as underwriting
public bonds, handling private placement
bonds, and providing personal loan guarantees, as well as peripheral operations including the provision of trusts, securities, investment management, and M&A-related advice.

(2) One of the Leading Institutional Investors in JapanThe SCB has assets under management of approximately ¥37 trillion ($352 billion) as ofMarch 31, 2018. Of this, it invests approximately ¥17 trillion ($161 billion) in securities—mainly as government bonds, corporate
bonds, and foreign securities—and approximately ¥13 trillion ($122 billion) in short-termmoney markets.
The SCB fulfills an important role in Japan’s money and securities markets as a leading institutional investor.

Contributor to Regional Develop(3) 
ment
The SCB provides loans to local governments,
operating companies, private finance initiatives, etc., for the purpose of helping develop
and revitalize communities.
Also, we proactively support shinkinbanks in their efforts to resolve issues confronting communities and SMEs. The SCB thus
fulfills its role as a contributor to regional development together with shinkin banks.

Overseas Networks and Correspondent BanksThe SCB has offices in New York, Hong Kong, Shanghai, Bangkok, and London. In addition to proactively collecting information on each
local area, we support the overseas expansion of shinkin banks’ customers. As of March 31, 2018, we had 227 overseas correspondentbanks with main branches in 47 countries. The 70 shinkin banks conduct foreign exchange operations via the network of overseas correspondent banks of the SCB and other institutions.
To address the emerging urgency among the entire international community to implement measures against money laundering and thefinancing of terrorism, the SCB, as the central financial institution for shinkin banks, intends to support the whole shinkin bank industry in
implementing and enhancing such measures, while establishing and maintaining its own risk management system.

Shinkin International Ltd. (London)
New York Representative Office

Europe63 banks
Middle East
2 banksAsia
106 banks

North America
26 banks
Japan 11 banks
Shanghai Representative OfficeHong Kong Representative Office
Bangkok Representative Office

Africa2 banks

Latin America
10 banks

Oceania
7 banks5

Management Issues and Strategies
Striving to Build a Sustainable Business Model
Fiscal 2017 was positioned as a year for striving to build a sustainable business model for the next 10 years. We implemented
various support measures for shinkin banks’ main customers—individuals and SMEs—to help them strengthen their business,
supported shinkin banks’ efforts to revitalize their local communities, and took steps to strengthen the management stabilityof the SCB, which is the cornerstone for steadily implementing all these support measures.
We will mainly explain the characteristic initiatives of fiscal 2017 below.

The SCB Medium-term Action Program 2016−Management Plan Overview(FY2016−2018)

Core Plan 1

Core Plan 2

Assist shinkin banks to enhancetheir customer relations

Assist shinkin banks to enhancetheir management stability

1. Support initiatives for individual customers
2. Support initiatives for small and medium-sizedenterprises (SMEs)

1. Support initiatives to boost earnings capacity

3. Support initiatives for regional communities

2. Support initiatives to enhance financial
soundness

4. Support initiatives for utilizing fintech

Core Plan 3
Enhance the SCB’s
management stability
1. Ensure stable finances and solid earnings
2. Promote organizational reform and humanresources development

Achievement of “Target Figures”
Profit attributable toowners of parent
Consolidated capital adequacy ratio(domestic standard)
Target:At least 15%

FY2017
Results:

30.57%

Target:¥40.0 billion¥44.4 billion

Outlier ratio
Target:Overhead ratio
Target:45%
maximum

6

FY2017
Results:

FY2017
Results:

35.62%

20%
maximum

FY2017
Results:

12.13%

Assist Shinkin Banks to Enhance
Their Customer Relations

vestment trusts that lead to asset buildup. The
SCB supports these assets under management
at shinkin banks.
In fiscal 2017, as part of our efforts to promote and enhance sales of investment trusts
at shinkin banks, we increased the number of
products to 151 and expanded our productlineup.
We also partnered with Canon Marketing
Japan Inc. to develop “Asset Management Navigation System for Shinkin Banks” as an operational support tool. This tool is designed tostrengthen compliance, streamline office tasks
such as processing customer applications, anddeliver proposals and after-sales follow-up
more suited to increasingly diverse needs.

In order to support shinkin banks in their customer relations, the SCB has been offeringvarious support measures targeting individual
customers, SMEs, and regional communities.
Recently, the SCB is also working to respondto rapidly advancing digitization of the banking
industry as exemplified by “fintech”.

•	‌Trust Business Services to Individuals
After entering the trust banking business inJanuary 2017, the SCB launched full-scale initiatives and has been enhancing support for inheritance-related product demand, which has
been growing year after year. We provide theoriginal trust products for individual customers
as the private brand of the shinkin bank industry, and the products are provided throughshinkin banks nationwide, which serve as trust
agreement agents for individual customers.
In just a little over a year after launching
the business, the number of shinkin banks
serving as agents now exceeds 130, and there
are around 1,600 offices offering the products,
which are now used by many individual customers.
We will continue to work on product promotion and expansion of our shinkin banksales network to be of service to more customers when it comes to their inheritancerelated and asset transfer needs through thenationwide network of shinkin banks.

• Initiatives for Expanding Sales Channels
In our matching services, the SCB rolled out
nationwide a website-based sales scheme that
had been introduced initially only in certain
regions. We also provided matching services
in technical fields, and held business matching
events with buyers, including trading companies with overseas sales channels, and food
manufacturers that are shinkin bank customers.

•	‌Production of Experience Japan Catalog for
Foreign Tourists
Focusing on the inward travel needs of foreign
tourists, the SCB produced an “Amazing Cultural Local Experience Catalogue in JAPAN”
listing the hands-on services provided byshinkin bank customers, and posted the catalog on a special website.
We worked to attract visitors all over thecountry where shinkin bank customers pro-•	‌Support for Asset Buildup for Individual
Customers
Shinkin banks offer various financial products
in addition to deposit products, including inShinkin International Ltd.
LondonSCB New York Representative Oﬃce

Bank of China
BeijingTokyo

SCB Hong Kong Representative Oﬃce
Shanghai

The Bank of East Asia

SCB Shanghai Representative Oﬃce

Hong Kong

Mexico City

Bank of Communications

ManilaBangkokBank of Shanghai

Ho Chi Minh CityBDO Unibank, Inc.

SCB Bangkok
Representative Oﬃce
Bangkok BankNew York

Shinkin Central Bank

Banco Mercantil del Norte, S.A.

Joint Stock Commercial Bank for
Investment and Development of Vietnam

Jakarta

JETRO HO CHI MINH

Maybank Indonesia… SCB Oﬃce…

Business Alliances, etc.
(SCB employees seconded)… Business Alliances

vide services by doing sales promotions withoverseas travel agencies.

•	‌Launch of Two-Step Loans in Collaboration
with JBICIn April 2018, the SCB signed a business cooperation agreement with Japan Bank for International Cooperation (JBIC) to support theoverseas business expansion by shinkin bankcustomers and began offering dollar-denominated two-step loans.
By utilizing this scheme, shinkin banks will
enhance their support for the fundraisingneeds of their customers based on capital in
US dollars procured from JBIC.

•	‌Support for Regional Revitalization Projects
The SCB provides a regional revitalization support scheme utilizing the Nippon Foundation’s
Wagamachi fund to support initiatives aimed
at creating new flows of money in regional areas to solve community issues and develop
next-generation leaders.
In fiscal 2017, the fund provided ¥130 million in assistance to 14 projects of 13 shinkinbanks nationwide, including urban development and community-based improvement
projects.
•	‌Promotion of Urban Development Projects
Based on the partner agreement signed with
the Ministry of Land, Infrastructure, Transport
and Tourism and the Organization for Promoting Urban Development, the SCB supports theestablishment of managed urban development
funds through collaboration between shinkinbanks and the Organization for Promoting Urban Development.
In fiscal 2017, four funds were establishednationwide, providing funding support for projects designed to solve community issues.
•	‌Strengthening of Support for Digitalization
The development of fintech and other forms ofdigitalization are expected to bring about major changes in lifestyles and trade practices.
Amid these circumstances, the SCB is working
to enhance support for digitalization in theshinkin bank industry.
In December 2017, consolidated subsidiary The Shinkin Banks Information System
Center Co., Ltd. (SSC) developed a platform
supporting an open API (*1) for the roll-out ofservices utilizing fintech by shinkin banks.
Additionally, we are working on developing a domestic and international informationand collaboration platform led by the Digital
Innovation Office established in April 2018.
As a part of that initiative, via investments in

7

funds offered by Geodesic Capital (* 2), we aredeveloping a network with venture companies
that represent the next generation. At thesame time, we are working to provide new
products and services and streamline operations in the shinkin bank industry.
*1.	‌Open API: Connection specifications, etc. for financial
institution systems accessible by fintech companies
and others*2.	‌A venture capital that engages in business primarily in
Silicon Valley in the United States

Assist Shinkin Banks to Enhance
Their Management Stability
The SCB provides products and services thatwill help to “boost earnings capacity” and “enhance financial soundness” of shinkin banks,
while gradually expanding its support of human resources development by, for example,
dispatching the professionals needed byshinkin banks.

•	‌Provision of Investment Products for Shinkin
Banks
To respond to demand for diversifying investment tools, the SCB has leveraged its trust
banking business functions to develop and provide investment products for shinkin banks
such as the one called “SCB Global Trust”,

which spreads investment across diverse asset
classes overseas, and another called “SCB
Callable Trust”, which utilizes derivatives.

•	‌Establishmentof Portfolio Management
Support Office
The Portfolio Management Support Office,which was opened in April 2018, will provide
support for more advanced portfolio management at shinkin banks through profit simulations and support for creating investment
plans.

•	‌Centralization of Deposit Assessment Operations at Shinkin Banks
To improve operational efficiency and reduce
costs, the SCB is taking steps to centralize
common operations conducted by eachshinkin bank. After a limited trial run in fiscal
2017 where we handled administrative tasks
for some shinkin banks related to deposit assessment operations (*) as the initial step, weplan to roll out the system to shinkin banks
nationwide in fiscal 2018.

Enhance the SCB’s Management
Stability
In order to make steady progress in carryingout the first and second core plans of the“SCB Medium-term Action Program 2016”,
the SCB works to enhance its own financial
and earnings stability through organizational
reform and human resources development
over the medium to long term.

• Enhancing Operation Management Systems
The SCB is working to reduce labor and increase efficiency in existing operations by utilizing RPA (*) and other methods. We expect
to reduce human tasks by around 50% in theforeign remittance operations that will begin in
earnest in fiscal 2019.
In the future, we will expand the scope of
application to include streamlining of companywide operations.
*	‌R PA: Robotic Process Automation. A system for increasing the efficiency of operations by automating certain decisions by using software with robotic functions
incorporated.

*	‌
Deposit assessment operations: An operation conducted by financial institutions to respond to requests
for a statement of transaction status of individual andcorporate deposit accounts from public institutions
such as local public entities.

Helping Recovery Following the Great East Japan Earthquake
and the Kumamoto Earthquake
Networking Event for Reconstruction
Support Project
The “Shinkin no Kizuna Reconstruction Support Project”, which the SCB established incollaboration with the Japan NPO Center,
provided a total of ¥360 million in assistanceto 95 private NPOs (for a total of 111 projects)
and has been used to support activities such asproviding mental health care to disaster victims and helping them rebuild their daily lives.
In April 2018, we planned and held a networking event including staff of the Reconstruction Agency and executives and employees of shinkin banks to promote partnerships
among NPOs that have received assistance sofar. Lively information sharing on reconstruc-

Recovery Support Sales Event
A recovery support sales event was held at
the SCB head office with specialty products
from Tohoku and Kumamoto. The event featured 45 products made by 28 customers
from 15 shinkin banks.

Networking eventtion support activities took place at the networking event.

Recovery support sales event

8Overseas Networks
The SCB has offices in New York, London, Hong Kong, Shanghai, and Bangkok. These offices collect and disseminate information relating to economic and financial conditions, the investment and loan environment, and the laws, taxation regimes,
and employment situation of each region.
These offices also work with allied banks to support the overseas expansion of shinkin banks’ customers.
Moreover, as part of human resources development to support the overseas business of SMEs, we dispatch employees toallied banks and overseas JETRO offices. The overseas offices also accept shinkin bank employees as trainees looking to improve their skills related to supporting the overseas businesses of their customers and contribute to human resources development in the shinkin bank industry.
In the second half of fiscal 2018, we plan to dispatch employees to Silicon Valley for the purpose of collecting informationon the latest trends in fintech and other digital technology.
Alliances with Local Banks Overseas
The SCB is forming business alliances with nine
local banks overseas to enhance and strengthen its capability to support shinkin bank customers that are expanding their businesses
overseas. We provides a wide range of support to shinkin bank customers who conductbusiness overseas by helping them open local
bank accounts, and providing local currency
denominated financing based on standby L/C,
for example.
Additionally, we seconded two employees
to Bangkok Bank and one employee to Maybank Indonesia and Joint Stock Commercial
Bank for Investment and Development of Vietnam respectively, and in April 2018 we seconded one employee to BDO Unibank, Inc. in
the Philippines.

We also provide advice to shinkin bankcustomers for business talks aimed at cultivating overseas sales channels based on partnerships with foreign and domestic buyers andexternal expert organizations, and hold business matching events with buyer companies
that have overseas sales channels.

Overseas Business Consultations
Experts engage in overseas business consultations with the customers of shinkin banks considering overseas expansion, foreign trade, andnew businesses and transactions overseas covering such topics as local investment environments, systems, foreign and domestic market
trends, problems related to overseas expansion, and ways to solve issues particular tooverseas locations.

Providing Information
In addition to publishing “International Business Support News” and other reports forshinkin banks and their customers, we provide
up-to-date information related to doing business overseas through various seminars pertaining to overseas business support. Moreo-

Expansion into Asia by Shinkin Bank Customers

Expansion of Services for Shinkin Banksand their Customers
In April 2018, we signed a business cooperation agreement with Japan Bank for International Cooperation (JBIC) to support theoverseas business expansion of shinkin bankcustomers and began offering dollar-denominated two-step loans to shinkin banks. This
has allowed shinkin banks to respond promptly and properly to the US dollar fundraisingneeds of their customers.
As another part of our business support
for customers of shinkin banks and our support activities for regional revitalization, we
published an “Experience Japan Catalog” forforeign tourists to Japan that provides information on pay services for experiencing theculture and lifestyles of each area of Japan andposted it on the “Attractive JAPAN” website.

ver, we provide up-to-date local informationfrom our overseas representative offices andour employees seconded to allied banks.

South Korea: 103
China: 1,128

Hong Kong: 123
Myanmer: 32
India: 43

Thailand: 478

Taiwan: 99

Laos: 10Vietnam: 336

Philippines: 119
Combodia: 33
Malaysia: 75
Singapore: 40
Indonesia: 193

Business Alliances with Asian Banks• Bangkok Bank (Thailand) • Bank of Communications (China)• Bank of China (China) • Maybank Indonesia (Indonesia)• Joint Stock Commercial Bank for Investment and Development of Vietnam (Vietnam)• The Bank of East Asia (Hong Kong) • Bank of Shanghai (China) • BDO Unibank (Philippines)
Source: Twelveth Survey on the Overseas Business of Shinkin Bank Customers (2017)9

Business Overview
Earnings Performance
Looking at the financial results for fiscal 2017
overall, operating income amounted to ¥273
billion ($2,574 million), down ¥10 billion ($97
million), or 3.6%, year on year. In addition todividends from Shinkin Trust Bank, Ltd., interest income increased due to distributions
from investment trust funds and gain fromtheir cancellations, but was offset by a decrease in gains on sales of bonds, which was
associated with a reduction in trades to cancel
hedge positions. Meanwhile, operating expenses came to ¥212 billion ($2,003 million),
down ¥22 billion ($213 million), or 9.6%, year
on year, mainly resulting from a decline in financial derivative expenses associated with areduction in trades to cancel hedge positions.
As a result, ordinary income came to ¥60
billion ($570 million), an increase of ¥12 billion($116 million), or 25.5%, year on year. However, reflecting an increase of ¥9 billion ($86
million) in income taxes, net income totaled¥46 billion ($437 million), up ¥5 billion ($48
million), or 12.3%, year on year.

Funding
In fiscal 2017 (ended March 31, 2018), the total
amount of funding increased ¥1,369 billion($12,883 million) year on year, for a total of¥36,518 billion ($343,603 million). Of this figure, deposits received came to ¥30,260 billion($284,722 million), an increase of ¥1,084 billion ($10,201 million), which mainly comprised
fixed-term deposits from shinkin banks.
After deducting redemptions, debenturesat the end of fiscal 2017 came to ¥2,714 billion($25,544 million), down ¥238 billion ($2,239
million) during the fiscal year, including ¥341
billion ($3,216 million) in debentures issued by
the SCB.
Borrowed money amounted to ¥3,542 billion ($33,336 million), a year-on-year increaseof ¥523 billion ($4,921 million), mainly comprising borrowings under a funding provision
to support increased lending by the Bank ofJapan and foreign currency denominated repurchase transactions.

Asset Management
The amount of assets under management in fiscal
2017 increased ¥830 billion ($7,815 million),or 2.2%, to ¥37,466 billion ($352,529 million).
Mainly due to lower government bond holdings, outstanding invested securities decreased¥66 billion ($630 million), or 0.3%, to ¥17,137
billion ($161,251 million) at fiscal year end.
Loans and bills discounted decreased¥1,042 billion ($9,811 million), or 13.0%, during the year under review to ¥6,952 billion($65,418 million), centering on loans to national and government agencies and organizations, despite an increase of loans to businesscorporations.
The outstanding amount of short-termmoney market assets rose ¥1,829 billion($17,209 million) year on year, or 16.2%, to¥13,059 billion ($122,877 million). This primarilyreflects Bank of Japan current deposit increases.
Securities
As of March 31, 2018, the outstanding amount of
securities was ¥17,137 billion ($161,251 million).
Government bonds, corporate bonds,
and other domestic securities accounted for¥11,560 billion ($108,769 million), and foreign
securities for ¥4,622 billion ($43,492 million).
In terms of foreign securities, the SCB
mainly invests in safe assets, which include
government-secured financial institution
bonds and government-agency bonds in major
developed countries.
To advance its diversified investment
portfolio, the SCB also invests in such risk
assets as stocks and investment trust funds
not subject to interest risk, while optimizing
its portfolio in response to shifts in the financing and investment environment.
The SCB also carries out interest rate
swaps and other derivative trading, to hedge
risks linked to assets under management.
Loans and Bills Discounted
The SCB conducts a variety of loan-related
business. As of March 31, 2018, the outstanding amount of loans and bills discounted was¥6,952 billion ($65,418 million). Of the total
amount, loans to shinkin bank customers
through those banks accounted for ¥283 billion ($2,667 million), while direct loans to suchparties as national and government agencies
and organizations, regional public corporations, and charitable organizations accounted

Ordinary Income and Net Income (Non-consolidated)

10(Millions of yen)

FY2013

FY2014FY2015FY2016FY2017

Ordinary income (loss)

48,651

81,19855,971

48,34260,678Net income (loss)

35,39660,81740,87541,38346,498for ¥3,339 billion ($31,424 million). Directloans to business corporations accounted for¥2,675 billion ($25,178 million).

Breakdown of Funding*
9.7%(¥3,542 billion)
7.4%(¥2,714 billion)

82.9%(¥30,260 billion)

Deposits
Debentures
Borrowed money

Breakdown of Asset Management*
0.6% (¥217 billion)

0.3%(¥99 billion)
34.8%(¥13,059 billion)

18.6%(¥6,952 billion)

45.7%(¥17,137 billion)

Short-term market
operation
Securities
Loans and bills
discounted
Trading assets
Money held in trust

Breakdown of Securities*
1.3%(¥216 billion)
27.0%(¥4,622 billion)

37.1%(¥6,359 billion)

4.3%(¥738 billion)
25.6%(¥4,389 billion)

4.7%(¥811 billion)

Government bonds
Municipal bonds
Corporate bonds& short-term
corporate bonds
Stocks & investment
trust funds
Foreign securities
OthersBreakdown of Loans and Bills
Discounted*
9.4%(¥653 billion)

National andgovernment
agencies andorganizations

4.1%(¥283 billion)

38.5%(¥2,675 billion)

42.2%(¥2,938 billion)

Regional public
corporations
and charitableorganizations
and others
Business
corporations

5.8%(¥401 billion)* As of March 31, 2018.

Agency loans
OthersCapital Adequacy
OutlineThe SCB’s equity capital, as defined underregulations concerning capital adequacy ratio,
mainly comprises common shares from member
shinkin banks, public issues of preferred sharesthat supplement common shares, and internal
reserves accumulated to date by the SCB.
The SCB raises funds through the issuance of general common shares and specificcommon shares. The dividend payout ratio for
specific common shares differs from that for
general common shares.
Furthermore, in accordance with the
SCB’s articles of incorporation, the amountof residual assets distributed per specificcommon share is limited to a maximum of¥100,000 per share. This makes it possible toraise funds by issuing common shares without
diluting the residual assets distributed to preferred shareholders.
According to transitional measures basedon new Japanese domestic standards for regulations concerning capital adequacy ratio, equity capital also includes fixed-period andperpet­ual subordinated loans.

Raising Capital
In order to improve and enhance its financial
position in preparation for possible changes
in the regulatory framework, the SCB raised¥200 billion ($1,881 million) in specific common shares from the shinkin bank industry,
with September 30, 2015 as the payment date.
Therefore, there is no dilution in the distribution of residual assets for the preferredshareholders.
*	‌If the capital increase by general common shares isdetermined, instead by specific common shares, a dilution
will be caused in the distribution of residual assets forpreferred shareholders. In this case, there is no change in
the normal policy to conduct anti-dilution measures.

Consolidated Capital Adequacy Ratio
The SCB’s consolidated capital adequacy ratio
at March 31, 2018, was 30.57%.
Equity capital, the numerator for calculating the capital adequacy ratio, amounted to¥1,645 billion ($15,480 million).
Risk assets, the denominator for calculating the capital adequency ratio, amounted to¥5,381 billion ($50,632 million).

Risk Management and Capital
Adequacy Assessment
The SCB has implemented policies to manage
its capital adequacy as part of its integrated
risk management. The capital assessment division evaluates capital adequacy using a holistic
approach, measuring various types of risks
under uniform criteria and comparing quantified risks with the SCB’s capital.
In order to assess the potential impacts ofshock on its capital, the SCB conducts stresstesting to estimate losses under various scenarios and the probability of their occurrence.
Risk limits and risk exposure are reported
to senior management at the Risk Management Committee and at other meetings. The
Risk Management Committee deliberates
measures in response to the results of capital
adequacy assessments, and implements mea­sures as deemed necessary.

Enhancing Capital Adequacy
Recognizing that increasing equity capital is
the most important way to secure the soundmanagement of financial institutions, the SCB
has raised capital in phases, while accumulatinginternal reserves.

