Shinkin Central Bank

Annual Report 2012

Shinkin Central Bank

3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
Telephone: +81-3-5202-7711 Facsimile: +81-3-3278-7011
http://www.shinkin-central-bank.jp

Printed in Japan

Shinkin Central Bank

Annual Report 2012

Shinkin Central Bank,
the Central Bank for Shinkin Banks
As the central financial institution of shinkin banks, Shinkin Central
Bank (referred to as SCB hereafter) has occupied a well-establishedposition in Japan’s financial industry, with shinkin banks having a totalof ¥122 trillion (equivalent to $1,490 billion) in funds.

Management Philosophy
As the central bank for all shinkin banks, the SCB supports the growth of
the shinkin bank sector and thus contributes to economic development
throughout Japan.

1.	Strengthening the corporate base, broadening the operational functions, and enhancing the credit standing of shinkin banks

2. 	Stable fund-raising from shinkin banks as well as diversification offunding sources

5.	Contributing to regional development and revitalization hand in handwith shinkin banks

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

7. Nurturing professionals and creating an attractive workplace
8. Enhancing public trust in the SCB
Corporate Data (as of March 31, 2012)
Name:
Establishment:
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:

Shinkin Central Bank (SCB)
June 1, 1950
1,142
14
4
¥31,126 billion ($378 billion)¥29,607 billion ($360 billion)¥490 billion ($5,971 million)¥90 billion ($1,106 million)

32.43%271
A1 (Moody’s)
A+ (S&P)
A+ (R&I)
AA (JCR)		(As of July 31, 2012)
Note: The number of employees includes full-time Directors and Auditor. The number ofOverseas Network includes Shinkin International, Ltd., a subsidiary in London. The
amounts of total assets and total funds are the average balances for the year ended
March 31, 2012.

Senior Managing Director(in charge of International/
Treasury Operations)Katsuo Akiyama
Managing Director(in charge of Overseas Offices)
Kazuyuki Okura

International Business Solution Division(including International Operations Center/
Correspondent Banking)Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
General Manager: Makoto Asahi

Operational Policies

cial circumstances

Deputy President(in charge of International Planning)
Junichi Hattori

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: Hiroshi Sudo

Management Philosophy and Operational Policies

3. 	Upgrading market operation and developing financial services
4. 	Actively pursuing new business in conformity with changes in finan-International Directory (As of July 31, 2012)

Contents
F inancial Highlights (Non-Consolidated Financial
Summary) ································································ 1
Message from the President and CEO ······················ 2
Corporate Management and Auditors ······················ 3
The SCB Is a Powerful Financial Institution in Japan,
Which Is Listed on the Tokyo Stock Exchange ········· 4Management Issues and Strategies ···························· 6
Efforts Aimed at Recovery from the Great East Japan
Earthquake ··································································· 8Overseas Network ······················································ 9Business Overview ····················································· 10
Capital Adequacy ···················································· 11
Asset Quality ·························································· 12
Important Management Indices ······························· 13
Corporate Governance ··········································· 14
Strengthening the Compliance System ···················· 15
Risk Management ···················································· 16
Corporate Social Responsibility (CSR) Activities ···· 19
What Are Shinkin Banks? ······································· 20
Preferred Shares ···················································· 22
Financial Section ··························································· 23
Organization / SCB Group ········································· 80
International Directory ················································ 81
This material contains certain forward-looking statements. Such forward-looking
statements are not guarantees of future performance and involve risks and uncertainties,
and actual results may materially differ from those contained in the forward-looking
statements as a result of various factors.
U.S. dollar amounts are converted for convenience only, at ¥82.22 per dollar, theprevailing rate on March 31, 2012.