Capital Adequacy Ratio (Domestic Standard*)

Consolidated
Non-consolidated

Capital adequacy ratio
Amount of capital
Amount of risk-weighted assets
Capital adequacy ratio(%, billions of yen)
FY2013
37.86
1,692
4,469
37.84

FY2014
36.40
1,656
4,551
36.46

FY2015
41.10
1,824
4,439
42.38

FY2016
37.03
1,764
4,765
38.28

FY2017
30.57
1,645
5,381
31.62

11

Asset Quality
Risk-Monitored Loans
The amount of risk-monitored loans as ofthe end of March 2018 was ¥93 million ($0.8
million) for loans to bankrupt borrowers,¥11,227 million ($105 million) for delinquentloans, ¥77 million ($0.7 million) for loans
past due three months or more, and ¥30,490

million ($286 million) for restructured loans.
Total risk-monitored loans increased¥146 million ($1 million) to ¥41,889 million($394 million) during the fiscal year. The ratio of total risk-monitored loans to totalloans remained as low at 0.60%, and theRisk-monitored Loans (Non-consolidated)

(%, millions of yen)
End of March
2017
106
10,954930,672
41,743Loans to bankrupt borrowers
Delinquent loans
Loans past due three months or more
Restructured loans
Total risk-monitored loans (A)End of March2018
93
11,22777
30,49041,889

Increase or
Decrease
(13)
273
68
(182)
146

204

199

(5)

7,995,390
0.52

6,952,659
0.60(1,042,731)
0.08

End of March
2017
106
10,954930,672
41,743End of March2018
93
11,22777
30,49041,889

Increase or
Decrease
(13)
273
68
(182)
146

204

199

(5)

7,995,391
0.52

6,952,660
0.60(1,042,731)
0.08Partial direct write-offs
Total loans (B)Ratio of total risk-monitored loans to total loans (%) (A/B)

Risk-monitored Loans (Consolidated)
Loans to bankrupt borrowers
Delinquent loans
Loans past due three months or more
Restructured loans
Total risk-monitored loans (A)soundness of the SCB’s loan assets remainedhigh.

(%, millions of yen)

Partial direct write-offs
Total loans (B)Ratio of total risk-monitored loans to total loans (%) (A/B)

Asset Assessment under
the Financial Reconstruction Law
As of the end of March 2018, bankrupt andquasi-bankrupt assets amounted to ¥326
million ($3 million), doubtful assets ¥10,994
million ($103 million), and substandard assets ¥30,568 million ($287 million).
Accordingly, the total amount of bad debts
under the Financial Reconstruction Law increased ¥146 million ($1 million) to ¥41,889
million ($394 million). The coverage ratio ofbad debts (the total of claims deemed collectible with collateral and guarantees and the allowance for possible loan losses divided bytotal bad debts) was 72.30%.
Bankrupt and quasi-bankrupt assets arerecorded for the remaining amount after
deducting the amounts deemed collectible withcollateral and guarantees, while doubtful assets
are recorded for the loss-expected amount of

the remaining amount after similarly deducting
the amounts deemed collectible with collateraland guarantees, respectively, in the specificallowance for possible loan losses.
For substandard assets, the anticipatedloss ratio is calculated based on the loan loss
ratio and recorded in the general allowance for
doubtful accounts.

Asset Assessment under the Financial Reconstruction Law (Non-consolidated)(%, millions of yen)
Bankrupt and quasi-bankrupt assets
Doubtful assets
Substandard assets
Total claims under the Financial Reconstruction Low (FRL) (A)Normal claims
Partial direct write-offs
Total loans (B)Ratio of total claims under the FRL to total loans (%) (A/B)
Total coverage amounts on disclosed claims under the FRL (C)Coverage ratio (%) (C/A)

12

End of March2017
204
10,85730,682
41,7438,060,144

End of March2018
326
10,99430,56841,8897,004,527

Increase or
Decrease
122
137
(114)
146
(1,055,617)

204

199

(5)

8,101,888
0.51

7,046,416
0.59(1,055,472)
0.08

30,38372.78

30,28972.30(94)(0.48)

Important Management Indices
As the central financial institution for shinkin banks, the SCB strives
to attain and maintain sound management.

Consolidated capital
Adequacy Ratio (%)

Nonperforming Loan Ratio (%)(As of September 30, 2017)(As of September 30, 2017)34.58%
1.74%
16.81%
11.68%SCBCity banks1 Regional banks2Long-term Credit Rating

0.90%(As of July 31, 2018)

0.56%
SCB

City banks Regional banks

30.57%

0.60%

Notes:Note:
NPL ratio = total risk-monitored loans/total loans.
Source: Japanese Bankers Association(As of March 31, 2018)(As of March 31, 2018)

1. Average of 5 city banks
2. Average of 64 regional banks
Source: Bank disclosure documents

A1

A

A+

AA

Moody’s

S&P

R&I

JCR

Note:

Symbols indicating credit rating are assigned byeach rating agency.

The SCB promotes streamlining of management through ongoingsweeping restructuring.

Funds per Employee(As of September 30, 2017)

Ratio of Expenses (%)(As of September 30, 2017)(Millions of US dollars)

245
0.85%
0.67%

37
SCB

16

City banks Regional banks

0.07%
SCB

City banks Regional banks$257 million

0.07%

Notes:Note:(As of March 31, 2018)

1. Total funds = deposits + CDs + debentures
2. ‌US dollar amounts are converted for convenience only, at ¥112.70 and ¥106.28 per
US$1.00, the prevailing rate on September
30, 2017 and March 31, 2018, respectively.
Source: Japanese Bankers Association(As of March 31, 2018)

Ratio of expenses = total expenses/(deposits + CDs + debentures) average
outstanding balance
Source: Japanese Bankers Association

13

Corporate Governance
The SCB strives to maintain fairness andtransparency in its management by fortifying
our corporate governance system as we
implement various operational strategies. The
SCB’s goal is to gain the trust of all our stakeholders by demonstrating the strong commitment to establishing a rigorous corporate
governance system and to becoming an evermore distinguished financial institution wellrespected in society.

Institutional Structure

General Assembly of Representatives
The SCB is a cooperative financial institution
comprising 261 shinkin banks nationwide (asof March 31, 2018) that are its members andinvestors. The General Assembly of Representatives, equivalent to the general meetingof shareholders in a joint-stock company, isheld annually to elect directors and resolve
important issues.
Board of Directors
The SCB’s Board of Directors, comparable to
the Board of Directors in a joint-stock company, holds regular meetings nine times per
year, and makes decisions regarding importantbusiness matters.
The Board of Directors includes 12 fulltime directors, and 17 part-time directors selected from among the presidents orboard chairs of shinkin banks from each region in Japan. In accordance with Article 32,
paragraph 4 of the Shinkin Bank Act, the
SCB’s Articles of Incorporation stipulate that
more than half the total number of board
members must be executive officers of shinkinbanks. There are no board members corresponding to the outside directors as definedby the Companies Act.
The SCB is confident that the appropriate
check on management provided by the parttime directors ensures that supervision andsafeguard functions are in place and have ahigh degree of objectivity and transparency inbusiness operations.
Corporate Auditors
The SCB’s corporate auditors, comparable
to the corporate auditors of a joint-stockcompany, audit the execution of duties by the
directors.
The SCB appoints one full-time corporate
auditor and two part-time corporate auditorsfrom among the presidents of shinkin banks,
and two part-time corporate auditors who
are not executives of the SCB or shinkinbanks (non-member corporate auditors),
equivalent to outside corporate auditors as defined by the Companies Act. Non-member
corporate auditors are appointed from among
persons who meet the requirements stipulated in Article 32, paragraph 5 of the Shinkin
Bank Act. There are no stipulations of standards or guidelines regarding independence forthe appointment of non-member corporate
auditors. The SCB is confident that non-mem-14

ber corporate auditors are able to utilize theirprofessional knowledge and experience toconduct audits from an independent perspective.
One of the non-member corporate auditors is a certified accountant with a wealth ofknowledge and experience regarding financeand accounting.
There are no particularly notable conflicts of interest between the SCB and nonmember corporate auditors.
General Meeting for Preferred Shares
A general meeting for preferred shareholders
may be held to protect their property rights
under the Law Concerning Preferred Sharesof Cooperative Financial Institutions.
Part-time Directors and Corporate Auditors
The General Affairs Division provides information and other support for part-time directors,
and the staff members exclusively assisting corporate auditors under their direction provide
the same for part-time corporate auditors, inorder to facilitate the timely and appropriate
execution of duties by part-time directors andcorporate auditors.

Checks on Business Operations

Execution of Business Operations
At the SCB, the Board of Directors makes
decisions on important business operations.
Based on those decisions, the president
presides over the SCB’s business operations
and the Deputy president and other full-time
directors assist the president.
In addition, the SCB has established the
Executive Committee to deliberate and makedecisions on important managerial matters,
including ones to be resolved by or reported
to the Board of Directors.
The SCB has also established various
committees of the Executive Committee tofacilitate robust discussions on all aspectsof its business operations. To ensure that
deliberations and decisions are carried out ona cross-organizational basis, each committee
comprises several directors and general managers of divisions.
Supervision and Checks
At the SCB, the Board of Directors supervises
the execution of business by the directors.
More than half of the Board of Directors are
executive officers of shinkin banks, thereby
ensuring that the Board of Directors fulfills its
checking functions.
AuditsTo facilitate audits of the directors’ executionof duties, the corporate auditors at the
SCB attend Board of Directors’ and otherimportant meetings. The corporate auditors
also receive reports from directors regarding
their execution of duties, and inspect theminutes of the Executive Committee andother important documents. In addition, thecorporate auditors hold regular meetings withindependent corporate auditors to exchange
opinions and information.
Dedicated staff members are assigned toassist the corporate auditors to ensure that
directions are given efficiently, and to help
them perform their duties in a timely andappropriate manner.
Internal Audit System
The SCB is building an internal audit systemthat aims to realize efficient and effective business operations by utilizing the Internal Audit
Division that is independent from operational
divisions and branches. The Internal Audit
Division examines and assesses the legal andregulatory compliance status, risk management status, and operations management
status, of each division, branch, and affiliatedcompany of the SCB, to make sure that they
are functioning appropriately and effectively.
When deemed necessary, the Internal Audit
Division issues guidance so that corrective
measures may be undertaken.
In addition, each division and branch is
required to carry out its own internal inspections for the prevention and early detectionof administrative errors.
Use of Outside Specialists
The SCB has appointed Ernst & Young ShinNihon LLC as its corporate auditor.
The SCB utilizes the expertise of outside
specialists, including independent auditors,
attorneys, and tax accountants. To effectively
handle more sophisticated and diversified
operational requirements, the SCB consults
with, and receives advice from, such specialists on a regular basis and as the need arises.
Appropriate Information Disclosure
The SCB’s preferred shares are listed on theTokyo Stock Exchange. The SCB strives tomaintain appropriate disclosure of corporate
information, pursuant to the Financial Instruments and Exchange Law, other related laws,
and the Securities Listing Regulations of theTokyo Stock Exchange. The SCB also strives
to maintain transparency in its management
through appropriate disclosure.

Improving Internal Control Systems

The SCB regards compliance as the basic
premise of all business activities. The SCB
continues to strengthen and operate internal
control systems, based on a policy of maintaining reliable financial reporting, managing
risks flexibly and effectively in response to
those characteristics, and implementing
internal audits by utilizing the Internal Audit
Division, which is independent from theoperational divisions and branches.

Strengthening the Compliance System
The SCB views compliance as one of thehighest-priority management agendas. In linewith this stance, the SCB is carrying out themeasures outlined below as it strives to further strengthen its compliance system.

Compliance System

1.	‌The SCB has formulated the Shinkin Central Bank Code of Ethics, which stipulates
the ethical rules and behavior standards
that must be upheld by all SCB directors
and employees.
2.	‌In order to improve customer protection
and satisfaction, the SCB formulates Customer Protection Control Policy.
3.	‌The SCB formulates an annual Compliance
Program, which lays out its specific compliance plan for each fiscal year.
4.	‌To clarify the rules to be followed by directors and employees, the SCB has compiled a Compliance Manual as a practicalcompliance handbook.
5.	‌A compliance supervisory division andcompliance-related divisions have been set
up, and their respective roles clarified. A
compliance supervisor and deputy, both
responsible for compliance, are appointed
to each division and branch of the SCB.
6.	‌In order to deliberate compliance issues,customer protection issues, and serious

accidents, the SCB has established the Risk
Management Committee.
7.	‌In addition to conducting regular lectures
and training seminars for directors andemployees, each division and branch also
carries out its own training programs as
part of the SCB’s efforts to strengthen
compliance education.
8.	‌The audit items used by the Internal Audit
Division include compliance-related items,
and internal audits include investigation ofwhether the compliance system is functioning adequately.
9.	‌In cases of compliance violation, re ports from the heads of the divisions or
branches concerned are promptly called
for, and appropriate actions are taken toprevent a recurrence.
10.	‌T he SCB operates a hotline to facilitate
repor ting of compliance breaches bydirectors and employees. The SCB also
has in place strict measures to protect
whistle-blowers.
11.	‌Pursuant to the Law on Sales of Financial
Products, the SCB has formulated andmade public its Financial Products Solicitation Policy. To ensure that solicitation iscarried out fairly, important points regarding a product must be explained to thecustomer at the time of sale.

12.	‌Pursuant to the Law on Protection of Personal Information, the SCB has published
its Personal Information Protection Policy
on its internet website. The SCB takes
necessary and appropriate safety measures
to protect personal information.
13.	‌I n addition to publishing its Outline forManaging Conflicts of Interest on its internet website, pursuant to the Shinkin BankAct and the Financial Instruments and Exchange Law, the SCB is taking appropriate
management steps to ensure that customers’ interests are not wrongfully violated.
14.	‌Based on the financial Alternative Dispute
Resolution (ADR) system, to respond
expeditiously, fairly, and appropriately tocustomers’ inquiries, complaints, disputes,
and other issues, the SCB has overhauled
its internal management system and is
striving to enhance its reliability.
The SCB intends to review and update thecontent of its Compliance Manual and otherpolicies on an ongoing basis. All SCB directors
and employees are working to maintain strict
compliance through coordination among related divisions, and by strengthening internal
education programs.

Compliance System Overview
Customers
Division or branch

Corporate
lawyerCorporate
Auditors

Personnel responsible for compliance (appointed by the head of compliance administration)
Personnel deputy responsible for compliance (appointed by the compliance supervisor)
Compliance supervisor (head of division or branch)Compliance supervisory division（General Affairs Division）

Deputy head ofcomplianceadministration

Head of complianceadministration(General Manager ofLegal & Compliance Office)(General Manager ofGeneral Affairs Division)

Supervisor of compliance

Compliance-related divisions
Personnel Division
Strategic Planning Division
Business Promotion DivisionInternal Audit Division

Compliance hotline

Employees

Operations Division
Systems Division(Director in charge ofGeneral Affairs Division)

Risk Management Committee

Directors (full time)

Executive Committee
Board of Directors

15

Risk Management
Learning from the experience of the financial crisis, the SCB is exhaustively implementing more highly detailed and thoroughprocesses to manage risk by pursuing more sophisticated integrated, market and credit risk management and other measureswhile also advancing predictor and interim management for credit control.
Basic Policy on Risk Management

In the wake of the global financial crisis, financial
institutions face significant changes in economic
and financial market conditions and otheraspects of their operating environment. To
respond promptly and appropriately to thesechanges, financial institutions require very finely
tuned risk management.
The SCB has positioned risk management
as a key management priority for ensuringsound management and securing adequate
profits. All directors and employees conduct
their daily duties with a full awareness of theimportance of risk management.
The SCB classifies risk in two broad categories—risk that must be controlled andrisk that must be absolutely minimized—
and manages the risks accordingly. The typesof risk that must be controlled are market,
liquidity, and credit risks. The type of risk thatmust be minimized is operational risk. The
Risk Management Division coordinates the
management of different risks to provide
comprehensive risk management.
The SCB has also established cross­organizational bodies—the Risk Management
Committee ALM Committee, and Credit Committee, —to manage risk from a Bank-wide
perspective. These committees deliberate andmake decisions on specific issues relating to theirrespective risk management functions based on
the policies determined by the Board of Directors and the Executive Committee.
To ensure the effectiveness of its risk management systems, the SCB has also establishedthe Internal Audit Division—a body indepen­
dent from its risk management systems—tomonitor the SCB’s risk management activities.

Integrated Risk Management

To manage risk in a comprehensive manner,
the SCB employs the integrated risk management method to cope with quantifiable risk.
Integrated risk management is a way tomanage its diverse risks by calculating themwith uniform criteria, such as the Value-atRisk (VaR) method, and comparing theiraggregated value to the institution’s overall
financial strength (i.e., capital adequacy).
For market risk and credit risk, the SCB
calculates the VaR. For the calculation of operational risk capital requirements, the SCB
employs the basic indicator approach, proposed under regulations concerning capital
adequacy ratios.
The SCB defines capital under its integrated risk management system and allocates quantitative risk limits, operation-

al risk and other types of risk.* Separately,
the SCB estimates losses under various
stress scenarios as part of its efforts tomonitor potential impacts on capital.
The quantit ative risk limits and re ser ve amounts for each f iscal year are
determined by the Executive Committee
following deliberation by the Risk Management Committee. The Risk Management
Division, which oversees integrated risk
management, measures the amount of risk
exposure both during and at the end of eachmonth, to ensure that quantitative limits
for each type of risk are not exceeded. The
Risk Management Division provides reports
on risk status to senior management andrelated divisions through the Risk Management Committee.
*	‌With regard to subsidiaries within the SCB’s scope of
consolidation, the SCB monitors risk exposure at eachsubsidiary and allocates capital commensurate with theamount of risk. These allocations enable subsidiaries totake risks.

Risk Categories
Category
Market risk

Must becontrolled

Must be absolutely
minimized

Description
Market risk is the risk of loss resulting from fluctuations in asset or liability values (including offbalance-sheet items), due to changes in such market risk factors as interest rates, stock prices,and exchange rates. This includes the risk of loss due to changes in earnings generated by assets
and liabilities.

Liquidity risk

Liquidity risk is the risk that a financial institution will be unable to generate sufficient cash inflow
to meet required cash outflows; and the risk of loss resulting from the unavoidable need to procure
funds at much higher interest rates than normal (cash flow risk); and the risk that market transactions will become either impossible, or that transactions must be carried out at very unfavorable
prices due to market disruptions (market liquidity risk).

Credit risk

Credit risk is the risk of loss due to the partial or complete loss of asset value (including offbalance-sheet assets), owing to such factors as that a borrower or counterparty will fail to perform
on an obligation.

Operational risk

Operational risk is the risk of unexpected loss resulting from inadequacies in operational
processes, breaches in internal controls, employee actions, or computer systems, as well as therisk of loss resulting from external events.

Administrative risk

Administrative risk is the risk of loss resulting from administrative failures, accidents, or management or staff fraud.

Information
technology risk

Information technology risk is the risk of loss due to computer system failures, errors, orinadequacies, and the risk of loss due to the fraudulent use of computer systems.

Other operational risks are those, other than the ones mentioned above, that may be defined, as
Other operational risk necessary, by the divisions responsible for the overall management of operational risk (excluding
market, liquidity, and credit risks).

16

Risk Management System
Board of Directors
Division responsible for asset assessment
Credit Planning & Supervision Division

Executive Committee

Risk Management
Committee
Risk Management Division

Risk Management Division

Responsible for integrated risk
management

Responsible for overall management ofoperational risk

Risk Management Division(Assessment)

Operations Division

Strategic Planning Division (Policy)
Financial Management Division(Calculation)

Systems Division

Credit Planning & Supervision Division
Responsible for credit assessment

Responsible for administrative risk
management

Responsible for liquidity risk
management

Responsible for the management of otheroperational risk

Responsible for credit control

under various scenarios. These include theinterest rate risk amount calculated using
outlier standards; the possible stress loss
in a highly volatile market; the basis-pointvalue (BPV) indicator, which measures thepotential change in portfolio market value
for fluctuation in interest rates.
The status of these risk management
activities is reported to senior management at
biweekly meetings of the ALM Committee.

Market Risk Management Framework
Board of Directors
Executive Committee
Decisions

Matters for discussion

Risk Management Committee
ALM Committee
Decisions

Responsible for market risk
management

Financial Management Division

Divisions stipulated by Risk
Management Division

Risk Management Division, Credit
Planning & Supervision Division

Risk Management Division

Risk Management Division

Responsible for information technology
risk management

Responsible for capital adequacy

ALM
Committee

CreditCommittee

Decisions

Reports

Divisions responsible formarket risk management

Matters for discussion

Market divisions
Mutual checks

Mutual checks

Mutual checks

Administrative control divisions

Market Risk* Management
To maintain an accurate understanding ofmarket risk and rigorously manage this risk,
the SCB has issued a market risk management
policy. Furthermore, divisions responsible formarket risk management are clearly separated
from divisions involved in market operations,providing a risk management structure inwhich internal checks are maintained throughthe independent functions.
The SCB has established the ALM Committee as the body responsible for deliberating and making decisions on matters relating
to m arket risk m an age ment . The A LM
Committee comprises senior management
and heads of divisions related to market risk.
Based on risk status information—obtained

via reports from divisions responsible formanaging market risk and other sources—
the ALM Committee deliberates widely and
expeditiously on policy relating to fundraising and management as well as proposed
market transactions.
For banking operations and trading activities, the divisions responsible for managing
market risk quantify and manage market risk
by VaR within the limit set by the Executive
Committee. In addition, market risk is further
divided into several categories, with risk
quantities monitored by category.
* Market risk includes interest rate risk and such equity­
related risk as stock price fluctuation risk.

In addition, the SCB manages market
risk by monitoring a wide range of measures

Liquidity Risk Management
As the central financial institution for shinkinbanks, the SCB maintains a rigorous system
for managing liquidity risk to respond to
the needs of shinkin banks for daily working
capital and emergency funds.
To maintain an accurate understandingof liquidity risk and rigorously manage thisrisk, the SCB has formulated a liquidity risk
management policy. Divisions responsible
for liquidity risk management are clearly
separated from divisions involved in cash
management and market operations, allowinginternal checks to be maintained through theindependent functions. In addition, the ALM
Committee deliberates and makes decisions
on matters relating to liquidity risk management.
Methods used for managing liquidity risk
include the daily setting and monitoring ofrisk limit amounts relating to the gap between
cash receipts and payments. This is carriedout for individual currencies and periods. In
the event that a significant liquidity risk arises,
the SCB is prepared to respond rapidly, andeven secure funding sources.

17

Credit Risk* Management
To maintain an accurate understanding ofcredit risk and rigorously manage this risk, the
SCB has formulated a credit risk management
policy. Furthermore, the SCB has formulated
a Credit Policy, which sets out the SCB’s
fundamental philosophy. The SCB requires
strict adherence to the Credit Policy on thepart of all directors and employees involvedin credit operations. The SCB conducts ongoing internal communications emphasizing
the importance of sound ethics in all behavior
and decision making.
At the SCB, divisions responsible for
credit control, credit assessment and asset
assessment are clearly separated from divisions
involved in client services. In this way, we arebuilding a structure in which internal checks
are maintained through the independentfunctions given to each part of the system.
The SCB has established the Credit Committee and the Risk Management Committee
as the bodies responsible for deliberating andmaking decisions on matters relating to credit
risk management. The Credit Committee andthe Risk Management Committee comprisesenior management and the general managers
of related divisions. The Credit Committee deliberates on credit transactions thatexceed a designated amount, and the Risk
Management Committee deliberates broadly
and thoroughly matters relating to credit
risk management. The Executive Committee
deliberates, and makes decisions regarding,
the results of self-assessment of assets andmatters relating to self-assessment of asset
write-offs and asset reserve provisions.
Divisions responsible for credit control
manage the credit risk for each borrower
relating to loans and market trading activities.
An overall credit limit is set for each borrower according to their credit rating.
Credit ratings are based on quantitative
criteria, set by evaluating the borrower’s
financial statements, and qualitative criteria,
set by evaluating the borrower’s competitive
strength in the particular industry within
which it operates. Based on these assessmentsof credit strength, each borrower is given acredit rating on the SCB’s 10-step scale. The
credit ratings given to borrowers are reviewed
regularly, and flexibly revised as necessary.
Divisions responsible for credit control
analyze the SCB’s overall credit portfolio
according to credit rating, industry, country,
and other criteria. These analyses are used
to monitor the diversification of credit risk
as well as changes in portfolio credit risk.

18

Furthermore, credit risk is quantified andmanaged within the risk limit set by the Executive Committee.
The credit risk amount is measured
using VaR as well as the Monte Carlo simulation method.
The Credit Planning & Supervision Division—responsible for credit assessment—
accurately monitors each borrower’s financial
condition, the purposes for which funds areused, and repayment resources. In addition toappropriate assessment and post-transaction
management, the Credit Planning & Supervision Division continually inspects whether theclient service division is conducting appropriate credit controls, and provides guidanceas necessary. In the event that there should
be any problem on the borrower’s side, theCredit Planning & Supervision Division expeditously assesses the borrower’s management
situation and provides supervision. Where
necessary, action is taken to recover the loan.
The Credit Planning & Supervision Division is also responsible for asset assessment.
The division undertakes and manages operations relating to asset self-assessments, andthe calculation of asset write-offs and asset
reserve provisions.

requirements, the SCB uses the basic indicator approach proposed under regulations
concerning capital adequacy ratios.

* C redit risk includes such risk as counterparty risk forderivative transactions and securitization transaction
risk.

Information Technology Risk Management
The Systems Division takes charge of information technology risk management. It provides
control and guidance to divisions involved insystem development, operation, and utilization.
Recognizing t h at c y ber at t ack s are
becoming increasingly sophisticated and inge­
nious, the division is stepping up measures
to reinforce its cybersecurity, including theestablishment of the Shinkin Central Bank
Computer Security Incident Response Team.
In the event of a system failure that
seriously affects the execution of business
operations, an SCB-wide response is triggered based on crisis management procedures(contingency planning). In addition to periodically conducting crisis response drills, basedon system failure crisis scenarios, the SCB also
has in place a Disaster Recovery System andother precautions based on the Business Continuity Plan.

Operational Risk Management
To provide comprehensive management ofoperational risk, the SCB has issued a policythat governs operational risk management.
In addition, the SCB has separate policies tomanage two major types of operational risk:
administrative and information technology
risk. The Risk Management Division is responsible for overall operational risk management,
the Operations Division oversees administrative risk management, and the Systems Division is responsible for information technology
risk management. The SCB may also create
new divisions to cope with other types ofoperational risk as the need arises. With thisstructure, the SCB comprehensively manages
operational risk.
The SCB has established the Risk Management Committee to deliberate and makedecisions on matters relating to operationalrisk management. The Risk Management
Committee, comprising senior management
and heads of related divisions, deliberates andmakes decisions on comprehensive methods
for managing operational risk, including
administrative risk and systems risk.
To calculate its operational risk capital

Administrative Risk Management
The Operations Division oversees administrative risk management and administrative
instruction. In addition to developing andmaintaining the administrative processing
system and administrative rules, and undertaking reviews of administrative procedures,the Operations Division conducts administrative instruction programs for divisions
involved in administrative processing. With
this system, the SCB appropriately manages
administrative risk.
Furthermore, the SCB is undertaking a
range of measures to ensure accurate andefficient administrative processing. These
include the systemization of administrative
processing, the provision of various training
programs, including programs, to encourage
staff to submit proposals to improve operatingprocesses at all branches. The SCB also controls the entire process of administrative risk
management, from the identification of risk to
the implementation of corrective measures.

Corporate Social Responsibility Activities
The SCB aims to be a financial institution highly valued throughout society. To this end, it consistently strives to conduct its
duties according to management philosophy. Thus, as the central bank for all shinkin banks, the SCB supports the growth of theshinkin bank industry thereby contributing to nationwide economic development.
The SCB’s duties include assisting shinkin banks with regional and SME financing for the purpose of revitalizing regional economies, as well as maintaining and improving the credibility of the shinkin bank industry in order to ensure its continued growth.
The SCB believes that it should fulfill its corporate social responsibility, play a leading role as the central bank for shinkinbanks, and put into practice its management philosophy.
Regional Financial Institution
Since the SCB’s funds are principally deposits received from community-based shinkinbanks, we believe it is appropriate that theybe used for the social and economic development of local communities.
To this end, the SCB is working on making available direct loans for local public agencies and business entities.
Further, in collaboration with shinkinbanks, the SCB contributes to the development and revitalization of local economies by
providing support for syndicated loans, private finance initiatives, and SMEs according totheir life stage, as well as conducting regional
industry research and local contributions.

Metrolink Nihonbashi uses low-emission,
low-noise electric buses that provide a highdegree of accessibility through a low-floor design. The buses serve a circular route throughNihonbashi and Yaesu, near the SCB’s head
office. This contribution works as a convenient and free transportation option for shoppers and workers in the area. This service
aims to revitalize the local area by helping to
improve the environment and by attracting
more visitors.
In addition, to promote the spread ofmusic and art, and contribute to the advancement of culture in society, the SCB is sponsoring of the Tokyo Philharmonic Orchestra.

Participation in “Tokyo 2020 Medal
Project: Towards an Innovative Future
for All”
The Tokyo Organising Committee of the
Olympic and Paralympic Games is conducting
a citizen participation project to manufactureroughly 5,000 medals for use at Tokyo 2020
from recycled metal obtained from small electronic devices as an initiative to create themechanisms for a sustainable society and calling for broad participation. The SCB is participating in this project as part of our social
contribution activities to give a boost to the
Olympics, a national event, and has provided
used mobile phones and smartphones (about
100 devices) and other small electronic devices (about 150 devices).

Provision of Financial Products
Socially Responsible Investing (SRI) and
Environment, Social and Governance (ESG) Fund
Shinkin Asset Management Co., Ltd., a wholly
owned SCB subsidiary, offers the Shinkin SRI
Fund, which focuses on the social responsibility of companies and investments.
SRI is based on the philosophy that“companies with the best potential for steady
growth are those that maintain sustainableeconomic growth by fulfilling their corporatesocial responsibilities”. Consequently, SRI
backs investment on the basis of research andanalysis carried out from a broad range ofperspectives, including financial, environmental, social, and ethical considerations.
Shinkin Asset Management began managing the Shinkin ESG Special Fund. Limited toqualified institutional investors, the fund provides a source of information for making investment decisions based on non-financial
factors, namely environmental performance,social contribution, and good governance.

PR Measure for Youth (“Oen Notes”)

Metrolink Nihonbashi

Assisting Local Society
The “21st Shinkin Bank Social Contribution
Award” elicited submissions for 570 social contribution initiatives in a wide range of areas,from 167 shinkin banks and four related organizations.
Activities were evaluated on the basis ofcontinuity, social significance, integration withthe community, and impact on the local society.
Awards were presented for activities at six
shinkin banks, with individual prizes awarded tothree people, as good examples for shinkinbank employees to emulate.

As a PR measure for youth, we distributed notes
with simple descriptions of how money works
and what shinkin banks do to elementary school
students in areas where the main branches ofshinkin banks are located nationwide.
“Oen Notes” is a project run by C-GRAT
Co., Ltd. The aim of our participation is to promote the image of shinkin banks and foster asense of familiarity by placing information
about shinkin banks on notes that elementary
school students use on a daily basis.

Community and Environment
As part of its efforts to contribute to local
communities, the SCB sponsors Metrolink Nihonbashi, to realize human-friendly and environmentfriendly transportation in the Tokyo
metropolitan government’s urban planning vision.

19What Are Shinkin Banks?
Shinkin banks are cooperative financial institutions. Their membership comprises local
residents and SMEs. Shinkin banks’ distinctive characteristics are that they are conveniently located; offer fine-tuned, personalized
services; and have a strong relationship of mutual trust with their customers and communities.
Cooperative financial institutions are orga­
nizations that operate under the fundamental
principle of mutual support.
Shinkin banks limit their lending, in principle, to members. However, their functions arealmost the same as those of commercial banks,
and they also deal with many people who are
not members, accepting deposits, providing
exchange services, accepting payments, including those for public utilities, and engaging inover-the-counter sales of public bonds, investment trust funds, and insurance.
Shinkin banks not only provide deposit, lending and exchange services, but also offer a diverse
range of services to customers and other members of the local community in such areas assupport for management improvement and enterprise renewal, business succession support, business start-up support, and local-area revitalization.

Outline of Shinkin Banks

Japan’s 261 shinkin banks form an extensive
network, with approximately 7,300 offices
across the country, from Hokkaido in the northto Kyushu and Okinawa in the south.
Shinkin banks dedicate themselves to providing high-quality services to local residents,
as financial institutions that are deeply rooted
in their respective regions, and contribute toregional development.
Total deposits outstanding at 261 shinkinbanks as of March 31, 2018, reached approximately ¥140 trillion ($1,326 billion), which ranks
it in third place after Japan’s city and regionalbanks, and gives shinkin banks an important position in Japanese financial markets.
Shinkin banks continue to further deepen
their presence and roles as important infrastructure for regional economies and communities.

Deposits1 Outstanding by
Bank Segment (As of March 31, 2018)
City Banks

2,457

Shinkin Banks

1,326

Second-tier Regional BanksManagement improvement /enterprise renewal

Co-financing

Succession support / M&As

Product and service expansion

Overseas expansion

Personal lending businessBusiness start-ups

Local-area revitalization

Shinkinbankcustomers

Nationwide Network of Shinkin Banks (261 banks)

Hokuriku (16 banks)
Kinki (29 banks)

Hokkaido (20 banks)

Chugoku (21 banks)
Tohoku (27 banks)

Kyushu (27 banks)

Kanto (49 banks)

Tokyo (23 banks)
Tokai (38 banks)

Okinawa (1 bank)

Shikoku (10 banks)

Deposits Outstandingat Shinkin Banks(Trillions of yen / billions of US dollars)$3,358Agricultural Cooperatives

128.0(1,244)131.9(1,098)134.7(1,195)137.9(1,229)Loan and Bills Discounted
Outstanding at Shinkin Banks(Trillions of yen / billions of US dollars)

140.9(1,326)
64.4
(626)

65.8
(547)

67.3
(597)

69.1
(616)

70.9
(667)

953
2

628

Credit Cooperatives

191

Labor Credit Associations

185

1. Deposit includes domestic operations.
2. ‌City banks, regional banks and second-tierregional banks do not include the special
international financial transactions account.
Sources: Japanese Bankers Association, the Norinchukin
Bank, National Central Society of Credit
Cooperatives, National Association of Labour
Banks and the SCB.

20

Shinkinbanks(Billions of US dollars)
2

Regional Banks2

Notes:

Shinkin Bank Services

2014

Note:

2015

2016

2017

2018

Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥102.94, ¥120.15, ¥112.69, ¥112.19
and ¥106.28 per US$1.00, the prevailing rate on
March 31, 2014, 2015, 2016, 2017 and 2018,
respectively.
Source: The SCB.

2014

Note:

2015

2016

2017

2018

Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥102.94, ¥120.15, ¥112.69, ¥112.19
and ¥106.28 per US$1.00, the prevailing rate on
March 31, 2014, 2015, 2016, 2017 and 2018,
respectively.
Source: The SCB.

Capital Adequacy Ratio of Shinkin Banks
13.17%

13.16%

13.08%
12.78%FY2014The capital adequacy ratio of shinkin banks fell
to 12.51% (preliminary figure) as of March 31
2018, from 12.78% at the end of the previous
fiscal period. This decline was driven by theincrease in risk-weighted assets relating mainly
to loan growth.
The ratio maintains a level that is not inferior to that of other business categories,
and is outperforming other domestic regionalbanks (9.81%) and second-tier regional banks(9.21%).

FY2015FY201612.51%FY2017FY2018(Preliminary figure)

Source: The SCB.

Non-consolidated
Capital Adequacy Ratio
by Bank Segment (%)

Nonperforming-loan Ratioof Shinkin Banks (%)(as of March, 31, 2018)

6.45%

17.99%

5.91%
5.30%

12.51%
9.81%

Shinkinbanks

City banks(Preliminary figure)

4.75%

9.21%

Regional Second-tierbanks regional banks

4.34%

FY2014FY2015FY2016FY2017(Domestic)

Sources: Bank disclosure document, Regional Banks
Association of Japan, The Second Association ofRegional Banks.

FY2018(Preliminary figure)

Source: The SCB.

Difference between Shinkin Banks and Commercial Banks
Category

Shinkin Banks

Commercial Banks
Banking Act

Legal foundation

Shinkin Bank Act

Organization

Non-profit cooperative organization financed For-profit joint stockby its members
corporations

Membership qualifications(1) ‌Those who have an address or office in the Noneregion(2) Those who have a business office in the region(3) Those who work in the region(4) ‌Executive officers of companies that have abusiness office in the region(In the case of businesses)
Businesses with no more than 300 employees orwith less than 900 million yen in capital21

Preferred Shares
The SCB’s Preferred Shares

Trading of Preferred Shares

The SCB issues preferred shares under the
Law Concerning Preferred Shares of Cooperative Financial Institutions. The preferredshares, which are regulated by the Financial
Instruments and Exchange Law, are issued tocomplement members’ (shinkin banks’) common shares and offered publicly to increase thenet worth of cooperative financial institutions.
Although the preferred shares do notcarry the voting rights that holders of common shares receive, the preferred shares havecertain advantages over common shares, suchas the guarantee of priority in the payment
of dividends.

Like listed stocks, the SCB’s preferred sharescan be traded anytime during Tokyo Stock
Exchange trading hours through a securities
company. Credit transactions are also possible
for preferred shares, just as they are for stocks.

Listing of Preferred Shares
The SCB has issued preferred shares since
fiscal 1995 and, for the first time in Japan, thepreferred shares were listed on the Tokyo
Stock Exchange on December 22, 2000 (Securities Identification Code 8421). The SCB’s
preferred shares are marketable securities
that are very similar to preferred stocks,
and, basically, the same listing criteria anddisclosure rules apply to them.

Dividends of Preferred Shares
The SCB’s basic policy is to pay stabledividends while securing sound management,enhancing internal reserves, and boostingearnings power.
The SCB’s preferred shares pay a dividend
to the holders at the end of March of every
fiscal year. As the rule of interim dividends is
not provided in the Law Concerning Preferred
Shares of Cooperative Financial Institutions,
the SCB does not pay interim dividends.
Dividends of preferred shares comprise
preferred dividends and participating dividends.
Preferred dividends are paid before any
dividends are paid to common stock holders(shinkin banks). Participating dividends arepaid from retained earnings after preferred
dividends. They may vary depending on profits
of the SCB.

Composition of Preferred Shares (March 31, 2018)
・Number of Investors (20,210)
Foreign institutions
and others
36(0.2%)
Financial institutions
205(1.0%)
Other corporations
211(1.0%)

Other corporations
38,871(5.5%)(Closing price,yen)First day of listing (December 22, 2000) 200,500
Foreign institutions
and others
1,771(0.2%)

Highest price (March 15, 2006)

311,500

Lowest price (April 14, 2009)

102,400

Closing price (July 31, 2018)240,300* The price of preferred shares is split-adjusted, reflecting
the stock split of preferred shares as at July 31, 2009.

Individuals
113,901(16.1%)
Individuals
19,747(97.7%)

22

Price of Preferred Shares*

・Number of Subscription (708,222)
Securities companies
6,904(1.0%)

Securities companies
11(0.1%)The SCB’s preferred shares are treatedas stocks in the taxation system, and are given
the same preferential treatment concerning
tax as stocks.
For fiscal 2017, the dividend for preferredshares was ¥6,500 ($61) per share, which
included a preferred dividend of ¥3,000 ($28)
and a participating dividend of ¥3,500 ($32).

Financial institutions
546,775(77.2%)

Financial Section

Contents
24 Five-Year Summary (Consolidated)
25 Consolidated Balance Sheet
26 Consolidated Statement of Income
27 Consolidated Statement of Comprehensive Income
28 Consolidated Statement of Changes in Net Assets
30 Consolidated Statement of Cash Flows
31 Notes to Consolidated Financial Statements
76 Independent Auditor’s Report
77 Non-Consolidated Balance Sheet
78 Non-Consolidated Statement of Income
79 Statement of Trust Account (Consolidated)

23

Five-Year Summary (Consolidated)
FY2013

FY2014FY2015(Millions of yen)
FY2016FY2017

Total Income

308,171

307,894

302,154319,307306,892

Trust Fees

597

600

665

595

351

Total Expenses

255,548

223,028

242,097

266,503

244,018

Profit Attributable to Owners of Parent

37,612

62,69642,78143,871

44,466Comprehensive Income

48,004

173,51218,303

11,056

20,433

Net Assets

1,276,826

1,433,756

1,632,969

1,625,842

1,626,605

Total Assets

31,184,564

33,516,073

35,092,905

37,464,593

38,790,449

Net Assets per Share (yen)268,795.17

301,997.98

301,512.71

299,542.84

299,587.63

Net Income per Share (yen)7,537.36

12,865.13

7,115.71

6,223.20

6,311.86

16,603

18,957

18,115

19,603

19,603General Common Shares

12,00014,00012,00012,00012,000Specific Common Shares

－

－

1,512

3,000

3,000

Preferred Shares

4,603

4,957

4,603

4,603

4,603

Total Trust Assets

2,180,138

2,096,294

2,181,287

1,859,161

525,445

Dividends

Notes:
1. National and local consumption tax incurred by the Shinkin Central Bank and its domestic consolidated subsidiaries are
excluded from transaction amounts.
2. In the fiscal year ended March 31, 2017 the Shinkin Central Bank started trust business; “Trust Fees” and “Total Trust Assets”
have therefore been added to the above table.
3. “Total Trust Assets” is calculated by means of simple aggregation of the trust assets for each consolidated company conducting
trust business pursuant to the “Act on Engagement in Trust Business Activities by Financial Institutions”. Consolidated
companies conducting such trust business comprised only Shinkin Trust Bank, Ltd. until the fiscal year ended March 31, 2016,
in the fiscal year ended March 31, 2017 comprised the Shinkin Central Bank and Shinkin Trust Bank, Ltd., and in the fiscal
year ended March 31, 2018 comprised the Shinkin Central Bank.

24

Consolidated Balance Sheet
Millions of Yen
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks (Note 2 (2), 26)
Bills Bought and Call Loans (Note 26)
Receivables under Resale Agreements (Note 26)
Receivables under Securities Borrowing Transactions (Note 26)
Monetary Debts Purchased (Note 26)
Trading Assets (Note 3, 9, 26, 27)
Money Held in Trust (Note 26, 27)
Securities (Note 4, 7, 9, 26, 27)Loans and Bills Discounted (Note 5, 6, 9, 26)
Foreign Exchanges Assets
Other Assets (Note 9)
Tangible Fixed Assets (Note 8, 14, 25)
Intangible Fixed Assets (Note 25)
Deferred Tax Assets (Note 23)
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets

Liabilities and Net Assets
Liabilities
Deposits (Note 26)
Debentures (Note 12, 26)
Trading Liabilities (Note 10, 26)
Borrowed Money (Note 9, 11, 26)
Bills Sold and Call Money (Note 26)
Payables under Repurchase Agreements (Note 9, 26)
Payables under Securities Lending Transactions (Note 9, 26)
Foreign Exchanges Liabilities
Borrowed Money from Trust Account
Other Liabilities (Note 11, 13)
Reserve for Employee Bonuses
Reserve for Directors' Bonuses
Net Defined Benefit Liability (Note 24)
Reserve for Directors' Retirement Allowances
Reserve under Specific Law
Deferred Tax Liabilities (Note 23)
Deferred Tax Liabilities for Land Revaluation (Note 14)
Acceptances and Guarantees
Total Liabilities

Net Assets
Common Shares and Preferred Shares (Note 22)
Capital Surplus
Retained Earnings
Total Shareholders' Equity
Net Unrealized Gains (Losses) on Other Securities (Note 23, 27)
Net Deferred Gains (Losses) on Hedging Instruments (Note 23, 28)
Land Revaluation Excess (Note 14)
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans (Note 24)
Total Accumulated Other Comprehensive Income
Non-controlling interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of these financial statements.

Millions of
U.S. Dollars(Note 1)
2018

2018

2017

12,393,632
413,259
89,99915,340177,359
250,424
99,78917,108,434
6,952,660
20,460967,208
71,353
12,9993,996
256,687(43,157)
38,790,449

10,611,955
362,234
19,99986,206
180,477
232,088
17,164,425
7,995,391
20,514
488,62273,89914,843
3,895
255,536(45,499)
37,464,593

116,613
3,888
846
144
1,668
2,356
938
160,975
65,418
192
9,100
671
122
37
2,415
(406)
364,983

30,230,956
2,705,490
66,636
1,637,770
40,313
98,373
1,789,012
447
5,375
204,426
1,721
89
41,525595
178,321
6,100
256,687
37,163,843

29,150,114
2,950,000
84,345
1,203,870
27,821
188,402
1,606,958
368
360
234,605
1,726
83
41,524535
186,387
6,109
255,536
35,838,750

284,446
25,456626
15,409379
925
16,833
4
50
1,923
16
0
390
5
0
736
57
2,415
349,678

690,998
100,678
571,563
1,363,240
299,808(50,303)
13,433(2,848)(7,681)
252,409
10,956
1,626,605
38,790,449

690,998
100,678546,678
1,338,355
348,931(72,705)
13,455(3,246)(9,351)
277,083
10,403
1,625,842
37,464,593

6,501
947
5,377
12,826
2,820
(473)
126
(26)
(72)
2,374
103
15,304364,98325

Consolidated Statement of Income
Millions of
U.S. Dollars(Note 1)
2018

Millions of Yen
Shinkin Central Bank For the year ended March 31,
IncomeInterest Income:Interest on Loans and Discounts
Interest on Due from Banks
Interest on Bills Bought and Call Loans
Interest on Receivables under Resale Agreements
Interest on Receivables under Securities Borrowing Transactions
Interest and Dividends on Securities
OthersTrust Fees
Fees and Commissions (Note 16)
Trading Income (Note 17)
Other Operating Income
Other Income (Note 19)
Total Income

Expenses
Interest Expenses:
Interest on Deposits
Interest on Debentures
Interest on Borrowed Money
Interest on Bills Sold and Call Money
Interest on Payables under Repurchase Agreement
Interest on Payables under Securities Lending Transactions
OthersFees and Commissions (Note 16)
Trading Losses (Note 18)
Other Operating Expenses
General and Administrative Expenses
Other Expenses (Note 20)
Total Expenses

Profit before Income Taxes
Income Taxes (Note 23):
Current
Deferred
Total Income Taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2018

2017

220,528
17,597
8,417
706
0
131
193,032642
351
42,7793,904
24,406
14,922306,892

201,637
17,869
8,448
753
0
148
173,879
538
595
42,6855,260
59,028
10,099319,307

2,074
165
79
6
0
1
1,816
6
3
402
36
229
140
2,887

121,559
37,839
5,920
7,066
461
1,920
15,88352,467
15,386
133
54,22851,647
1,063
244,018

122,381
39,689
7,998
8,292
254
1,062
9,267
55,817
14,78474,53452,043
2,759
266,503

1,143
356
55
66
4
18
149
493
144
1
510
485
10
2,295

62,87352,804591

16,3891,490
17,88044,992526
44,466

12,199(3,948)8,250
44,554682
43,871

154
14
168
423
4
418

2017
6,223.20
3,000.00
1,500.00
6,500.00

U.S. Dollars(Note 1)
2018
59.38
28.22
14.11
61.15

Yen
Net Income per Share (Note 32)
Dividend Declared per Share (General Common Shares)
Dividend Declared per Share (Specific Common Shares)
Dividend Declared per Share (Preferred Shares)
The accompanying notes are an integral part of these financial statements.

26

2018
6,311.86
3,000.00
1,500.00
6,500.00

Consolidated Statement of Comprehensive Income
Shinkin Central Bank For the year ended March 31,
ProfitOther Comprehensive Income (Note 21)
Net Unrealized Gains (Losses) on Other Securities
Net Deferred Gains (Losses) on Hedging Instruments
Land Revaluation Excess
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans
Comprehensive Income
Comprehensive Income attributable to owners of the parent
Comprehensive Income attributable to non-controlling interests

2018

Millions of Yen

44,992(24,559)(49,122)
22,4010
398
1,762
20,433
19,814618

2017

44,554(33,497)(129,013)
96,145(1,593)963
11,056
10,328727

Millions of
U.S. Dollars(Note 1)
2018
423
(231)
(462)
210
0
3
16
192
186
5

The accompanying notes are an integral part of these financial statements.

27

Consolidated Statement of Changes in Net Assets
Shinkin Central Bank For the year ended March 31,2018

Millions of Yen
Shareholders' Equity
Common Shares and Preferred
SharesBalance at Beginning of Year

Capital Surplus

Retained Earnings

690,998

100,678

Total Shareholders’ Equity
546,678

1,338,355

Fluctuation Amount during the Fiscal Year
Surplus Dividends(19,603)(19,603)

Profit attributable to owners of parent

44,46644,466

Reversal of Land Revaluation Excess

22

22

Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year--

24,88424,884690,998

100,678

571,563

1,363,240

Accumulated Other Comprehensive Income
Net Unrealized
Gains (Losses)
on Other
Securities
Balance at Beginning of Year348,931

Net Deferred
Gains (Losses) Land Revaluation
on Hedging
ExcessInstruments(72,705)

Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
IncomeForeign
Currency
Translation
Adjustments

13,455(3,246)(9,351)

277,083

Noncontrolling
Interests

Total Net
Assets

10,403

1,625,842

Fluctuation Amount during the Fiscal Year
Surplus Dividends(19,603)

Profit attributable to owners of parent

44,466

Reversal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year

22
(49,122)

22,401

(22)

398

1,670

(24,674)552(24,121)

Total Fluctuation Amount during the Fiscal Year(49,122)

22,401

(22)

398

1,670

(24,674)552

763

Balance at End of Year

299,808(50,303)

13,433(2,848)(7,681)

252,409

10,956

1,626,605

Millions of U.S. Dollars (Note 1)
Shareholders' Equity
Common Shares and Preferred
SharesBalance at Beginning of Year

Capital Surplus

6,501

Retained Earnings
947

Total Shareholders’ Equity
5,143

12,592

Surplus Dividends

(184)

(184)

Profit attributable to owners of parent

418

418

Reversal of Land Revaluation Excess00

Fluctuation Amount during the Fiscal YearNet Changes in Items Other Than Shareholders’Equity during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year

-

-

234

234

6,501

947

5,377

12,826

Accumulated Other Comprehensive Income
Net Unrealized
Gains (Losses)
on Other
Securities
Balance at Beginning of Year

3,283

Net Deferred
Gains (Losses) Land Revaluation
on Hedging
ExcessInstruments
(684)

126

Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
IncomeForeign
Currency
Translation
Adjustments
(30)

(87)

2,607

Noncontrolling
Interests

Total Net
Assets97

15,297

Fluctuation Amount during the Fiscal Year
Surplus Dividends(184)

Profit attributable to owners of parent

418

Reversal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year

28

0
(462)

210

(0)

3

15

(232)

5

(226)

Total Fluctuation Amount during the Fiscal Year

(462)

210

(0)

3

15

(232)

5

7

Balance at End of Year

2,820

(473)

126

(26)

(72)

2,374

103

15,304

Shinkin Central Bank For the year ended March 31,2017

Millions of Yen
Shareholders' Equity
Common Shares and Preferred
SharesBalance at Beginning of Year

Capital Surplus

690,998

Retained Earnings
100,678

Total Shareholders’ Equity
520,923

1,312,600

Surplus Dividends(18,115)(18,115)

Profit attributable to owners of parent

43,87143,871

Fluctuation Amount during the Fiscal Year

Reversal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year--

25,75525,755690,998

100,678546,678

1,338,355

Accumulated Other Comprehensive Income
Net Unrealized
Gains (Losses)
on Other
Securities
Balance at Beginning of Year477,944

Net Deferred
Gains (Losses) Land Revaluation
on Hedging
ExcessInstruments(168,850)

13,455

Foreign
Currency
Translation
Adjustments(1,653)Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
Income(10,270)

310,625

Noncontrolling
Interests

9,743

Total Net
Assets1,632,969

Fluctuation Amount during the Fiscal Year
Surplus Dividends(18,115)

Profit attributable to owners of parent

43,871

Reversal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year

(129,013)

96,145-(1,593)919(33,542)660(32,882)

Total Fluctuation Amount during the Fiscal Year

(129,013)

96,145-(1,593)919(33,542)660(7,126)

Balance at End of Year348,931(72,705)

13,455(3,246)(9,351)

277,083

10,403

1,625,842

The accompanying notes are an integral part of these financial statements.

29

Consolidated Statement of Cash Flows
Millions of
U.S. Dollars
Shinkin Central Bank For the year ended March 31,

2017(Note 1)
2018

Cash Flows from Operating Activities:
Profit before Income Taxes
Depreciation
Impairment Loss
Increase (Decrease) in Reserve for Possible Loan Losses
Increase (Decrease) in Reserve for Employee Bonuses
Increase (Decrease) in Reserve for Directors' Bonuses
Increase (Decrease) in Net Defined Benefit Liability
Increase (Decrease) in Reserve for Directors' Retirement AllowancesInterest Income
Interest Expenses
Net Losses (Gains) on Securities
Net Losses (Gains) on Money Held in Trust
Net Losses (Gains) on Foreign Exchange
Net Losses (Gains) on Disposal of Fixed Assets
Net Decrease (Increase) in Trading Assets
Net Increase (Decrease) in Trading Liabilities
Net Decrease (Increase) in Trading Receivable
Net Increase (Decrease) in Trading Payables
Net Decrease (Increase) in Loans and Bills Discounted
Net Increase (Decrease) in Deposits
Net Increase (Decrease) in Debentures
Net Increase (Decrease) in Borrowed Money (Excluding Subordinated Borrowings)
Net Decrease (Increase) in Due from Banks (Excluding Due from Central Bank)Net Decrease (Increase) in Call Loans and Others
Net Decrease (Increase) in Receivables under Securities Borrowing Transactions
Net Increase (Decrease) in Call Money and Others
Net Increase (Decrease) in Payables under Securities Lending Transactions
Net Decrease (Increase) in Monetary Debts Purchased
Net Decrease (Increase) in Foreign Exchanges (Assets)
Net Increase (Decrease) in Foreign Exchanges (Liabilities)
Net Increase (Decrease) in Due to Trust Accounts
Interest Received
Interest Paid
Other, Net
Sub-total
Income Taxes Paid
Net Cash Provided by (Used in) Operating Activities

62,8739,691
60(2,341)(4)
6
0
59(220,528)
121,559
23,339128
39,214
117(18,336)(17,709)101
19,7381,042,731
1,080,842(244,510)
650,100
333,793(121,024)
70,866(77,538)
182,054
3,117
54
78
5,015
275,967(142,068)(516,450)
2,561,001(17,362)2,543,638

52,804
10,647
(544)
(38)
3
1,105
(18)
(201,637)
122,381(32,002)(224)
43,797
11
42,064(45,116)
2,579(1,231,567)
1,936,087(102,920)
482,700
35,045(28,146)
34,334
98,023
192,408(2,788)(6,714)112(2,964)
268,378(139,300)(352,062)
1,176,436(18,665)
1,157,771

591
91
0
(22)
(0)
0
0
0
(2,074)
1,143
219
1
368
1
(172)
(166)
0
185
9,811
10,169(2,300)6,116
3,140(1,138)
666
(729)
1,712
29
0
0
47
2,596
(1,336)(4,859)24,096(163)
23,933

Cash Flows from Investing Activities:
Acquisitions of Securities
Proceeds from Sale of Securities
Proceeds from Redemption of Securities
Increase in Money Held in Trust
Decrease in Money Held in Trust
Acquisitions of Tangible Fixed Assets
Acquisitions of Intangible Fixed Assets
Proceeds from Sales of Shares of Subsidiaries Resulting in Change in Scope of Consolidation
Net Cash Provided by (Used in) Investing Activities(4,221,520)
2,326,190
1,805,703(100,000)(1,775)(3,416)
2,417(192,401)(4,333,235)
2,195,709
2,575,669(40,000)
112,955(4,542)(4,007)
502,548(39,720)
21,887
16,990
(940)
(16)
(32)
22
(1,810)(216,200)(19,603)(66)(235,870)(108,150)(18,115)(66)(126,332)(2,034)(184)(0)(2,219)(0)
2,115,366
9,668,340
11,783,706(0)
1,533,987
8,134,353
9,668,340(0)19,90390,970110,874

Cash Flows from Financing Activities:
Repayment of Subordinated Borrowings
Dividends Paid
Dividends Paid to Non-controlling Interests
Net Cash Provided by (Used in) Financing Activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period (Note 2 (2) )The accompanying notes are an integral part of these financial statements.

30

Millions of Yen
2018Notes to Consolidated Financial Statements
1. Basis of Presentation:
The accompanying consolidated financial statements have been
prepared from the accounts maintained by Shinkin Central Bank (the“Bank”) and its consolidated subsidiaries in accordance withaccounting principles and practices generally accepted in Japan thatare different in certain respects from the application and disclosure
requirements of International Financial Reporting Standards.
Certain items presented in the consolidated financial statements
have been reclassified for the convenience of readers outside Japan.
The amounts in Japanese yen are presented in millions of yen by
rounding down figures. As a result, the totals in yen shown in the
consolidated financial statements do not necessarily agree with thesums of the individual account balances.
U.S. dollar amounts represent the arithmetical results oftranslating original Japanese yen amounts of the respective accountbalances to U.S. dollars on a basis of ¥106.28 to U.S.$1, the exchange
rate prevailing as of March 31, 2018. The amounts in U.S. dollars arepresented in millions of U.S. dollars by rounding down figures. As aresult, the totals in U.S. dollars shown in the consolidated financial
statements do not necessarily agree with the sums of the individual
account balances. The U.S. dollars amounts are included solely forthe convenience of readers outside Japan and this translation should
not be construed as representation that Japanese yen amounts havebeen or could be readily converted, realized or settled in U.S. dollars
at that or at any other rates.

subsidiary, the Bank makes appropriate adjustments for any materialtransactions subsequent to December 31.

2. Significant Accounting Policies:(1) Principles of Consolidation
The consolidated financial statements include the accounts of the
Bank and its seven consolidated subsidiaries as of March 31, 2018
listed below:
Ownership
Location
Percentage
Name
The Shinkin Banks Information
System Center Co., Ltd.
Tokyo
50.7%
Shinkin International Ltd.
London100%
Shinkin Chukin Business Co., Ltd.
Tokyo
100%
Shinkin Asset Management Co., Ltd.
Tokyo
100%
Shinkin Securities Co., Ltd.
Tokyo
100%
Shinkin Capital Co., Ltd.
Tokyo
100%
Shinkin Guarantee Co., Ltd.
Tokyo
100%

Affiliated companies to which the equity method is not applied due toimmateriality:
Aozora Loan Services Co., Ltd.

(*) Shinkin Trust Bank, Ltd. merged with Mitsubishi UFJ Trust and Banking
Corporation on September 19, 2017, and, therefore, has been excluded fromthe scope of consolidation from the second quarter of the current fiscal year.

Unconsolidated subsidiaries
Shinkin no Kizuna Investment Limited Partnership
Shinkin no Tsubasa Investment Limited Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because their total assets, total income, net income(amount based on the equity method), retained earnings (amountbased on the equity method) and accumulated other comprehensive
income (amount based on the equity method) are immaterial and do
not hinder a rational judgment of the Bank’s financial condition andresults of operation when excluded from the scope of consolidation.
The fiscal year and the closing date thereof for the financial
statements of the consolidated subsidiaries are in agreement withthose of the Bank, except for Shinkin International Ltd., which has afiscal year ended on December 31. For the consolidation of the

All significant intercompany accounts and transactions havebeen eliminated in consolidation. The Bank’s share of net assets ofsubsidiaries is valued at fair value on acquisition. Minority interests
in net assets of subsidiaries are valued at fair value on acquisition in
the consolidated financial statements. The excess of the cost over thefair value of the underlying net equity in subsidiaries on acquisition isexpensed when incurred.
The application of equity-method to unconsolidated subsidiaries andaffiliates is as follows:
Non-consolidated equity-method subsidiaries:
N/A
Affiliated equity-method companies:
N/A
Unconsolidated subsidiaries that are not accounted for by the equity
method:Shinkin no Kizuna Investment Limited Partnership
Shinkin no Tsubasa Investment Limited Partnership
Unconsolidated subsidiaries that are not accounted for by theequity method are excluded from the scope of equity method because
their effect on the accompanying consolidated financial statements, interms of net income (amount based on the equity method) andretained earnings (amount based on the equity method), would not bematerial.

(2) Cash and Cash Equivalents
In the consolidated statement of cash flows, “Cash and Cash
Equivalents” consist of Cash and Due from Central Bank.
Reconciliation between Cash and Due from Banks in the
consolidated balance sheet and Cash and Cash Equivalents at March
31, 2018 and 2017 is as follows:
Millions ofMillions of Yen
U.S. dollars
2018
2017
2018
Cash and Due fromBanks

12,393,632

10,611,955

116,613

Due from Banks(Excluding Duefrom Central Bank)(609,925)(943,615)(5,738)

11,783,706

9,668,340

110,874

Cash and Cash
Equivalents(3) Trading Assets and Liabilities
Transactions for “Trading Purposes” (for purposes of seeking tocapture gains arising from short-term changes in interest rates,
currency exchange rates or market prices of financial instruments andother market related indices or from gaps among markets) are
included in “Trading Assets” and “Trading Liabilities” on the
consolidated balance sheet on a trade date basis. In addition, gains
and losses from “Trading Assets” and “Trading Liabilities” arerecorded as “Trading Income” and “Trading Losses” on the
consolidated statement of income on a trade date basis.
Securities and monetary debts purchased for trading purposes
are stated at fair value at the fiscal year end. Trading-related financial
derivatives such as swaps, futures and options are stated at the31deemed amounts that would be received or paid for settlement if suchtransactions were terminated at the fiscal year end.
(4) Financial Instruments(i) Securities
The Bank and its consolidated subsidiaries classify securities into
three categories: held-to-maturity debt securities, investments inaffiliates that are not accounted for by the equity method, and othersecurities. Held-to-maturity debt securities are stated at cost and areamortized by the straight-line depreciation method using theweighted-average method. Investments in affiliates that are notaccounted for by the equity method are stated at cost using theweighted-average method. Stocks and investment trusts in othersecurities are stated based on the average quoted market price over amonth preceding the balance sheet date and others are stated at fairvalue based on quoted market prices and other applicable information
at the balance sheet date (and the cost of securities sold is mainly
determined using the weighted-average method). Other securities
where there is significant difficulty in determining fair value arestated at cost using the weighted-average method.
The full amount of net unrealized gains or losses on othersecurities is recorded directly within Net Assets.
Securities included as trust property in “Money Held in Trust”
are stated in the same manner as above.
(ii) Derivative Transactions
Derivative transactions are stated at fair value.
(iii) Hedge Accounting(a) Hedge of Interest Rate Risk
The Bank applies the deferred method of hedge accounting describedin the Japanese Institute of Certified Public Accountants (JICPA)
Industry Audit Committee Report No. 24, February 13, 2002
“Accounting and Auditing Treatment of Accounting Standards for
Financial Instruments in Banking Industry” to transactions to hedge
against interest rate risk arising from the financial assets andliabilities.
Effectiveness of a fair value hedge is assessed for each of theidentified group of hedged items such as loans and deposits, andcorresponding group of hedging instruments such as interest rate
swaps with the same maturity bucket. Effectiveness of a cash flow
hedge is assessed based on the correlation between an interest raterisk factor of the hedged items and that of the hedging instruments.
For certain asset and liabilities, the exceptional treatment forinterest rate swaps is applied.
(b) Hedge of Foreign Exchange Fluctuation Risk
The deferred method of hedge accounting is applied to transactions tohedge against foreign exchange fluctuation risks associated with
monetary assets and liabilities denominated in foreign currencies inaccordance with the regulations set forth in JICPA Industry Audit
Committee Report No. 25, July 29, 2002 “Accounting and Auditing
Treatment of Accounting Standards for Foreign Currency
Transactions in the Banking Industry”.
To minimize foreign exchange fluctuation risk on monetary
assets and liabilities, the Bank has engaged in currency swaps,
foreign exchange swaps, and similar transactions. Effectiveness ofthese transactions in the hedging of foreign exchange risks ofmonetary assets and liabilities denominated in foreign currencies isassessed through comparison of the foreign currency position of thehedged monetary assets and liabilities and that of the hedging
instruments.

32

The Bank has also applied fair value hedge accounting to theforeign exchange risk of other securities in foreign currency (otherthan bonds) when the hedged foreign currency securities are specified
prior to the commencement of transactions, and there exists spot andforward liabilities exceeding the acquisition costs of the foreign
currency securities designated as hedged items on a foreign currency
basis.
(c) Internal Derivative Transactions
Internal derivative transactions between trading accounts and otheraccounts, which are designated as hedges, are not eliminated andrelated gains and losses are recognized in the consolidated statementof income or deferred under hedge accounting because the internalinterest rate swaps and currency swaps transactions, etc. designated as
hedging instruments are conducted in a manner without any
subjection and are appropriately covered by third party transactions
conducted in accordance with the standard articulated by JICPA
Industry Audit Committee Reports No. 24 and No. 25.
(5) Tangible Fixed Assets (excluding Leased Assets)
Tangible fixed assets of the Bank are depreciated by the decliningbalance method. However, buildings acquired on or after April 1,
1998 (excluding facilities installed in buildings), and facilities
installed in buildings and structures that are acquired on or after April
1, 2016, are depreciated by the straight-line method.
The estimated useful lives of major items are as follows:
Buildings ................. 5 to 50 years
Others ...................... 3 to 20 years
Tangible fixed assets of consolidated subsidiaries are, in
principle, depreciated using the declining balance method, based on
their estimated useful lives.
(6) Intangible Fixed Assets (excluding Leased Assets)
Intangible fixed assets are amortized by the straight-line method. The
costs of software for internal use are amortized by the straight-line
method, mainly over a 5 year period (the estimated useful life of thesoftware).
(7) Leased Assets
Leased assets of Tangible Fixed Assets and Intangible Fixed Assets
related to finance leases that do not transfer ownership are
depreciated using the straight-line method with estimated useful lives
equal to lease terms, and zero residual values.
(8) Deferred Debenture Charges
Debenture charges are expensed in the fiscal year of issuance.
(9) Reserve for Possible Loan Losses
Reserve for possible loan losses of the Bank is provided inaccordance with the Bank’s predetermined internal rules forwrite-offs and provisions as follows:
The reserve for loans to borrowers who are classified as
substantially bankrupt or who are bankrupt in the legal sense isprovided at 100% of the amount remaining after write-offs anddeduction of expected collection from the disposal of collateral andthe execution of guarantees. In addition, a reserve is provided forloans to borrowers who, although not actually bankrupt in the legal
sense, are experiencing serious financial difficulties and whose failure
is imminent. In such cases, the reserve is provided at the amountdeemed necessary based on the borrower’s capability of repayment
after deduction of expected collection from the disposal of collateraland the execution of guarantees.

The Bank calculates the reserve by the cash flow estimate
method to those borrowers who owe the debts classified as Loans toProbably Bankrupt Borrowers and Restructured Loans by the Bank,
whose total credit exceeds a certain amount and also the cash flow
related to collection of the principal and interests from whom can be
estimated. The cash flow estimate method is to determine the amountof reserve for possible loan losses from the gap between the amounts
calculated by discounting the cash flow by the contracted interest rateprior to relaxation of terms and conditions of loans and their bookvalues.
For all other loans, a reserve is provided based on the ratio of
actual defaults for a certain period in the past.
All claims are assessed by the Operating Related Division basedon internal rules for self-assessment of asset quality. Subsequently,
the Asset Auditing Division, that is independent from the Operating
Related Division, audits these self-assessments. The reserve isprovided based on the results of the assessments.
For loans to Bankrupt Borrowers and Substantially Bankrupt
Borrowers, amounts deemed uncollectible, which are calculated after
deduction of expected collection from the disposal of collateral andthe execution of guarantees, are written off. The amount written off
was ¥199 million ($1 million) as of March 31, 2018 and ¥204 million
as of March 31, 2017.
Reserve for possible loan losses of the consolidated subsidiaries
for general claims is provided as the amounts deemed necessary
based on the default rate calculated from actual default during acertain period in the past, and for doubtful claims as the amounts
deemed uncollectible based on the assessment of each claim.
(10) Reserve for Employee Bonuses
Reserve for Employee Bonuses is set aside to pay employee bonuseswith respect to the portion of estimated bonus payments to employeesthat correspond to this fiscal year.
(11) Reserve for Directors’ Bonuses
Reserve for Directors’ Bonuses is set aside to pay directors andcorporate auditors bonuses with respect to the portion of estimatedbonus payments to directors and corporate auditors that correspond to
this fiscal year.
(12) Reserve for Directors’ Retirement Allowances
Reserve for Directors’ Retirement Allowances provided for by the
Bank is calculated based on the estimated allowances to be paid up to
the end of this fiscal year.
(13) Reserve under Specific Law
This reserve amount is calculated pursuant to Article 46-5, Paragraph
1 of the “Financial Instruments and Exchange Act” and Article 175 of
the “Cabinet Office Ordinance on Financial Instruments Business” toindemnify any losses incurred from accidents in the conduct ofmarket derivative transactions on behalf of clients.

Actuarial differences are amortized from the following year, using thestraight-line method over a certain number of years (10 years) within
the average remaining service period of current employees at eachtime the cost is incurred.
Also, certain consolidated subsidiaries calculate the net defined
benefit liability and retirement benefit cost using the simplified
method which assumes the retirement benefit obligation to be equal
to the necessary payments of the voluntary retirement for all
employees at the fiscal year-end.
(15) Translation of Foreign Currency-denominated Assets andLiabilities
Foreign currency-denominated assets and liabilities are translated into
Japanese yen at exchange rates prevailing at the end of the fiscal year.
Foreign currency-denominated assets and liabilities of consolidated
subsidiaries are translated into Japanese yen at exchange rates
prevailing at the end of the fiscal year.
(16) Consumption Tax
National and local consumption tax incurred by the Bank and its
domestic consolidated subsidiaries are excluded from transaction
amounts. However, national and local consumption tax paid onpurchases of tangible fixed assets and intangible fixed assets, which
are not deductible as a tax credit, are expensed in this fiscal year.
(17) Amortization of Goodwill
Goodwill is fully amortized in the fiscal year incurred.
(18) Accounting standards issued but not yet adopted‐ “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No.28, issued on February 16, 2018)‐ “Implementation Guidance on Tax Effect Accounting” (ASBJ
Guidance No.28, issued on February 16, 2018)‐ “Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No. 26, issued on February 16, 2018)(i) Overview
They comprise a change of the treatment of the taxable temporary
differences related to its subsidiaries’ shares, etc. in non-consolidated
financial statements and clarification of the treatment ofrecoverability of Deferred Tax on the company falling under(Classification 1)(ii) Date of adoption
The Bank expects to adopt the guidance from the beginning of the
fiscal year beginning on April 1, 2018.
(iii) Effects of the adoption of the accounting standards and guidance
The Bank is evaluating the effect of the adoption of this implication
guidance on its consolidated financial statements.

(14) Employees’ Retirement Benefits
The Bank accounted for retirement benefit obligation based on the
projected benefit obligations. The projected benefit obligations are
attributed to periods on a benefit formula basis. The methods foramortizing prior service costs and actuarial differences are as follows:
Prior service costs:
Prior service costs are amortized, using the straight-line method overa certain number of years (10 years) within the average remaining
service period of current employees at the time the cost is incurred.
Actuarial differences:

33

‐ “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, issued on March 30, 2018)‐ “Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, issued on March 30, 2018)(i) Overview
This is a comprehensive accounting standard for revenue recognition.
Specifically, the accounting standard establishes the following
five-step model that will apply to revenue from customers:
Step 1: Identify the contracts with a customer
Step 2: Identify the separate performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the separate performanceobligations
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation by transferring good or service

4. Securities:
The details of Securities as of March 31, 2018 and 2017 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2018
2017
2018
Japanese Government
6,366,353 7,908,654
59,901
Bonds
Municipal Government
811,316
586,126
7,633
Bonds
Short-term Corporate
40,008376－
Bonds
4,349,349 3,570,547
40,923
Corporate Bonds(ii) Date of adoption
The Bank expects to adopt the accounting standards and guidance tothe consolidated financial statements from the beginning of the fiscal
year beginning on April 1, 2021.
(iii) Effects of the adoption of the accounting standards and guidance
The Bank is evaluating the effect of the adoption of this implication
guidance on its consolidated financial statements.

3. Trading Assets:
The details of Trading Assets as of March 31, 2018 and 2017 are as
follows:
Millions of
U.S. Dollars

Millions of Yen

64,840690

Others5,467,997

5,034,256

51,448

Total

17,108,434 17,164,425

160,975

Notes:
1. Stocks include investments in affiliated companies totaling ¥189
million ($1 million) as of March 31, 2018 and 2017.
2. Others include common shares and investment in unconsolidated
subsidiaries totaling ¥10,161 million ($95 million) as of March 31,2018 and ¥7,859 million as of March 31, 2017. Others also include
preferred shares issued by Shinkin Banks which were contributedin accordance with the Shinkin Bank Management Reinforcement
System. The amount was ¥202,525 million ($1,905 million) as ofMarch 31, 2018 and ¥215,090 million as of March 31, 2017,
respectively. Others also include foreign bonds and equities.

5. Loans and Bills Discounted:
Loans and Bills Discounted include the following non-performing
loans:
Millions ofMillions of Yen
U.S. Dollars

2018

2017

33,191

26,385

312

5

6

0

－

6

－

Loans to Bankrupt
Borrowers

93

106

0

Trading-Related
Financial Derivatives

36,19847,645340

Delinquent Loans

11,227

10,954105

Other Trading Assets

181,029

158,044

1,703

Loans Past Due Three
Months or More

77

9

0

Total

250,424

232,0882,356

Restructured Loans

30,49030,672286

Total

41,88941,743394

Trading AccountSecurities
Trading Bonds-Related
Financial Derivatives
Derivatives of Securities
related to Trading
Transactions

2018

73,410Stocks

2018

2017

2018

The above amounts are the amounts before exclusion of reserves forpossible loan losses.
Loans to Bankrupt Borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Article 96,
Paragraph 1, Item 3 (a)-(e) or Item 4 of the “Order for Enforcementof the Corporation Tax Act” (Cabinet Order No. 97 of 1965).
Delinquent Loans represent non-accrual loans other than Loans
to Bankrupt Borrowers and Restructured Loans.
Loans Past Due Three Months or More represent loans forwhich the principal and interests are past due three months or moreother than Loans to Bankrupt Borrowers and Delinquent Loans.
Restructured Loans represent loans on which contracts wereamended in favor of the borrowers (e.g. the reduction of or exemption
from stated interests, the deferral of interest payments, the extension

34

of maturity dates, and the renunciation of claims in order to assist or
facilitate the business restructuring of borrowers under financial
difficulties) other than Loans to Bankrupt Borrowers, Delinquent
Loans and Loans Past Due Three Months or More.
Loans include subordinated loans with a covenant stipulatingthat repayment of principal is preceded by that of general credits. The
amount was ¥19,200 million ($180 million) as of March 31, 2018 and¥20,300 million as of March 31, 2017, respectively. Of these amounts,¥4,700 million ($44 million) as of March 31, 2018, and ¥5,800
million as of March 31, 2017, respectively, were provided to Shinkin
Banks in accordance with the Shinkin Bank Management
Reinforcement System.
Bills Discounted are accounted for as financial transactions inaccordance with JICPA Industry Audit Committee Report No. 24,
February 13, 2002 “Accounting and Auditing Treatment of
Accounting Standards for Financial Instruments in Banking Industry”.
The face value of bills of lading amounted to ¥186 million ($1million) as of March 31, 2018 and ¥265 million as of March 31, 2017,
respectively. The Bank has the right to freely dispose of, sell or
re-collateralize such bills.
With respect to loan participation, in accordance with
“Accounting and Presentation of Loan Participation” (JICPA
Accounting Committee Report No. 3, November 28, 2014), theamount of the participation principal is accounted for as a loan to theoriginal debtor, and this amounted to ¥22,335 million ($210 million)
as of March 31, 2018 and ¥31,632 million as of March 31, 2017.

6. Commitments to Overdrafts and Loans:
Commitments related to overdrafts and loans represent agreements toextend overdrafts or loans up to a pre-agreed amount at thecustomer’s request as long as there is no violation of the conditions
stipulated in commitment agreements.
The amount of unused commitment lines does not necessarily
have a significant effect on the future cash flows of the Bank because
most of these commitment lines are terminated without being
exercised. Most of these agreements have provisions which stipulatethat the Bank may not extend the loan or may decrease thecommitment when there are certain changes in the financial
conditions, certain issues relating to collateral and other reasons. The
Bank limits the commitment line to an amount below the amount of
the related customer’s time deposit. The Bank periodically checks thefinancial condition of its customers based on its internal rules andperforms certain actions to secure loans or revises the contracts, asnecessary.
The amounts of unused commitment lines under suchagreements are ¥24,111,394 million ($226,866 million) as of March
31, 2018 and ¥22,390,249 million as of March 31, 2017, respectively.
The amounts which the Bank could cancel at any time without
penalty or of which the original contractual maturity is less than one
year are ¥24,028,554 million ($226,087 million) as of March 31,2018 and ¥22,311,810 million as of March 31, 2017, respectively.

Of cash-collateralized securities borrowings, those freely
disposable for sale or re-collateralized, and pledged as collateralamounted to ¥219 million ($2 million) as of March 31, 2018 and¥402 million as of March 31, 2017. Those held by the Bank without
being disposed of as of March 31, 2018 amounted to ¥131,192
million ($1,234 million) and as of March 31, 2017 amounted to¥102,572 million.
8.

Tangible Fixed Assets:
Millions of Yen
2018
2017

Accumulated Depreciation
on Tangible Fixed Assets
Accumulated Deferred
Gains on Tangible Fixed
Assets(Deferred Gains recognized
for the fiscal year)

Millions of
U.S. Dollars
201895,68091,877

900

1,764

1,764

16

(－)

(－)

(－)

9. Assets Pledged as Collateral and Associated Liabilities:
Assets pledged as collateral for the fiscal years ended March 31, 2018and 2017 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2018
2017
2018
Assets Pledged as Collateral
Trading Assets

16,722

7,894

157

3,395,029

2,692,973

31,944Loans and Bills Discounted 1,717,394

3,070,482

16,159Total

5,129,146

5,771,350

48,2601,248,300

598,200

11,745

188,402925

1,606,555

16,830

Securities

Liabilities associated with
Assets Pledged as Collateral
Borrowed Money

Payables under Repurchase
98,373
Agreements
Payables under Securities
1,788,791
Lending Transactions

Trading Assets of ¥1,203 million ($11 million) as of March 31, 2018and ¥504 million as of March 31, 2017 and Securities in the amountof ¥125,123 million ($1,177 million) as of March 31, 2018 and¥616,693 million as of March 31, 2017, respectively, were secured ascollateral for exchange settlement transactions, etc. or as substitutefor margin money in futures transactions, etc.

7.

Special Contracts for Securities and Cash-Collateralized
Securities Lending and Borrowings:
Securities lending based on non-collateralized special contracts(securities lending and borrowings) are stated as Japanese
Government Bonds and Others in “Securities”. The amount in total
was ¥397,919 million ($3,744 million) as of March 31, 2018 and¥163,059 million as of March 31, 2017.

35

Other assets include guarantee money, cash collateral paid forfinancial instruments and clearing margin deposits for central
counterparty. The amounts are as follows:
Millions ofMillions of Yen
U.S. Dollars
2018
Guarantee money
Cash collateral paid
for financial
instruments
Clearing margindeposits for central
counterparty

36

335

2017
397

2018
3

170,786

212,247

1,606

684,438

167,918

6,439

10. Trading Liabilities:
The details of Trading Liabilities as of March 31, 2018 and 2017 are
as follows:
Millions ofMillions of Yen
U.S. Dollars
2018
2017
2018
Trading Bonds Sold

12,753

7,930

119

Trading-Related Financial
Derivatives

53,882

76,414506

Total

66,636

84,345626

11. Borrowed Money and Lease Obligations:
Balance as of
Category
April 1, 2017
(Millions of Yen)
1,203,870
Borrowings

Balance as ofMarch 31, 2018
(Millions of Yen)
1,637,770

1,203,870

1,637,770

15,409

0.33

1,171

813

7

1.41

－

1,171

559

5

1.50

May 2019Dec. 2022

Borrowed Money
Lease Obligations Due for Repayment
within One Year
Lease Obligations (Excluding Those
Due for Repayment within One Year)

Balance as of
Average
March 31, 2018
Interest Rate (%)(Millions of U.S. Dollars)
15,4090.33

Maturity－
July 2018No maturity

Notes:
1. Average interest rates were computed by the weighted average method using the interest rates and the balances at the fiscal year-end.
2. The repayment schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Over 4 years,
Within 1 year
within 2 years
within 3 years
within 4 years
within 5 years
134,300
468,000
646,000－－
Borrowed Money
813
296
123
120
20
Lease Obligations

Within 1 year

Millions of U.S. Dollars
Over 1 year,
Over 2 years,
Over 3 years,
within 2 years
within 3 years
within 4 years

Over 4 years,
within 5 years

1,263
4,403
6,078
－
－
Borrowed Money
7
2
1
1
0
Lease Obligations
3. Borrowed Money includes subordinated borrowings of ¥389,470 million ($3,664 million) as of March 31, 2018 and ¥605,670 million as ofMarch 31, 2017, respectively.

12. Debentures:
IssuerThe Bank

The Bank

The Bank
Total

Name of Issue

No.269-340
5-yearInterest-bearing
debentures
No.2
7-yearInterest-bearing
debentures
No.2
10-yearInterest-bearing
debentures－

Issuance Date

Balance as of Balance as of Balance as ofApril 1,March 31,
March 31,
2017
2018
2018
(Millions of (Millions of (Millions of
Yen)
Yen)
U.S. Dollars)Interest
Rate (%)

Collateral

Redemption
Date

Apr. 2012Mar. 2018

2,920,000

2,675,490

25,1730.010.40－

Apr. 2017Mar. 2023

Sep. 25, 2015

10,00010,000

94

0.29

－

Sep. 27, 2022

Sep. 25, 2015

20,00020,000

188

0.52

－

Sep. 26, 2025－

2,950,000

2,705,490

25,456

－

－

－

Note:
The redemption schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Within 1 year
within 2 years
within 3 years
within 4 years
627,710634,330
596,060
476,340

Over 4 years,
within 5 years
351,050

Millions of U.S. Dollars
Over 2 years,
Over 3 years,
within 3 years
within 4 years
5,608
4,481

Over 4 years,
within 5 years
3,303

Within 1 year
5,906Over 1 year,
within 2 years
5,968

37

13. Asset Retirement Obligations:
The details of Asset Retirement Obligations were omitted because theamount was one-hundredth or less of the total balance of Liabilities
and Net Assets as of April 1, 2017 and as of March 31, 2018
respectively.

17. Trading Income:The details of Trading Income for the fiscal years ended March 31,2018 and 2017 are as follows:
Millions ofMillions of Yen
U.S. Dollars

14. Land Revaluation:
Based on the “Act on the Revaluation of Land” (Act No. 34,
promulgated on March 31, 1998), land used for business was revalued.
Deferred tax on the revaluation of the land was recorded as “Deferred
Tax Liabilities for Land Revaluation” under Liabilities, and unrealized
gain on the revaluation of the land, net of deferred tax, was recorded as“Land Revaluation Excess” under Net Assets.

Income from Trading
Account Securities
Income from
Trading-Related Securities
Income from
Trading-Related Financial
Derivatives
Other Trading Income
Total

Date of Revaluation: March 31, 1999
Revaluation method in accordance with Article 3, Paragraph 3 of Act
No. 34: Revaluations were made based on the method, determined by
the Commissioner of the National Tax Administration, which formed
the basis for calculating land value taxes (prescribed by the “Land
Value Tax Law”), as set forth in Article 2, Item 4 of the “Order for
Enforcement of the Act on Revaluation of Land” (Government
Ordinance No. 119, dated March 31, 1998), with appropriate
adjustments.

18. Trading Losses:
The details of Trading Losses for the fiscal years ended March 31,2018 and 2017 are as follows:
Millions ofMillions of Yen
U.S. Dollars

2018

15. Trusts with contracts:
The details of principal amounts of trusts with contracts forcompensation of principal for the fiscal years ended March 31, 2018and 2017 are as follows:
Millions of
U.S. Dollars
Millions of Yen
2018
2018
2017
Money Trust
47
5,054
74

16. Fees and Commissions:
The details of Fees and Commissions for the fiscal years ended March
31, 2018 and 2017 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2018
2017
2018
Deposit, Fixed Income
533
400
5
Securities and Lending
412
429
3
Exchange Business
9,371
9,004
88
Securities Related Business
2,156
2,225
20
Agency Business
10,376
9,569
97
Guarantee Business
19,395 20,546
182
Trustee Business
534
509
5
OthersIncome on Fees and42,779 42,685
402
Commissions Businesses
223
243
2
Exchange
15,163 14,540
142
OthersExpenses on Fees and15,386 14,784
144
Commissions Businesses

38

2017

303

522

2

－

53

－

3,579

4,638

33

21
3,904

46
5,260

0
36

2018
Expenses from
Trading-Related Securities
Total

2018

2017

2018

133

－

1

133

－

1

19. Other Income:The details of Other Income for the fiscal years ended March 31, 2018and 2017 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2018
2017
2018
Gains on sale of stocks and other
10,3759,312
97
securities
Gain on sales of shares ofsubsidiaries
Others
Total

2,200

－

20

2,346
14,922786
10,09922140

20. Other Expenses:
The details of Other Expenses for the fiscal years ended March 31,2018 and 2017 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2018
2017
2018
Losses on sale of stocks and
752
2,719
7
other securities
Others

310

39

2

Total

1,063

2,759

10

21. Consolidated Statement of Comprehensive Income:For the fiscal year ended March 31, 2018 and 2017
Reclassification adjustment amount and tax effect amount related to Other Comprehensive Income
Millions ofMillions of Yen
2018

U.S. Dollars
2017

2018

Net Unrealized Gains (Losses) on Other Securities:
The Amount Arising during the Period(99,316)(157,528)(934)

Reclassification Adjustment Amount

31,137(21,603)292

Prior to Tax Effect Adjustment(68,179)(179,132)(641)

Tax Effect Amount

19,057

50,118179

Net Unrealized Gains (Losses) on Other Securities(49,122)(129,013)(462)

Net Deferred Gains (Losses) on Hedging Instruments :The Amount Arising during the Period(6,565)64,629(61)

Reclassification Adjustment Amount37,64868,776354

Prior to Tax Effect Adjustment

31,082

133,405

292

Tax Effect Amount(8,681)(37,260)(81)

Net Deferred Gains (Losses) on Hedging Instruments

22,401

96,145210

The Amount Arising during the Period

－

－

－

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Tax Effect Amount

0

－

0

Land Revaluation Excess

0

－

0

The Amount Arising during the Period

398(1,593)

3

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Tax Effect Amount

－

－

－

Foreign Currency Translation Adjustments

398(1,593)

3

Land Revaluation Excess:Foreign Currency Translation Adjustments:

Remeasurements of Defined Benefit Plans:
The Amount Arising during the Period

494

(601)

4

Reclassification Adjustment Amount

1,976

1,951

18

Prior to Tax Effect Adjustment

2,470

1,349

23

Tax Effect Amount

(708)

(385)

(6)

Remeasurements of Defined Benefit Plans

1,762

963

16

Other Comprehensive Income(24,559)(33,497)

(231)

39

22. Changes in Net Assets:(1) Class and Number of Shares Outstanding, and Class and Number of Shares of Treasury Shares
Number of Share Units at
Number of Share Units at
Increase During the Fiscal Decrease During the Fiscal
March 31, 2018
April 1, 2017 (Thousand
Year (Thousand Units)
Year (Thousand Units)(Thousand Units)
Units)
Shares Outstanding
General Common Shares

4,000

－

－

4,000

Specific Common Shares

2,000

－

－

2,000

Preferred Shares (Type-A)

708

－

－

708

6,708

－

－

6,708

General Common Shares

－

－

－

－

Specific Common Shares

－

－

－

－

Preferred Shares (Type-A)

－

－

－

－

－

－

－

－

Amount Per Share(Yen)

Record Date

Effective Date

Total
Treasury Shares

Total(2) Dividends
Dividends paid during the fiscal year ended March 31, 2018
Resolution

Annual General Meeting of
Shareholders, June 21, 2017Class of share

Total Dividend
Amount (Million Yen)

GeneralCommon shares

12,0003,000

March 31, 2017

June 21, 2017

Specific Commonshares

3,000

1,500

March 31, 2017

June 21, 2017

Preferred shares(Type-A)

4,603

6,500

March 31, 2017

June 21, 2017

Among the dividends whose record date falls within the fiscal year ended March 31, 2018, those whose effective date will fall within thefollowing fiscal year:
Resolution

Annual General Meeting of
Shareholders, June 20, 201840

Class of share

Total Dividend
Amount (Million Yen)

Resource ofDividends

Amount Per Share(Yen)

Record Date

Effective Date

GeneralCommon shares

12,000Retained Earnings

3,000

March 31, 2018 June 20, 2018

Specific
Common shares

3,000

Retained Earnings

1,500

March 31, 2018 June 20, 2018

Preferred shares(Type-A)

4,603

Retained Earnings

6,500

March 31, 2018 June 20, 2018

23. Income Taxes:(1) Breakdown of Deferred Tax Assets and Liabilities is as follows:
Millions ofMillions of Yen
U.S. Dollars
2018

2017

2018

Depreciation

2,907

3,006

27

Reserve for Possible Loan
Losses

5,558

5,272

52

Net Defined Benefit Liability

12,004

11,997

112

Write-Downs for Securities

1,482

3,513

13

Net Deferred Losses on
Hedging Instruments

19,49428,176183

Tax Loss Carryforwards

2

9

0

Others

3,137

2,785

29

Valuation Allowances(3,210)(2,510)(30)

Total Deferred Tax Assets

41,37752,250389

Deferred Tax Assets:

Deferred Tax Liabilities:
Net Unrealized Gains on Other
Securities
Others(115,268) (134,325)(435)(1,084)

(416)

(4)

Total Deferred Tax Liabilities(115,703) (134,741)(1,088)Net Deferred
Tax Liabilities(74,326)(82,491)(699)(2) Reconciliation between the effective statutory tax rate and theactual effective tax rate for the fiscal years ended March 31, 2018 and2017:

Statutory effective tax rate

2018

2017

－ %

27.92 %

(Adjustments)
Change in Valuation Allowances－ %(11.30%)

Dividends received, not taxable－ %(1.46%)

Others－ %0.46 %

Actual effective income tax rate after
the application of tax effect accounting－ %15.62 %

Note:
In the current fiscal year, since the difference between the statutory
effective tax rate and the actual effective income tax rate after theapplication of tax effect accounting was less than 5% of the statutory
effective tax rate, notes on this are omitted.

24. Retirement Benefit Plans:(1) Retirement Benefit Scheme
The Bank and some of its consolidated domestic subsidiaries have adefined benefit plan that offers lump-sum payments upon retirement
and contributes to the Employees’ Pension Fund for all shinkin banks
nationwide.
With regard to notes related to employees’ retirement benefits
based on a multiple-employer plan, they are included in notes related
to employees’ retirement benefits based on a defined benefit plan.
(2) Defined Benefit Plan as of March 31, 2018 and 2017 is asfollows:(i) Reconciliation of beginning- and end-of-period balance ofRetirement Benefit Obligation
Millions ofMillions of Yen
U.S. Dollars
2018

2017

Retirement Benefit
Obligation at Beginningof Period

63,45461,726597

Service Cost

3,013

2,922

28

Interest Cost

244

238

2

Actuarial Difference
Incurred

(568)

233

(5)

(1,777)(1,667)(16)

Prior Service Cost

－

－

－

Other

－

－

－

64,36663,454605

Retirement Benefits Paid

Retirement Benefit
Obligation at End of
Period2018(ii) Reconciliation of beginning- and end-of-period balance ofPension Plan Assets
Millions ofMillions of Yen
U.S. Dollars
Balance of Pension Plan
Assets at Beginning of
PeriodExpected Return on
Pension Plan Assets
Actuarial Difference
IncurredContributions by the
Employer and Employees
Retirement Benefits Paid
Other
Balance of Pension Plan
Assets at End of Period

2018

2017

2018

21,92921,307

206

438

426

4

(74)

(367)

(0)

1,491

1,478

14

(944)

(914)

(8)

－

－

－

22,841

21,929214

41

(iii) Reconciliation of end-of-period balance of Retirement Benefit
Obligation and Pension Plan Assets with Net Defined Benefit
Liability and Net Defined Benefit Asset presented on the consolidatedbalance sheets
Millions ofMillions of Yen
U.S. Dollars
2018

2017

Funded Plan Retirement
Benefit Obligation

53,01852,235Pension Plan Assets(22,841)

Unfunded Plan Retirement
Benefit Obligation
Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
Sheets2018(v) Remeasurements of Defined Benefit Plan
Remeasurements of Defined Benefit Plan (before tax effects)
comprise the following.
Millions ofMillions of Yen
U.S. Dollars
2018

2018

Prior Service Cost

－

－

－

498

Actuarial Differences

2,470

1,349

23

(21,929)

(214)

Other

－

－

－

30,17730,305

283

Total

2,470

1,349

23

11,347

11,218106

41,525

41,524390(vi) Accumulated Remeasurements of Defined Benefit Plan
Accumulated Remeasurements of Defined Benefit Plan (before tax
effects) comprise the following.
Millions ofMillions of Yen
U.S. Dollars
2018

Millions of
U.S. Dollars

Millions of Yen

2018

UnrecognizedPrior Service Cost
Unrecognized
Actuarial Differences

2017

2018

－

－

－

11,67314,143

109

2018

2017

41,525

41,524

390

Other

－

－

－

Net Defined Benefit Asset

－

－

－

Total

11,67314,143

109

Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
Sheets41,525

41,524390

Net Defined Benefit
Liability(vii) Pension Plan Assets(a) The ratios by main asset categories in total pension plan assets are
as follows:
2018
2017

(iv) Breakdown of Retirement Benefit Expense

Millions of
U.S. Dollars

Millions of Yen
2018

2017

2018

Bonds

62 %

66 %

Stocks27 %26 %Service Cost

3,013

2,922

28

Cash and Deposits

8%6%Interest Cost

244

238

2

Other

3%

2%

Total

100 %

100 %

Expected Return on
Pension Plan Assets
Amortization ofActuarial Differences
Amortization of Prior
Service Cost

(438)

(426)

(4)

1,976

1,951

18

－

－

－

Other

(548)

(544)

(5)

Retirement Benefit
Expenses Related toDefined Benefit Plan

4,247

4,141

39

Note:
Other includes the employee contribution amount to the Employees’
Pension Fund.

(b) Method for setting the Expected Long-term Rate of Return
To set the Expected Long-term Rate of Return on Pension Plan
Assets, the Bank takes into account past return performance and thecurrent and future expected rate of return on the diverse range ofassets that makes up the pension assets.
(viii) Underlying actuarial assumptions
Main underlying actuarial assumptions as of March 31, 2018 and2017 are as follows:

Discount Rate
Expected Long-term Rate of
Return on Pension Plan Assets
Estimated Rate of Salary
Increase

42

2017

2018

2017

0.0～0.6 %0.0～0.6 %

2.0 %

2.0 %

0.0～7.4 %0.0～7.4 %25. Leases:
1. Finance Leases(1) Finance leases that do not transfer ownership(i) Outline of lease assets(a) Tangible fixed assets
Hardware related to computer equipment(b) Intangible fixed assets
Software related to computer equipment(ii) Lease asset depreciation method
Depreciation method is described in the “Significant Accounting
Policies”.
(2) Finance leases that do not transfer ownership accounted for inaccordance with the ordinary lease transaction method
Data omitted due to immateriality.

2. Operating Leases
Future lease payments related to non-cancelable operating leases: Not
applicable

26. Financial Instruments:
1. Matters concerning financial instruments(1) Policies on financial instruments
Shinkin Central Bank Group (the “Group”) works to ensure the stableprocurement of funds through the acceptance of deposits mainly fromits Shinkin Bank members and through the issuance of debentures.
Additionally, the Group takes steps to diversify its funding methods
by procuring funds from short-term money markets depending onmarket conditions.
Procured funds are invested in short-term money market
instruments, marketable securities, and loans.
Moreover, the Group uses derivative transactions for the
purpose of risk-hedging in ALM (asset liability management)
activities and engages in short-term trading of securities andderivatives.
To appropriately manage the various risks that result from thesefinancial instruments, the Group engages in ALM activities including
the above-mentioned derivative transactions. For its trading activities,
the Group establishes risk limit and loss limit amounts and engages intransactions within the scopes of these risk limits, as a way topreserve a sound management and to ensure stable earnings.
(2) Types and related risks of financial instruments
Financial assets held by the Group consist mainly of short-term funds,
securities, and loans assets.
Short-term funds are invested in the call loan and euro-yen
deposits.
These investments are exposed to market risks such as thecounterparty credit risk, interest rate risk, and foreign currency risk.
Securities portfolios of the Group consist of domestic securities
including Japanese government bonds (JGBs), corporate bonds andother bonds as well as foreign securities such as government bonds,
government-guaranteed bonds, and agency bonds issued in the majorindustrialized countries. The Group also invests in equity securities
and investment funds to diversify its portfolio.

These investments are exposed to market risks such as theindividual issuers’ credit risk, interest rate risk, price fluctuation risk,
and foreign currency risk, and market liquidity risk.
Loans assets consist of direct loans to low-risk borrowers
including Shinkin Banks, central and local governments, public
service corporations, good standing domestic and overseas companies,
and agency loans provided through Shinkin Banks.
These loans are exposed to market risks such as counterparty
credit risk, interest rate risk, and foreign currency risk.
Meanwhile, financial liabilities of the Group consist mainly of
deposits and debentures.
Deposits include current deposits, ordinary deposits, deposits at
notice, term deposits, and foreign currency-denominated deposits,
most of which are deposits from Shinkin Bank members.
These deposits are exposed to market risks such as interest raterisk and foreign currency risk, and liquidity risk.
As a debenture issuer, the Group issues interest-bearing
debentures.
These debentures are exposed to interest rate risk and liquidity
risk.
Furthermore, the Group engages in derivative transactions.
Specifically, the Group trades interest rate derivatives (interest
swaps, interest futures, and interest options), currency derivatives(foreign currency forwards and currency swaps) and bond derivatives(bond futures and bond futures options).
These transactions are exposed to market risks such ascounterparty credit risk, interest rate risk, and foreign currency risk.
The Bank hedges market risks of its financial assets andliabilities through ALM activities.
The Group partially avoids exposure to market risks by
mitigating (i) interest rate risk through interest rate swaps and(ii) foreign currency risk of foreign currency-denominated assets
through foreign currency-denominated fund procurement, currency
swaps, and forex swaps.
Hedge accounting is applied to risk hedges through ALM
activities including the use of derivatives. With regard to hedge
accounting, hedged items, hedging methods, policies, and methods ofhedge effectiveness assessment, etc. are described in the “Significant
Accounting Policies”.
(3) Risk management frameworks of financial instruments
The basic policies for risk management of the Bank are broadly
divided into “risks to be minimized” and “risks to be controlled”.
Credit risk, market risks, and liquidity risks fall into the latter
category. Both categorized risks are managed by risk management
divisions that are independent of the client service divisions. The Risk
Management Division comprehensively manages these risks.
<Integrated risk management>
For the integrated management of risks, the Bank has introduced
integrated risk management for quantifiable risks. Integrated risk
management is a risk management method of measuring various risks
using a uniform risk measure such as Value at Risk (VaR),
aggregating the measurements, and comparing the aggregatedamounts with the Bank’s capital. The Bank measures credit risks andmarket risks using VaR methodology, and monitors this on a daily
basis to prevent risk limits from being breached.

43

These risk limit amounts are reviewed each fiscal year by the
Risk Management Committee and determined at the Executive
Committee. The values of risk are measured weekly by the Risk
Management Division, which takes steps to prevent any of thevarious risk limits from being breached, and through the Risk
Management Committee, reports regularly to the management andrelevant divisions.
The values of risk at consolidated subsidiaries are aggregatedand managed through the integrated risk management framework.
(i) Credit risk management
For the accurate identification and strict management of credit risk,
the Bank has established credit risk management policies. Moreover,the Bank has created a structure in which divisions responsible for
credit control, credit management and credit assessment are clearly
segregated from divisions involved in client services, with mutuallyindependent tasks to ensure effective internal checking functions.
The Bank established the Credit Committee and the Risk
Management Committee, comprised of senior management and headsof divisions related to credit risk, as bodies to deliberate and makedecisions on matters relating to credit risk management. The Credit
Committee deliberates on credit transactions that exceed the credit
limit, while the Risk Management Committee deliberates on theestablishment and the review of policies regarding credit management.
The Executive Committee deliberates and makes decisions on mattersrelated to asset self-assessments including the results of asset
self-assessments, asset write-offs and asset reserve provisions.
Divisions responsible for credit control manage the credit riskfor each borrower relating to loans and market trading activities. An
overall credit limit is set for each borrower according to the credit
rating of the borrower. These divisions analyze the Bank’s overall
credit portfolio according to credit rating, industry, country and othercriteria. These analyses are used to monitor the diversification of
credit risk as well as changes in portfolio credit risk. Additionally,
divisions responsible for credit control quantify credit risk in VaR
methodology using Monte Carlo simulation methods and manage
credit risks based on the limits set at the Executive Committee.
Divisions responsible for credit management accurately monitor
each borrower’s financial condition, the purposes for which funds areused and repayment resources. In addition to appropriate assessment
and post-transaction management, these divisions continually check
whether the client service divisions are conducting appropriate credit
control, and provide guidance as necessary.
Divisions responsible for credit assessment undertake andmanage operations relating to asset self-assessments, and thecalculation of asset write-offs and asset reserve provisions.
Credit risks of consolidated subsidiaries are added to the credit
risk of the Bank by each borrower and monitored.
(ii) Market risk management
To maintain an accurate understanding of market risk and rigorously
manage this risk, the Bank has issued a market risk management
policy. Furthermore, divisions responsible for market risk
management are clearly separated from divisions involved in market
operations, providing a risk management structure in which internal
checks are maintained through independent functions.
The Bank has established the ALM Committee as the body
responsible for deliberating and making decisions on matters relating
to market risk management. The ALM Committee is comprised of

44

senior management and heads of divisions related to market risk.
Based on risk status information—obtained via reports from divisions
responsible for market risk management and other sources—the ALM
Committee deliberates broadly and in a timely manner ALM related
policies and market transactions including the Bank’s fund-raisingand management as well as the usage of hedging transactions
involving derivatives such as interest rate swaps.
Divisions responsible for market risk management quantify andmanage market risk mainly by VaR within the limit set by the
Executive Committee. In addition, market risk is classified into
several categories, and the amount of risk for each category ismonitored. Market risk management at the Bank not only uses VaR
methodology but takes multi-faceted approaches, that is, monitoring
sensitivity to change in individual risk factors such as the interest raterisk based on outlier standard and the basis point value (BPV: theamount of the change in a portfolio’s market value from a specificchange in the interest rate), stress loss amounts from unexpectedmarket changes, and appraisal losses from financial instruments. For
stress loss amounts, in particular, a supplementary framework has
been incorporated into the integrated risk management, in addition to
the above monitoring system. In this way, market risks including
those that cannot be captured through VaR methods alone aremanaged.
Moreover, for trading operations, clear regulations are in placeconcerning the trading instruments and trading management methods,
enabling appropriate trading operations by setting a specific loss limit
amount.
Market risks of consolidated subsidiaries are not directly added
to the values of market risk of the Bank but are managed separately
under integrated risk management.
<Quantitative information on market risk>(a) Financial instruments held for trading purposes
The Bank uses VaR analysis for quantifying market risk of trading
securities held within securities and interest-rate andforeign-exchange instruments held for trading purposes withinderivative transactions. The VaR model is based on the delta method
and uses a 99.0% confidence interval, a holding period of fivebusiness days and an observation period of one year. In addition, withregard to market risk related to trading operations at consolidated
subsidiaries, which is managed separately within the integrated risk
management framework, the Bank uses a market risk-equivalentamount under the regulations on banks’ capital ratio.
The market risk amount (estimated loss amount) of the Bank’s
trading operations was ¥167 million ($1 million) as of March 31,2018 and ¥100 million as of March 31, 2017, and the market risk
amount (estimated loss amount) of the trading operations of theBank’s consolidated subsidiaries was ¥871 million ($8 million) as ofMarch 31, 2018 and ¥548 million as of March 31, 2017.
The Bank conducts back testing to compare VaR calculatedusing the model with actual loss amounts. Since the actual loss
amount exceeded the VaR estimate five times as the results of backtesting covering the fiscal year ended March 31, 2018, the Bank
conservatively modified the VaR measures. However, it should be
noted that VaR measures the amount of market risk at certain
probability levels statistically calculated based on historical market
fluctuation. Hence, there may be cases where market risk cannot becaptured in situations
unprecedentedly.

wheremarketconditions

change(b) Financial instruments other than those held for trading purposes
The Bank uses VaR analysis for quantifying market risk of due frombanks, securities not held for trading purposes, loans and bills
discounted, deposits, debentures, payables under securities lendingtransactions and, within derivative transactions, interest-rate andforeign-exchange instruments not held for trading purposes. The VaRmodel is based on the delta method and uses a 99.0% confidence
interval, a holding period of one year and an observation period offive years. In addition, with regard to market risk at consolidated
subsidiaries related to operations other than trading operations, which
is managed separately within the integrated risk management
framework, such risk is calculated in accordance with methods usedby the Bank.
The Group’s market risk amount (estimated loss amount) otherthan for trading purposes was ¥316,153 million ($2,974 million) as ofMarch 31, 2018 and ¥284,122 million as of March 31, 2017. The
Bank conducts back testing to compare VaR calculated using themodel with actual loss amounts, and believes that the measurement
model it uses has an adequate level of accuracy to capture market risk.
However, it should be noted that VaR measures the amount of market
risk at certain probability levels statistically calculated based on
historical market fluctuation. Hence, there may be cases where
market risk cannot be captured in situations where market conditions
change unprecedentedly.

(iii) Liquidity risk management related to fund-raising
For the accurate identification and strict management of liquidity risk,
the Bank has established liquidity risk management policies.
Divisions responsible for liquidity risk management are clearly
separated from divisions involved in cash management and market
operations, allowing internal checks to be maintained through theindependent functions. In addition, the ALM Committee deliberates
and makes decisions on matters relating to liquidity risk management.
Methods used for managing liquidity risk include the setting
and daily monitoring of risk limit amounts relating to the gap between
cash receipts and payments. This is carried out for individual
currencies and periods. In the event that a significant liquidity riskarises, the Bank has preparations to respond rapidly, including thesecuring of funding sources.
The liquidity risk management frameworks created by the Bank
include subsidiaries as well, by providing overdraft facilities forconsolidated subsidiaries with operations involving fund movements
in relatively large amounts.
(4) Supplementary explanation concerning the fair values of financial
instruments
Fair values of financial instruments, in addition to values based onmarket prices, also include values based on reasonable estimates ifmarket prices are unavailable. Since value estimates are predicated on
certain assumptions, values may vary if the underlying assumptions
change.

45

2. Matters concerning fair value and others of financial instruments
Carrying values stated on the consolidated balance sheet, fair value and differences between them are as follows. Unlisted stocks and similar
items with significant difficulty in determining fair value are not included in the table below. (See Note 2.)
Immaterial items have been omitted.
As of March 31, 2018
Millions of Yen
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

12,393,632

12,393,641

8(2) Bills Bought and Call Loans

413,259

413,259－(3) Receivables under Resale Agreements

89,99989,999－(4) Receivables under Securities Borrowing Transactions

15,34015,340－(5) Monetary Debts Purchased (*1)

177,356

177,3593

Trading Securities

214,220

214,220－(7) Money Held in Trust

99,78999,789－918,259

1,005,204

86,944

15,964,904

15,964,904－

6,913,088

6,950,953

37,865

Total Assets

37,199,851

37,324,673

124,822(1) Deposits

30,230,956

30,233,884

2,927(2) Debentures

2,705,490

2,710,093

4,603

12,75312,753－(6) Trading Assets(8) Securities
Held-to-Maturity Debt Securities
Other Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

6,952,660(39,572)(3) Trading Liabilities
Trading Bonds Sold
(4) Borrowed Money

1,637,770

1,646,986

9,216(5) Bills Sold and Call Money40,31340,313－(6) Payables under Repurchase Agreements

98,373

98,373－(7) Payables under Securities Lending Transactions

1,789,012

1,789,012－

Total Liabilities

36,514,669

36,531,417

16,748

To which Hedge Accounting is not applied(5,234)(5,234)－

To which Hedge Accounting is applied(63,543)(132,023)(68,479)(68,777)(137,257)(68,479)

Derivatives (*2)

Total Derivatives

46

Millions of U.S. Dollars
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

116,613

116,6130(2) Bills Bought and Call Loans

3,888

3,888

－

(3) Receivables under Resale Agreements

846

846

－

(4) Receivables under Securities Borrowing Transactions

144

144

－

1,668

1,668

0

Trading Securities

2,015

2,015

－

(7) Money Held in Trust

938

938

－

8,640

9,458

818

150,215150,215－65,04565,402356

Total Assets

350,017351,191

1,174(1) Deposits

284,446

284,47327(2) Debentures

25,45625,499

43

119

119

－

(5) Monetary Debts Purchased (*1)
(6) Trading Assets(8) Securities
Held-to-Maturity Debt Securities
Other Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

65,418(372)(3) Trading Liabilities
Trading Bonds Sold
(4) Borrowed Money

15,40915,49686(5) Bills Sold and Call Money

379

379

－

(6) Payables under Repurchase Agreements

925

925

－

(7) Payables under Securities Lending Transactions

16,833

16,833－

Total Liabilities

343,570

343,728

157

To which Hedge Accounting is not applied

(49)

(49)

－

To which Hedge Accounting is applied(597)(1,242)

(644)

(647)

(1,291)(644)

Derivatives (*2)

Total Derivatives*1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Debts Purchased are immaterial and have therefore been deducted directly from the carrying value.
*2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.

47

As of March 31, 2017
Millions of Yen
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

10,611,955

10,611,958

2(2) Bills Bought and Call Loans

362,234

362,234－(3) Receivables under Resale Agreements

19,99919,999－(4) Receivables under Securities Borrowing Transactions

86,206

86,206－(5) Monetary Debts Purchased (*1)

180,476

180,4771

Trading Securities

184,425

184,425－(7) Money Held in Trust

－

－

－

(6) Trading Assets(8) Securities
Held-to-Maturity Debt Securities

1,282,771

1,390,011

107,240

Other Securities

15,647,543

15,647,543－

7,953,722

8,003,992

50,270Total Assets

36,329,335

36,486,850

157,514(1) Deposits

29,150,114

29,157,033

6,919(2) Debentures

2,950,000

2,961,148

11,148

7,930

7,930

－

(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

7,995,391(41,669)(3) Trading Liabilities
Trading Bonds Sold

1,203,870

1,218,813

14,943(5) Bills Sold and Call Money(4) Borrowed Money27,821

27,821－(6) Payables under Repurchase Agreements

188,402

188,402－(7) Payables under Securities Lending Transactions

1,606,958

1,606,958－

Total Liabilities

35,135,098

35,168,110

33,011(9,903)(9,903)－(105,183)(182,129)(76,944)(115,089)(192,033)(76,944)

Derivatives (*2)
To which Hedge Accounting is not applied
To which Hedge Accounting is applied
Total Derivatives*1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Debts Purchased are immaterial and have therefore been deducted directly from the carrying value.
*2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.
Note 1: Calculation method of fair value for financial instruments
Assets(1) Cash and Due from Banks
For deposits that do not mature and have maturities with variable-interest-rates, since fair value approximates carrying value, carrying value isused as fair value. For deposits that have maturities with fixed-interest-rate, present value is calculated by discounting future cash flows using the
expected interest rate that would be applied to new deposits. For term deposits with short maturities, since fair value approximates carrying value,
carrying value is used as fair value.
(2) Bills Bought and Call Loans, (3) Receivables under Resale Agreements and (4) Receivables under Securities Borrowing Transactions
Since contract durations are short-term and fair value approximates carrying value, carrying value is used as fair value.
(5) Monetary Debts Purchased
Monetary debt purchased is stated at amounts obtained from brokers.

48

(6) Trading Assets
Securities including bonds held for trading are stated at market prices, etc.
(7) Money Held in Trust
Securities managed as trust assets of money held in trust whose main purpose is securities investment are valued at the prices quoted by theexchanges in the case of listed equity shares and at market prices in the case of bonds.
Note concerning securities categorized by holding purpose is stated in “Fair Value of Securities and Money Held in Trust”.
(8) Securities
Stocks are valued at the price quoted by the exchanges. Investment trusts are valued at the announced standard price. Bonds are valued at thequoted market prices or price calculated on the basis of rational estimation, etc.
For overseas Collateralized Loan Obligations (CLOs), fair value has been determined using a valuation technique that management believes
provides a reasonable estimate of the securities’ fair value at the end of the fiscal year. Fair value based on management’s reasonable estimates iscalculated using the discounted cash flow approach, with the primary price variables including default rates for similar assets, recovery rates,
early redemption rates, and discount rates.
Note concerning securities categorized by holding purpose is stated in “Fair Value of Securities and Money Held in Trust”.
(9) Loans and Bills Discounted
For floating rate loans, since market interest is reflected in fair value in short term and fair value approximates carrying value unless theborrower’s credit standing after the lending undergoes significant change, carrying value is used as fair value. For fixed rate loans, categorized bytype of loan and internal credit rating, fair value is determined by discounting loans to present value using the interest rate that would conceivably
be applied in case of a newly made loan of the same principal and interest total. For loans with short contractual maturities, since fair value
approximates carrying value, carrying value is used as fair value.
With regard to loans to Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably Bankrupt Borrowers, the Bank estimates loan
loss based on the present value of estimated future cash flows or the estimated recoverable value from collateral and guarantees. Since fair value
therefore approximates the total loan value on the consolidated balance sheet at the consolidated closing date less the total recorded value of thereserve for possible loan losses, this value is used for fair value.
Liabilities(1) Deposits
For demand deposits, the amount payable upon demand on the balance sheet date (carrying value) is used as fair value. For term deposits, fairvalue is calculated by discounting future cash flows to present value. The discount rate is the interest rate that would be applicable to newly madedeposits. For term deposits with short contractual maturities and term deposits with variable interest rates, since fair value approximates carrying
value, carrying value is used as fair value.
(2) Debentures
For debentures issued by the Bank, market prices are used as fair value.
(3) Trading Liabilities
For trading bonds sold, market prices, etc. are used as fair value.
(4) Borrowed Money
For borrowed money, categorized by types of loans, fair value is calculated by discounting borrowed money to present value using the interest
rate that would conceivably be applied in case of a newly made loan of the same principal and interest total.
In instances with short contractual maturities, since fair value approximates carrying value, the carrying value is used as fair value.
(5) Bills Sold and Call Money, (6) Payables under Repurchase Agreements, and (7) Payables under Securities Lending Transactions
Since contract durations are short term and fair value approximates carrying value, carrying value is used as fair value.
Derivative Transactions
With regard to derivative transactions, these are noted in “Derivatives”.
Note 2: The following financial instruments have significant difficulty in determining fair value and are not included in fair value
information of financial instruments.
Category

2018

Millions of Yen

Millions of U.S. Dollars
2018

2017

Unlisted stocks, etc. (*1)

208,698

221,263

Investment in investment partnerships (*2)
Total

16,571

12,847155

225,270

234,110

2,119

1,963

*1. Unlisted stocks, etc. means unlisted common shares and preferred shares held by the Bank. Since unlisted stocks, etc. have no market prices
and therefore are with significant difficulty in determining fair value, unlisted stocks, etc. are not included in fair value disclosure
information.
*2 Investment in investment partnerships is not included in fair value disclosure information given that investment partnership assets include
items such as unlisted stocks, etc., which are with significant difficulty in determining fair value.

49

Note 3: Amounts of monetary claims and securities with maturities scheduled for redemption after the consolidated balance sheet date
As of March 31, 2018
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

Due from Banks (*1)
Bills Bought and Call Loan
Receivables under Resale Agreements
Receivables under Securities Borrowing
Transactions
Monetary Debts Purchased
Securities
Held-to-Maturity Debt Securities
Japanese Government Bonds
Municipal Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other Securities with maturities
Japanese Government Bonds
Municipal Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Loans and Bills Discounted (*2)

12,125,995
413,259
89,999191,188－－

48,628
－
－

－
－
－

－
－
－

－
－
－

15,340

－

－

－

－

－

10,831

21,13025,808

8,244

9,522

101,842

365,760
365,000－－－
2,208,556
953,600
51,53740,000865,561
3,561,058

91,36890,000－－－3,276,691
1,526,700
151,195－
1,181,296
1,270,969

20,9327,000－－－
3,643,894
1,661,000
291,264－
1,261,932
977,50340,30440,000－－－1,454,644
373,500
138,386－
666,756
405,473240,000
240,000－－－
1,426,933
325,000
166,373－204,274
546,251

155,000
155,000－－－
978,866
394,000－－
105,893
182,673

Total

18,790,801

4,851,348

4,716,766

1,908,667

2,222,707

1,418,382

Millions of U.S. Dollars

Due from Banks (*1)
Bills Bought and Call Loan
Receivables under Resale Agreements
Receivables under Securities Borrowing
Transactions

Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

114,094
3,888
846

1,798
－
－

457
－
－

－
－
－

－
－
－

－
－
－

144

－

－

－

－

－

Monetary Debts Purchased
Securities
Held-to-Maturity Debt Securities
Japanese Government Bonds
Municipal Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other Securities with maturities
Japanese Government Bonds
Municipal Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Loans and Bills Discounted (*2)

101

198

242

77

89

958

3,441
3,434
－
－
－
20,780
8,972
484
376
8,144
33,506

859
846
－
－
－
30,83014,364
1,422－
11,114
11,958

196
65
－
－
－
34,285
15,6282,740－
11,873
9,197

379
376
－
－
－
13,686
3,514
1,302
－
6,273
3,815

2,258
2,258
－
－
－
13,426
3,057
1,565
－
1,922
5,139

1,458
1,458
－
－
－
9,210
3,707
－
－
996
1,718

Total

176,804

45,64644,38017,95820,913

13,345*1. Current deposits, ordinary deposits, deposits at notice, and transfer deposits, included in “Due from Banks”, are stated under amounts
redeemable “Within 1 year”.
*2. The loans of ¥8,655 million ($81 million) which obligor categories are Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably
Bankrupt Borrowers and which periods of redemption cannot be foreseen are not included in Loans and Bills Discounted.

50

As of March 31, 2017
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

Due from Banks (*1)
Bills Bought and Call Loan
Receivables under Resale Agreements
Receivables under Securities Borrowing
Transactions
Monetary Debts Purchased
Securities
Held-to-Maturity Debt Securities
Japanese Government Bonds
Municipal Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Other Securities with maturities
Japanese Government Bonds
Municipal Government Bonds
Short-term Corporate Bonds
Corporate Bonds
Loans and Bills Discounted (*2)

10,276,129
362,234
19,999189,828－－

128,365
－
－

3,000
－
－

－
－
－

－
－
－

86,206

－

－

－

－

－

4,372

3,484

29,127

8,612

13,536

121,337

335,802335,000－－－
1,201,366
758,100
33,941－
292,010
5,052,955

456,146
455,000－－－
3,310,618
1,667,500
105,878－
1,216,067
1,224,590

28,033－－－－3,301,651
1,788,800
181,497－
868,809808,273

23,8107,000－－－
2,326,634
1,096,500
47,954－562,433
346,239

176,294
170,000－－－
1,844,333
622,000
205,846－
479,104
392,124

265,000
265,000－－－
982,777444,000－－
80,404
162,417

Total

17,339,067

5,184,668

4,295,452

2,708,297

2,426,289

1,531,532*1. Current deposits, ordinary deposits, deposits at notice, and transfer deposits, included in “Due from Banks”, are stated under amounts
redeemable “Within 1 year”.
*2. The loans of ¥8,558 million which obligor categories are Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably Bankrupt
Borrowers and which periods of redemption cannot be foreseen are not included in Loans and Bills Discounted.

51

Note 4: Amounts of deposits, debentures and other interest bearing debt scheduled for repayment after the consolidated balance sheet date
As of March 31, 2018
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

Deposits (*1)

20,716,136

8,021,640

131,182

4,597

1,357,400－

Debentures

627,7101,230,390

827,390－

20,000－Borrowed Money (*2)

134,300

468,000

646,000－－

162,480

Bills Sold and Call Money40,313

－

－

－

－

－

Payables under Repurchase Agreements

98,373

－

－

－

－

－

Payables under Securities Lending
Transactions

1,789,012

－

－

－

－

－

Total

23,405,845

9,720,030

1,604,572

4,597

1,377,400

162,480

Millions of U.S. Dollars
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

194,92075,4761,234

4312,771

Debentures

5,906

11,576

7,785

－

188

－

Borrowed Money (*2)

1,263

4,403

6,078

－

－

1,528

Deposits (*1)

Over 7 years,
within 10 years Over 10 years－

Bills Sold and Call Money

379

－

－

－

－

－

Payables under Repurchase Agreements

925

－

－

－

－

－

16,833

－

－

－

－

－

43

12,9601,528Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

Payables under Securities Lending
Transactions

Total
220,228
91,45615,097*1. Demand deposits, included in “Deposits”, are stated under amounts payable “Within 1 year”.
*2. Borrowed Money without maturity is not included.
As of March 31, 2017
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Deposits (*1)

16,660,118

11,356,601

319,669

11,298802,427－

Debentures

579,460

1,266,140

1,074,400

10,00020,000－Borrowed Money (*2)

130,200－

468,000

216,200－

162,480

Bills Sold and Call Money27,821

－

－

－

－

－

Payables under Repurchase Agreements

188,402

－

－

－

－

－

Payables under Securities Lending
Transactions

1,606,958

－

－

－

－

－

Total

19,192,961

12,622,741

1,862,069

237,498

822,427

162,480*1. Demand deposits, included in “Deposits”, are stated under amounts payable “Within 1 year”.
*2. Borrowed Money without maturity is not included.

5227. Fair Value of Securities and Money Held in Trust:
1. Securities
The following tables contain information relating to Securities, Trading Assets (trading account securities and short-term corporate bonds), Cashand Due from Banks (negotiable certificates of deposit) and Monetary Debts Purchased (beneficiary rights) in the consolidated balance sheet.
(1) Trading Securities
Millions of Yen
Net Unrealized Gains (Losses)
Recognized as Income

2018

Millions of U.S. Dollars
2018

2017
47

43

0

(2) Held-to-Maturity Debt Securities
As of March 31, 2018
Millions of Yen

903,265－－－
14,271
917,536
－
－
－
－
722
722

988,427－－－
16,057
1,004,484
－
－
－
－
720
720

Unrealized
Gains (Losses)
85,161－－－
1,786
86,947
－
－
－
－
(2)
(2)

918,259

1,005,204

86,944

Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding Carrying
Value

Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Total

Fair Value

Millions of U.S. Dollars
Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding Carrying
Value

Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Total

Fair Value

8,498
－
－
－
134
8,633

9,300
－
－
－
151
9,451

－
－
－
－
6

－
－
－
－
6

6
8,640

6
9,458

Unrealized
Gains (Losses)
801
－
－
－
16
818
－
－
－
－
(0)
(0)
818

53

As of March 31, 2017
Millions of Yen

1,129,127－－－
43,2691,172,397
110,373－－－
1,500
111,873

1,226,049－－－
53,616
1,279,666
110,345－－－
1,500
111,845

Unrealized
Gains (Losses)
96,922－－－
10,347
107,269
(28)
－
－
－
－
(28)

1,284,271

1,391,511

107,240

Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding Carrying
Value

Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Total

Fair Value(3) Other Securities
As of March 31, 2018
Millions of Yen
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

54

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Total

62,342
8,583,200
5,445,124
482,605
40,0082,615,462
3,264,610
11,910,154
4,895
2,080,560
17,963
328,710－
1,733,887
2,174,563
4,260,020
16,170,174

Acquisition Cost
27,7208,357,512
5,254,363
478,400
39,996
2,584,751
3,051,400
11,436,633
5,435
2,082,285
18,072
328,979－
1,735,233
2,230,263
4,317,985
15,754,618

Unrealized
Gains (Losses)
34,622
225,688
190,760
4,205
11
30,710213,209473,520(539)(1,724)
(109)
(268)
－
(1,346)(55,699)(57,964)
415,556

Millions of U.S. Dollars

586
80,76051,233
4,540
376
24,60930,717
112,063

260
78,63649,4384,501
376
24,32028,710107,608

Unrealized
Gains (Losses)
325
2,123
1,794
39
0
288
2,006
4,455

46
19,576169
3,092－
16,314
20,46040,082
152,14651
19,592170
3,095－
16,327
20,984
40,628148,236

(5)
(16)
(1)
(2)
－
(12)
(524)
(545)
3,910

Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Total

Acquisition Cost

As of March 31, 2017
Millions of Yen
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Total

58,6699,449,379
6,393,480
401,087－
2,654,811
3,504,514
13,012,563－
1,376,447
275,673
185,038－
915,735
1,530,796
2,907,244
15,919,807

Acquisition Cost
27,7209,169,106
6,155,320
396,547－
2,617,238
3,269,059
12,465,885－
1,380,632
277,977
185,346－917,307
1,588,349
2,968,982
15,434,867

Unrealized
Gains (Losses)
30,949280,273
238,159
4,540－
37,573
235,455
546,677－(4,184)(2,304)(307)－(1,571)(57,553)(61,737)
484,94055

(4) Held-to-Maturity Debt Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2018
Not applicable.
For the Fiscal Year Ended March 31, 2017

Japanese Government Bonds
Municipal Government Bonds
Total

Millions of Yen
Amounts ofSecurities Sold
8,474
412
8,886

Costs of Securities
Sold
8,107
400
8,507

Gains (Losses) on
Sales
366
12
379

Reason for sale
Consolidated subsidiary Shinkin Trust Bank, Ltd. sold its bond holdings during the fiscal year ended March 31, 2017, as part of the businesstakeover procedures in preparation for the merger of Shinkin Trust Bank, Ltd. and Mitsubishi UFJ Trust and Banking Corporation in September
2017.
(5) Other Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2018

StocksAmounts ofSecurities Sold
64,941Aggregate Losses on
Sales
(752)

748,860

7,620

(379)

Japanese Government Bonds

744,686

7,620

(284)

Municipal Government Bonds

－

－

－

－

－

－

4,173

0

(94)

Bonds

Short-Term Corporate Bonds
Corporate Bonds
Others965,759

6,522(12,930)

Total

1,779,561

24,465(14,062)

Millions of U.S. Dollars
Aggregate Gains on
Aggregate Losses on
Sales
Sales

Amounts ofSecurities Sold

56

Millions of Yen
Aggregate Gains on
Sales
10,321

Stocks

611

97

(7)

Bonds

7,046

71

(3)

Japanese Government Bonds

7,006

71

(2)

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

39

0

(0)

Others

9,086

61

(121)

Total

16,744230(132)

For the Fiscal Year Ended March 31, 2017

StocksAmounts ofSecurities Sold
89,002Millions of Yen
Aggregate Gains on
Sales
9,177

Aggregate Losses on
Sales(2,719)Bonds

1,208,239

47,062(8,918)Japanese Government Bonds

1,208,239

47,062(8,918)Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

－

－

－

Others541,901

7,261(14,676)

Total

1,839,142

63,501(26,314)(6) Impaired Securities
Of Securities other than Trading Securities (excluding those where there is significant difficulty in determining fair value), if the fair value falls
by 30% or more compared with the acquisition price and it is not expected to recover up to the acquisition price in view of the rate of decline overpast periods, the securities are devalued and the fair value is recorded as the carrying amount on the consolidated balance sheet. In addition the
difference between the fair value and the acquisition price is treated as impairment losses in the fiscal year.
In the case where the issuer is in bankruptcy, de facto bankruptcy, or has a likelihood of falling into bankruptcy, impairment loss isrecognized for securities when the market price is below the purchase price.
In the fiscal year ended March 31, 2018, there were no impairment losses.
In the fiscal year ended March 31, 2017, the amount of impairment losses on securities was ¥366 million (all impairment losses wereincurred on other securities).

2. Money Held in Trust(1) Money Held in Trust for Trading Purposes
As of March 31, 2018
Millions of Yen
Carrying Value
Money Held in Trust for
Trading Purposes

99,789Carrying Value
Money Held in Trust for
Trading Purposes

938

Unrealized Gains (Losses)
Recognized as Income－
Millions of U.S. Dollars
Unrealized Gains (Losses)
Recognized as Income－

As of March 31, 2017
Not applicable.
(2) Held-to-Maturity Money Held in Trust
Not applicable.
(3) Other Money Held in Trusts (Money Held in Trust other than Held for Trading Purposes or Held-to-Maturity)
Not applicable.

57

3. Net Unrealized Gains on Other Securities and Other Money Held in Trust
Components of Net Unrealized Gains on Other Securities in the consolidated balance sheets are as follows:
As of March 31, 2018
Millions of
U.S. Dollars
Millions of Yen
Other Securities

415,080

3,905

－

－

Net Unrealized Gains

415,080

3,905

Deferred Tax Liabilities

115,271

1,084

Net Unrealized Gains(Prior to Equity Method Adjustment)

299,808

2,820

Non-controlling interests’ Portion－－

Parent Company’s Portion of Valuation Differential for Other
Securities Held by Equity-Method-Applicable Companies－－

299,808

2,820

Other Money Held in Trust

Net Unrealized Gains

Note:
Unrealized Gains on foreign currency translations of foreign currency-denominated other securities where there is significant
difficulty in determining fair value are included in “Other Securities” under “Net Unrealized Gains”.
As of March 31, 2017
Millions of Yen
Other Securities
Other Money Held in Trust

483,259－

Net Unrealized Gains

483,259

Deferred Tax Liabilities

134,328

Net Unrealized Gains(Prior to Equity Method Adjustment)

348,931

Non-controlling interests’ Portion－

Parent Company’s Portion of Valuation Differential for Other
Securities Held by Equity-Method-Applicable Companies－

Net Unrealized Gains

348,931

Note:
Unrealized Gains on foreign currency translations of foreign currency-denominated other securities where there is significant
difficulty in determining fair value are included in “Other Securities” under “Net Unrealized Gains”.

5828. Derivatives:
1. Derivative transactions to which hedge accounting is not applied
The following summarizes the contract values or the contracted principal equivalents, fair values, net unrealized gains (losses) and the valuation
methods of the fair values of the Bank’s derivative transactions that do not qualify for hedge accounting as of the consolidated balance sheet date,
which are classified by types of financial instruments. Please note that the contract values in themselves do not reflect the market risk associatedwith the Bank’s derivative transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2018
Millions of Yen
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Contract
Value

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－Fixed Rate Receivable/Variable Rate Payable

7,343,328

6,496,389

117,569

117,569

Variable Rate Receivable/Fixed Rate Payable

7,266,359

5,850,172(92,013)(92,013)

Variable Rate Receivable/Variable Rate Payable

190,630

190,630

(17)

(17)

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

1,808,600

1,020,600(24,532)(4,185)

Bought

1,919,200

1,092,300(6,361)(21,418)(5,354)(65)

Interest Rate Options:Over the Counter Transactions
Interest Rate Forwards:

Interest Rate Swaps:

Fixed Rate Receivable/Fixed Rate Payable
Interest Rate Options:

Others:

Total

59

Millions of U.S. Dollars
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Contract
Value

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－Fixed Rate Receivable/Variable Rate Payable

69,094

61,125

1,106

1,106

Variable Rate Receivable/Fixed Rate Payable

68,36955,044

(865)

(865)

Variable Rate Receivable/Variable Rate Payable

1,793

1,793

(0)

(0)

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

17,017

9,602

(230)

(39)

Bought18,057

10,277

(59)

(201)

(50)

(0)

Interest Rate Options:Over the Counter Transactions
Interest Rate Forwards:

Interest Rate Swaps:

Fixed Rate Receivable/ Fixed Rate Payable
Interest Rate Options:

Others:

Total

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.
2. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions are valued using discounted present value or calculation models for option prices, etc.

60

As of March 31, 2017
Millions of Yen
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Contract
Value

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－Fixed Rate Receivable/Variable Rate Payable

7,445,308

6,676,307

148,427

148,427

Variable Rate Receivable/Fixed Rate Payable

7,400,635

5,984,527(114,550)(114,550)

Variable Rate Receivable/Variable Rate Payable

212,330

179,630

(87)

(87)

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

2,362,600

1,688,600(34,381)(6,611)

Bought2,393,200

1,731,700(9,171)(25,444)(9,762)

1,734

Interest Rate Options:Over the Counter Transactions
Interest Rate Forwards:

Interest Rate Swaps:

Fixed Rate Receivable/Fixed Rate Payable
Interest Rate Options:

Others:

Total

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.
2. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions are valued using discounted present value or calculation models for option prices, etc.

61(2) Currency-Related Transactions
As of March 31, 2018
Total Contract
Value

Millions of Yen
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Currency Futures:
Sold
Bought

－
－

－
－

－
－

－
－

－
－

－
－

－
－

－
－

7,195

6,770

94

94

199,188236,733

215
－

1,090
(828)

1,090
(828)

－
－

－
－

－
－

－
－

－
－

－
－

－
－
355

－
－
355

Currency Options:
Sold
BoughtOver the Counter Transactions
Currency Swaps:
Forward Foreign Exchange Contracts:
Sold
BoughtCurrency Options:
Sold
BoughtOthers:Sold
BoughtTotal

62

Total Contract
Value

Millions of U.S. Dollars
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

67

63

0

0

Sold

1,874

2

10

10

Bought

2,227

－

(7)

(7)

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

3

3

Currency Options:Over the Counter Transactions
Currency Swaps:
Forward Foreign Exchange Contracts:

Currency Options:

Others:

Total

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions are valued using discounted present value, etc. (for currency swaps, fair value is calculated after
deduction of principal)

63

As of March 31, 2017
Total Contract
Value

Millions of Yen
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Currency Futures:
Sold
Bought

－
－

－
－

－
－

－
－

－
－

－
－

－
－

－
－

14,635

7,122

32

32

118,406
74,955

－
－

555
(333)

555
(333)

－
－

－
－

－
－

－
－

－
－

－
－

－
－
254

－
－
254

Currency Options:
Sold
BoughtOver the Counter Transactions
Currency Swaps:
Forward Foreign Exchange Contracts:
Sold
BoughtCurrency Options:
Sold
BoughtOthers:Sold
BoughtTotal

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions are valued using discounted present value, etc. (for currency swaps, fair value is calculated after
deduction of principal)(3) Stock-Related Transactions
Not applicable.

64(4) Bond-Related Transactions
As of March 31, 2018
Millions of Yen
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Contract
Value

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:Sold

30,764

－

7

7

－

－

－

－

Sold

－

－

－

－

Bought

6,500

－

5

(0)

Sold

－

－

－

－

Bought－－－－BoughtBond Futures Options:Over the Counter Transactions
Bond Options:

Others:
Sold

－

－

－

－

Bought

－

－

－

－

13

6

Total

Millions of U.S. Dollars
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Contract
Value

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:
Sold

289

－

0

0

Bought

－

－

－

－

Sold

－

－

－

－

Bought

61

－

0

(0)

Bond Futures Options:Over the Counter Transactions
Bond Options:
Sold

－

－

－

－

Bought－－－－Others:

Total

Sold

－

－

－

－

Bought

－

－

－

－

0

0

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Osaka Exchange, Inc.
Over the counter transactions are valued using calculation models for option prices, etc.

65

As of March 31, 2017
Millions of Yen
Contract Value(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Contract
Value

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:Sold

12,779－5

5

Bought

3,907

－

(0)

(0)

Sold

－

－

－

－

Bought

5,300

－

6

(0)

Sold

－

－

－

－

Bought－－－－Bond Futures Options:Over the Counter Transactions
Bond Options:

Others:
Sold

－

－

－

－

Bought

－

－

－

－

12

5

Total

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Osaka Exchange, Inc.
Over the counter transactions are valued using calculation models for option prices, etc.

(5) Commodity-Related Derivative Transactions
Not applicable.

(6) Credit Derivative Transactions
Not applicable.

662. Derivative transactions to which hedge accounting is applied
The following summarizes the contract values or the contracted principal equivalents, fair values and the valuation methods of the fair values of
the Bank’s derivative transactions that qualify for hedge accounting as of the consolidated balance sheet date, which are classified by types offinancial instruments and methods for hedge accounting. Please note that the contract values in themselves do not reflect the market risk
associated with the Bank’s derivative transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2018
Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Items

Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

80,000－676

Variable Rate Receivable/Fixed Rate Payable

4,460,428

3,714,664(76,433)

Fixed Rate Receivable/Variable Rate Payable

－

－

－

Variable Rate Receivable/Fixed Rate Payable

1,201,286

963,556(68,479)

Interest Rate Swaps

Total

Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Fair Value(144,236)

Items

Total Contract
Value

Millions of U.S. Dollars
Contract Value(Over 1 Year until
Settlement or Expiry)

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

752

－

6

Variable Rate Receivable/Fixed Rate Payable

41,96834,951(719)－
11,303

－
9,066

－
(644)

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable
Variable Rate Receivable/Fixed Rate Payable
Total(1,357)

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted,
Other Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Loans and Bills Discounted, Held-to-Maturity Debt
Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 24, February 13, 2002 “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in
Banking Industry”.
4. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions are valued using discounted present value or calculation models for option prices, etc.

67

As of March 31, 2017
Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Items

Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

80,00080,000

1,968

Variable Rate Receivable/Fixed Rate Payable

4,661,221

4,240,018(110,281)

Fixed Rate Receivable/Variable Rate Payable

180,000－

338

Variable Rate Receivable/Fixed Rate Payable

1,142,207

988,227(77,283)

Interest Rate Swaps

Total(185,256)

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted,
Other Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Loans and Bills Discounted, Held-to-Maturity Debt
Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 24, February 13, 2002 “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in
Banking Industry”.
4. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions are valued using discounted present value or calculation models for option prices, etc.
(2) Currency-Related Transactions
As of March 31, 2018
Millions of Yen
Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

412,096

260,654(3,266)150,018

－

2,394

－

－

－

Forward Foreign Exchange Contracts:
Sold
BoughtTotal(871)
Millions of U.S. Dollars

Method for Hedge
Accounting
Basic Treatment

Items

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

3,877

2,452

(30)

Sold

1,411

－

22

Bought－－－Currency Swaps
Forward Foreign Exchange Contracts:

Total

(8)

Notes:
1. Most of hedged items are foreign currency-denominated securities, Due from Banks etc.
2. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 25, July 29, 2002 “Accounting and Auditing Treatment of Accounting Standards for Foreign Currency
Transactions in the Banking Industry”.
3. Fair value calculation: Transactions are valued using discounted present value, etc. (for currency swaps, fair value is calculated after
deduction of principal)

68

As of March 31, 2017
Millions of Yen
Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

455,769

347,209(1,842)

340,749

－

662

－

－

－

Forward Foreign Exchange Contracts:
Sold
BoughtTotal(1,180)Notes:
1. Most of hedged items are foreign currency-denominated securities, Due from Banks etc.
2. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 25, July 29, 2002 “Accounting and Auditing Treatment of Accounting Standards for Foreign Currency
Transactions in the Banking Industry”.
3. Fair value calculation: Transactions are valued using discounted present value, etc. (for currency swaps, fair value is calculated after
deduction of principal)(3) Stock-Related Transactions
Not applicable.
(4) Bond-Related Transactions
Not applicable.

29. Related Party Transactions:
For the Fiscal Year Ended March 31, 2018
There were no significant related-party transactions.
For the Fiscal Year Ended March 31, 2017
There were no significant related-party transactions.

30. Segment Information:(1) Description of Reportable Segments
The Group classifies the businesses of the Bank and its consolidated subsidiaries as individual business segments. Among those businesssegments, the business of the Bank is deemed as the reportable segment.
The Bank, as an individual financial institution, provides such services as deposits, debentures, lending, market fund management, trading
operations, clearing and trust business. As the central financial institution for Shinkin Banks, the Bank complements the functions of the Shinkin
Banks and operates the shinkin bank industry’s own safety net, including the Shinkin Bank Management Reinforcement System. By doing so, theBank strives to maintain an orderly financial system within the shinkin bank industry.
(2) Method of Calculating Amounts by Reportable Segment
The accounting methods of the reportable segment are the same as those described in the “Significant Accounting Policies”. Reportable segment
profit is based on profit attributable to owners of parent.

69

(3) Amounts by Reportable Segment
For the Fiscal Year Ended March 31, 2018
(Millions of Yen)
Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

269,734

37,176306,911(19)

306,892

6,058

1,705

7,764

(7,764)－

Total

275,792

38,882

314,675(7,783)306,892

Segment profit

46,4982,278

48,777(4,311)

44,466

Segment assets

38,552,702

316,665

38,869,368(78,919)

38,790,449

Segment liabilities

36,949,667

237,304

37,186,971(23,128)

37,163,843

Depreciation
Interest Income

4,515
223,718

5,176
171

9,691
223,889(0)(3,361)

9,691
220,528

Interest Expenses

121,536

34

121,571(11)

121,559

Income Taxes

16,157

1,941

18,098(218)

17,880

Increase in Tangible andIntangible Fixed Assets

2,465

2,726

5,191

－

5,191

Inter-segment

Other items(Millions of U.S. Dollars)
Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers
Inter-segment
Total

2,537

349

2,887

(0)

2,887
－
2,887

57

16

73

(73)

2,594

365

2,960

(73)

Segment profit

437

21

458

Segment assets

362,746

2,979

365,726

Segment liabilities

347,663

2,232

Depreciation
Interest Income

42
2,104

Interest Expenses

418

(40)

364,983

349,896

(742)

48
1

91
2,106

1,143

0

Income Taxes

152

Increase in Tangible andIntangible Fixed Assets

23

(217)

349,678

(0)
(31)

91
2,074

1,143

(0)

1,143

18

170

(2)

168

25

48

－

48

Other items

Notes:
1. The “Other” is outside of business segments in our segment information and includes businesses performed by consolidated subsidiaries.
The Bank’s consolidated subsidiaries provide such financial services as securities, asset management, consumer credit guarantees,
investment and M&A advisory operations, and data processing outsourcing.
Shinkin Trust Bank, Ltd., which had performed trust and banking businesses, has been excluded from the scope of consolidation fromthe second quarter of the current fiscal year since it was taken over by Mitsubishi UFJ Trust and Banking Corporation on September 19,
2017.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥4,311 million ($40 million) comprises reduction of ¥526 million ($4 million) on
profit attributable to non-controlling interests and ¥3,784 million ($35 million) on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥78,919 million ($742 million) comprises reduction of ¥43,114 million ($405
million) on eliminations relating to capital consolidation and ¥35,804 million ($336 million) on inter-segment eliminations, etc.
(iii) The adjustment for other items including reduction of ¥23,128 million ($217 million) on the adjustment of segment liabilities
comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the Consolidated Statement of Income.

70For the Fiscal Year Ended March 31, 2017
(Millions of Yen)
Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

281,257

38,124

319,381(73)

319,307

2,761

2,140

4,901

(4,901)－

Total

284,018

40,264324,283(4,975)319,307

Segment profit

41,3833,711

45,095(1,223)43,871

Segment assets

37,257,840

285,852

37,543,692(79,099)

37,464,593

Segment liabilities

35,654,367

196,41235,850,780(12,029)35,838,750

Depreciation
Interest Income

5,193
201,4545,455
258

10,648201,713(0)(75)

10,647
201,637

Interest Expenses

122,340

49

122,390(8)

122,381

Income Taxes

6,954

1,509

8,464

(213)

8,250

Increase in Tangible andIntangible Fixed Assets

5,076

3,474

8,550

－

8,550

Inter-segment

Other items

Notes:
1. The “Other” is outside of business segments in our segment information and includes businesses performed by consolidated subsidiaries.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, asset management, consumer credit
guarantees, investment and M&A advisory operations, and data processing outsourcing.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥1,223 million comprises reduction of ¥682 million on profit attributable tonon-controlling interests and ¥540 million on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥79,099 million comprises reduction of ¥53,114 million on eliminations relating tocapital consolidation and ¥25,984 million on inter-segment eliminations, etc.
(iii) The adjustment for other items including reduction of ¥12,029 million on the adjustment of segment liabilities comprises
inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the Consolidated Statement of Income.

71

(Related Information)
For the Fiscal Year Ended March 31, 2018
1. Information by service(Millions of Yen)
Securities investment
operations
Income from externalcustomers

Lending operations

227,630

Other

17,597

Total
61,663306,892(Millions of U.S. Dollars)

Securities investment
operations
Income from externalcustomers

Lending operations

2,141

Other

Total

165

580

2,887

2. Information by geographic region(1) Income
Japan
168,458

Japan

United States
33,387

EuropeUnited States

EuropeOther
15,19589,850

Other

1,585
314
142
Note: Income from derivative transactions and Trading income are included in Other.

(Millions of Yen)
Total
306,892(Millions of U.S. Dollars)
Total
845
2,887

(2) Tangible fixed assets
The Group’s tangible fixed assets located in Japan account for over 90% of the tangible fixed assets presented in the Consolidated Balance Sheet.
Consequently, this information is omitted.

3. Information by principal customer
Name of customer
The Government of Japan

IncomeName of customer
The Government of Japan

Income56,603(Millions of Yen)
Related segment
Shinkin Central Bank business

532(Millions of U.S. Dollars)
Related segment
Shinkin Central Bank business

For the Fiscal Year Ended March 31, 2017
1. Information by service(Millions of Yen)
Securities investment
operations
Income from externalcustomers

239,956

Lending operations
17,868

Other

Total
61,482

319,307

2. Information by geographic region(1) Income
Japan

United States
EuropeOther
184,019
33,242
14,01688,029Note: Income from derivative transactions and Trading income are included in Other.

72(Millions of Yen)
Total
319,307(2) Tangible fixed assets
The Group’s tangible fixed assets located in Japan account for over 90% of the tangible fixed assets presented in the Consolidated Balance Sheet.
Consequently, this information is omitted.
3. Information by principal customer
Name of customer
The Government of Japan

Income63,524(Millions of Yen)
Related segment
Shinkin Central Bank business(Information related to Impairment losses of Fixed Assets by Reportable Segment)
For the Fiscal Year Ended March 31, 2018
(Millions of Yen)

Impairment losses

Reportable segment
Shinkin Central Bank business
60

Other

Total
60

－

(Millions of U.S. Dollars)

Impairment losses

Reportable segment
Shinkin Central Bank business
0

Other

Total
－

0

Note: The “Other” is outside of business segments in our segment information and includes businesses performed by consolidated
subsidiaries.
The Bank’s consolidated subsidiaries provide such financial services as securities, asset management, consumer credit guarantees,
investment and M&A intermediary, and data processing outsourcing.
For the Fiscal Year Ended March 31, 2017
Not applicable.
(Information related to Amortization of Goodwill and Balance of Unamortized Goodwill by Reportable Segment)
Not applicable.
(Information related to Accrual of Income from Negative Goodwill by Reportable Segment)
Not applicable.

31. Business Combinations:(1) Outline of the business combination(a) Name and business description of the companies concerned(i) Surviving company
Company name: Mitsubishi UFJ Trust and Banking Corporation
Business description: Trust and Banking operations(ii) Merged company
Company name: Shinkin Trust Bank, Ltd. (the Bank’s consolidated subsidiary)Business description: Business relating to securities investment trust services(b) Major reasons for the business combination
With the launch of trust operations simultaneously in order to strengthen trust operations, the Bank was transferred all the businesses excluding
business relating to securities investment trust services by Shinkin Trust Bank, Ltd. which is 100 percent owned subsidiary in the form of business
transfer.
In addition, through merger, the business relating to securities investment trust services on the Shinkin Trust Bank, Ltd. is transferred by
Mitsubishi UFJ Trust and Banking Corporation in order to strengthen trust operations.
(c) Date of the business combination
September 19, 201773

(d) Legal form of the business combination
The merger was an absorption-type merger where Mitsubishi UFJ Trust and Banking Corporation was a surviving company and Shinkin Trust
Bank, Ltd. was a dissolving company.
(2) Outline of accounting
The Bank accounted for the business combination based on the accounting procedures stipulated by the “Accounting Standard for Business
Divestitures” and “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” andrecognized ¥2,200 million under “Other Income” in Income.
(3) Name of the reportable segment which the subsidiary was included in the segment information“Others”(4) Estimated amount of gain on this subsidiary which has been recognized in the consolidated statements of income for the year ended March 31,
2018
Income ¥234 million
Expenses ¥135 million
32. Amounts per Share:
Yen
Net Assets per ShareNet Income per ShareNet Income per Share after Adjustment for Common
Share equivalents

74

2018

2017

299,587.63

299,542.84

6,311.86

6,223.20－－

U.S. Dollars
2018
2,818.85
59.38－

Notes:1. The basis for calculation of net assets per share is as follows:
2018

2017

2018

Total Net Assets

Millions of Yen

1,626,605

1,625,842

Millions of U.S.
dollars

15,304

Amount Deducted from Total Net Assets

Millions of Yen

216,080

215,528

Millions of U.S.
dollars

2,033

Non-controlling interests

Millions of Yen

10,956

10,403

Millions of U.S.
dollars103

Preferred Dividends

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

19

Dividend attributable to specificcommon shares

Millions of Yen

3,000

3,000

Millions of U.S.
dollars

28

Distribution of residual assets
attributable to specific common shares

Millions of Yen

200,000

200,000

Millions of U.S.
dollars

1,881

Millions of Yen

1,410,525

1,410,314

Millions of U.S.
dollars

13,271Unit

4,708,222

4,708,222－－

Number of General Common
Share Units

Unit

4,000,000

4,000,000－－

Number of Preferred
Share UnitsUnit

708,222708,222－－

Net Assets at Fiscal Year-end Used to
Calculate Net Assets per Share
Number of Share Units at Fiscal Year-end
Used to Calculate Net Assets per Share* When calculating net assets per share, of dividend attributable to preferred shares, preferred dividends are deducted from total net assets
whereas participating dividends are not deducted from total net assets.
Dividend attributable to specific common shares and distribution of residual assets attributable to specific common shares are
deducted from total net assets, and the number of specific common shares is not included within the number of shares.
2. The basis for calculation of net income per share is as follows:
2018

2017

2018

Millions of Yen

44,46643,871Millions of U.S.
dollars

418

Amount Deducted from Profit attributable
Millions of Yen
to owners of parent

2,124

2,124

Millions of U.S.
dollars

19

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

19

Profit attributable to owners of parent Used
Millions of Yen
to Calculate Net Income per share

42,341

41,746

Millions of U.S.
dollars

398

Profit attributable to owners of parent

Preferred Dividend

Average Number of Share Units for the
fiscal year

Unit

6,708,222

6,708,222－－

Average Number of General Common
Share Units

Unit

4,000,000

4,000,000－－

Average Number of Specific Common
Share Units

Unit

2,000,000

2,000,000－－

Average Number of Preferred
Share UnitsUnit

708,222708,222－－* When calculating net income per share, of dividends attributable to preferred securities, dividends attributable to preferred shares are
deducted from profit attributable to owners of parent whereas participating dividends are not deducted from profit attributable to ownersof parent.
3. Net income per Share after adjustment for Common share equivalents is not listed as there are no dilutive securities.

33. Subsequent Events:
Not applicable.

75

76

Non-Consolidated Balance Sheet
Millions of
U.S. Dollars

Millions of Yen
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks
Call Loans
Receivables under Resale Agreements
Receivables under Securities Borrowing Transactions
Monetary Debts Purchased
Trading Assets
Money Held in Trust
Securities
Loans and Bills Discounted
Foreign Exchanges Assets
Other Assets
Tangible Fixed Assets
Intangible Fixed Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets

2018

2017

2018

12,378,801
413,259
89,999177,359
217,220
99,78917,137,785
6,952,659
20,460961,269
68,994
7,179
70,653(42,730)
38,552,702

10,591,676
362,234
19,99977,522
178,977
205,696
17,204,776
7,995,390
20,514484,467
70,0548,000
83,632(45,103)37,257,840

116,473
3,888
846
1,668
2,043
938
161,251
65,418
192
9,044
649
67
664
(402)
362,746

Liabilities and Net Assets
Liabilities
Deposits
Debentures
Trading Liabilities
Borrowed Money
Call Money
Payables under Repurchase Agreements
Payables under Securities Lending Transactions
Foreign Exchanges Liabilities
Borrowed Money from Trust Account
Other Liabilities
Reserve for Employee Bonuses
Reserve for Directors’ Bonuses
Reserve for Employee Retirement Benefits
Reserve for Directors’ Retirement Allowances
Deferred Tax Liabilities
Deferred Tax Liabilities for Land Revaluation
Acceptances and Guarantees
Total Liabilities

30,260,341
2,714,890
53,882
1,637,770
25,313
98,373
1,776,158
447
5,375
196,352
1,334
89
22,023456
80,105
6,100
70,65336,949,667

29,176,129
2,952,900
76,413
1,203,870
24,821
188,4021,602,791
368
74
227,760
1,311
83
20,337389
88,974
6,109
83,63235,654,367

284,722
25,544506
15,409238
925
16,712
4
50
1,847
12
0
207
4
753
57
664
347,663

Total Net Assets
Total Liabilities and Net Assets

1,603,035
38,552,702

1,603,472
37,257,840

15,083362,74677

Non-Consolidated Statement of Income
Shinkin Central Bank For the year ended March 31,
IncomeInterest Income:Interest on Loans and Discounts
Interest on Due from Banks
Interest on Call Loans
Interest on Receivables under Resale Agreements
Interest on Receivables under Securities Borrowing Transactions
Interest and Dividends on Securities
OthersTrust Fees
Fees and Commissions
Trading Income
Other Operating Income
Other Income
Total Income

Expenses
Interest Expenses:
Interest on Deposits
Interest on Debentures
Interest on Borrowed Money
Interest on Call Money
Interest on Payables under Repurchase Agreement
Interest on Payables under Securities Lending Transactions
Interest Payable on Interest Rate Swaps
OthersFees and Commissions
Trading Losses
Other Operating Expenses
General and Administrative Expenses
Other Expenses
Total Expenses

Millions of
U.S. Dollars

Millions of Yen
2018

2018

2017

223,718
17,597
8,407
706
0
115
196,249
642
117
8,295
3,600
25,162
14,897
275,792

201,454
17,868
8,431
753
0
133
173,730
536
0
8,263
4,738
59,434
10,127
284,018

2,104
165
79
6
0
1
1,846
6
1
78
33
236
140
2,594

121,536
37,841
5,930
7,040
463
1,920
15,87250,964
1,502
6,520
136
54,38929,5001,052
213,136

122,340
39,690
8,005
8,244
254
1,062
9,265
52,831
2,985
6,605
4
74,76829,234
2,728
235,680

1,143
356
55
66
4
18
149
479
14
61
1
511
277
9
2,005

62,65648,338589

14,3891,768
16,15746,49810,555(3,601)
6,954
41,383

135
16
152
437

Income before Income Taxes
Income Taxes
Current
Deferred
Total Income Taxes
Net Income

U.S. Dollars

Yen
2018

Net Income Per ShareDividend Declared per Share (General Common Shares)
Dividend Declared per Share (Specific Common Shares)
Dividend Declared per Share (Preferred Shares)

78

6,614.86
3,000.00
1,500.00
6,500.00

2017

5,852.33
3,000.00
1,500.00
6,500.00

2018

62.23
28.22
14.11
61.15

Statement of Trust Account (Consolidated)
Million of Yen
Shinkin Central Bank
As of March 31
AssetsSecurities
Beneficiary Rights
Securities Held in Custody Accounts
Monetary Claims
Other Claims
Due from Banking AccountCash and Due from Banks
Total assets

2017

2018
6,000
381,740
63,00060,392
4
5,375
8,932
525,4458,507
1,694,135
63,00064,1638360
28,986
1,859,161

Millions of
U.S. Dollars
2018
56
3,591
592
568
0
50
84
4,943

Liabilities
Money Trust
81,36035,879337
Investment Trusts
1,450,501
Money Held in Trust Other than Money Trust
23,814
224
Securities Trusts
116,300
111,000
1,044
Monetary Claims Trusts
65,14961,415577
Composite Trusts
145,849
293,335
2,760
1,859,161
Total liabilities
525,445
4,943(Note1) The figures in this statement are calculated by means of simple aggregation of trust accounts for each consolidated company
conducting trust business pursuant to the “Act on Engagement in Trust Business Activities by Financial Institutions.” Consolidated companies
conducting such trust business comprised only the Bank in the fiscal year ended March 31, 2018, and comprised the Bank and Shinkin Trust
Bank, Ltd. in the fiscal year ended March 31, 2017.
(Note2) No trust assets were entrusted to other trust banks for asset administration as of March 31, 2018 and 2017.

79Organization (As of July 31, 2018)
General Meeting of Members
Corporate Auditors
Board of Directors
Chairman of the Board of Directors (part-time)
President and Chief Executive Officer
Deputy President
Senior Managing Directors
Managing Directors
Directors

Chief Secretary
Internal Audit Division
General Affairs Division
Legal & Compliance Office
Personnel Division
Strategic Planning Division
Digital Innovation Office
Investor & Public Relations OfficeFinancial Management Division
Risk Management Division
Credit Planning & Supervision Division
Trust Business Division
Business Promotion Division
Disaster Recovery & Reconstruction
Support Office*SME Business Solution Division
Shinkin Networks Promotion OfficeInternational Business Solution DivisionInternational Operations Center
Retail Business Solution Division
Support & Advisory Division for Shinkin Banks
Consulting Office
Portfolio Management Support OfficeTransfer & Clearing Division
Management Office for Domestic FundTransfer System
Operations Division
Operations Center
Systems Division
Systems Center
Corporate Business Promotion Division
Project Finance OfficeTreasury Business Division
Treasury Division
Credit & Alternative Investment Division
Treasury Operations Division
Research Institute
SDB Office
Regional Innovation Support Center

Corporate Business Division I
Corporate Business Division II
Osaka Corporate Business DivisionTokyo Business Division
Kanto Business Division I
Kanto Business Division II
Hokkaido Branch
Tohoku Branch(Disaster Recovery & Reconstruction Support office)

Hokuriku Branch
Shizuoka Branch
Nagoya Branch
Osaka Branch
Kobe Branch
Okayama Branch
Chugoku Branch
Shikoku Branch
Fukuoka Branch
Minami-Kyushu Branch
New York Representative OfficeHong Kong Representative Office
Shanghai Representative Office
Bangkok Representative Office* Located in the Tohoku Branch.

The SCB Group (As of July 31, 2018)
The SCB Group
Securities

Asset
management

Personal loan
guarantees

Investment and
M&A advisory

Data processing
consignment

Consigned
clerical work

Shinkin
CapitalThe Shinkin Banks
Information
System Center

Shinkin
ChukinBusiness

Data processing
consignment(handles SCB
administrative work)

Softwaredevelopment

Computing

Shinkin
Securities

ShinkinInternational

Shinkin AssetManagement

Shinkin
Guarantee

Dealing

Underwriting new
bonds and agency
business in theeuro market

Management
services fordiscretionary
investment contract
assetsDebt guarantee
business(guarantees for
unsecuredpersonal loans
provided byshinkin banks)

Brokerage
Underwriting

Dealing andbrokering forexisting euro
bonds
Foreign securities
investment andconsulting¥20bn in capital(100% ownership);¥10bn capitalreserve£30mn in capital(100% ownership)
London local
securities entity

Management
services forinvestment trust
assets¥200mn in capital(100% ownership)¥1.0bn in capital(100% ownership)

Investment banking
M&A
brokering
Corporatebusiness
consulting¥490mn in capital(100% ownership)* Shinkin Trust Bank, Ltd. was dissolved upon the merger with Mitsubishi UFJ Trust and Banking Corporation on September 19, 2017.

80

Computer
consulting andtraining¥4.5bn in capital(50.7% stake;
49.2% owned byshinkin banks);¥1.5bn capitalreserve

Promissory
note exchange
Branch,dormitory, andother property
management¥70mn in capital(100% ownership)

International Directory (As of July 31, 2018)
Senior Managing Director(in charge of Corporate Business Promotion/
Treasury Operations)
Hiroshi Nakahara
Senior Managing Director(in charge of Strategic Planning/
International Business Solution/Treasury/
Credit & Alternative Investment/
Overseas Offices)
Hiroshi Sudo
Managing Director(in charge of Treasury Business)
Norihiro Takano
Strategic Planning Division(including International Planning)
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7624
Facsimile: +81-3-3278-7033
General Manager: Yoshinori Jinno
International Business Solution Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
General Manager: Takehiro Suzuki
International Operations Center(including Correspondent Banking)Address: 8-1, Kyoubashi 3-chome,
Chuo-ku, Tokyo 104-0031
Telephone: +81-3-5250-1700
Facsimile: +81-3-5250-1780
SWIFT: ZENB JPJT
General Manager: Hideo Okada
Corporate Business Promotion Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7665
Facsimile: +81-3-3278-7045
Director: Naoki Hemmi
Treasury Business Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7642
Facsimile: +81-3-3278-7040
SWIFT: ZENB JPJT
General Manager: Kengo Kaji
Treasury Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7660
Facsimile: +81-3-3278-7043
SWIFT: ZENB JPJT
General Manager: Kenji Tanaka

Research Institute
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7671
Facsimile: +81-3-3278-7048
General Manager: Eiichi Matsuzaki

Overseas Offices
New York
New York Representative Office
Address: 655 Third Avenue, Suite 2620,
New York, NY 10017, U.S.A.
Telephone: +1-212-642-4700
Facsimile: +1-212-730-6000
Chief Representative: Kentaro Sone

LondonHong Kong
Hong Kong Representative Office
Address: Suite 4008, 40/F, Central Plaza, 18
Harbour Road, Wan Chai, Hong Kong, P.R. of China
Telephone: +852-2537-3777
Facsimile: +852-2537-4002
Chief Representative: Masao Yamaguchi

ShanghaiHong Kong
Bangkok

Shanghai
Shanghai Representative Office
Address: Room 508, Shanghai International Trade
Center, 2201 Yan-An Xi Road
Shanghai, P.R. of China
Telephone: +86-21-6270-3091
Facsimile: +86-21-6270-3095
Chief Representative: Hiroyuki Niwa
Bangkok
Bangkok Representative Office
Address: 19th Floor ,1903, Athenee Tower, 63
Wireless Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
Telephone: +66-2-168-8796
Facsimile: +66-2-168-8799
Chief Representative: Naoto Seita

Overseas Subsidiary

Hokkaido(Sapporo)

LondonShinkin International Ltd.
Address: 1st Floor, 85 London Wall,London EC2M 7AD, UK
Telephone: +44-20-7562-0500
Facsimile: +44-20-7256-8544
Managing Director: Koichi Kawashima

Tohoku(Sendai)

Credit & Alternative Investment Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7664
Facsimile: +81-3-3278-7044
General Manager: Daigo Morishita
Treasury Operations Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7666
Facsimile: +81-3-3278-7046
SWIFT: ZENB JPJT
General Manager: Hiroyuki Tanaka

New York

Hokuriku(Kanazawa)
Chugoku(Hiroshima)

Okayama Kobe
Osaka
Shikoku(Takamatsu)

FukuokaMinami-Kyushu(Kumamoto)Head Office

NagoyaShizuokaHead Office
BranchOffice/subsidiary

Shinkin Central Bank Head Office3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
Telephone: +81-3-5202-7711
http://www.shinkin-central-bank.jp/

81

Shinkin Central Bank Annual Report 2018

Shinkin Central Bank

3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
Telephone: +81-3-5202-7711
http://www.shinkin-central-bank.jp/
Printed in Japan