International Operations Center
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: Shigeo Enomoto
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: Hiroyuki Toda
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
General Manager: Nobuhiro Koizumi
Operations Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7655
Facsimile: +81-3-3278-7041
General Manager: Yoichi Tobitsuka

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: Tomoaki Nishimura
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: Koji Hirao

LondonOverseas Offices
New York Representative Office
Address: 114 West 47th Street,
Suite 2420, New York, NY 10036, U.S.A.
Telephone: +1-212-642-4700
Facsimile: +1-212-730-6000
Chief Representative: Atsushi Toyoshima

ShanghaiHong Kong

Hong Kong Representative Office
Address: 1413-1414 Two Pacific Place,
88 Queensway, Hong Kong, P.R. of China
Telephone: +852-2537-3777
Facsimile: +852-2537-4002
Chief Representative: Tokuo Iwasaki
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: Masataka Murakami
Hokkaido

Overseas Subsidiary
Shinkin International Ltd.
Address: 4th Floor, River Plate House,
7-11 Finsbury Circus, London EC2M 7YA, UK
Telephone: +44-20-7562-0500
Facsimile: +44-20-7256-8544
Telex: 8812847 ZILUK GManaging Director: Kengo KajiTohokuHokuriku

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: Hideki Sasaki
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: Katsushi Okado

New York

ChugokuOkayama Kobe
Osaka

Head Office

NagoyaShizuoka

Shikoku

FukuokaMinami-Kyushu

Head Office
BranchOffice/Subsidiary

Shinkin Central Bank Head Office3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
Telephone: +81-3-5202-7711 Facsimile: +81-3-3278-7011
http://www.shinkin-central-bank.jp

81

Shinkin Central Bank Annual Report 2012

Financial Highlights (Non-Consolidated Financial Summary)Millions of Yen

Shinkin Central Bank
For the years ended March 31,

2012

Millions of U.S. Dollars

2011

2010

2012

2011

2010

$

$

$

For the Fiscal Year370,260 ¥

338,057 ¥

370,090

Total Expenses

334,957

299,982352,862

4,073

3,607

3,792

Net Income (Loss)

29,007

27,38728,365

352

329

304

Net Business Profit (Loss)

45,45149,94956,180

552

600

603

¥30,049,035¥31,283,720¥28,400,491$365,471$376,232$305,217

Loans and Bills Discounted

5,374,685

5,254,796

6,263,796

65,36963,19667,316

Securities

20,624,250

21,547,910

17,324,312

250,842

259,145

186,182

Total Liabilities

28,975,645

30,258,547

27,397,921

352,416

363,903

294,443

Deposits

21,609,051

21,581,162

19,736,289

262,819

259,544

212,104

Debentures

3,965,870

4,340,630

4,815,810

48,23452,20251,755

1,073,389

1,025,172

1,002,570

13,055

12,32910,774

Total Income

¥

4,503

4,065

3,977

At the Year-end
Total Assets

Net Assets

U.S. dollar amounts are converted for convenience only, at ¥93.05, ¥83.15 and 82.22 per dollar, the prevailing rate on March 31, 2010, 2011 and 2012 respectively.
Total assets and total funds amounted to ¥31,126 billion ($378 billion) and ¥29,607 billion ($360 billion) of the average balance at the year ended March 31, 2012.

1

Message from the President and CEO
Shinkin Central Bank, or the SCB, serves as thecentral bank for Japan’s 271 shinkin banks—regional financial institutions located throughout the country that specialize in operations
with small and medium-sized enterprises.
Since its establishment in 1950, the SCB
has provided a wide range of financial services
in order to expand the potential of the shinkinbank sector as a whole.
Earnings Performance for Fiscal 2011
The SCB launched its three-year MediumTerm Action Program 2010 in the fiscal year
ended March 31, 2011 (fiscal 2010) with a view
to building a stable and solid financial base. In
fiscal 2011, we made progress with building
our portfolio to improve net interest marginand maintain stable income. From the middleof the year, we made conservative investments
in preparation for further deterioration inmarket conditions in response to growing
concerns over the European sovereign debt
crisis. As a result, in fiscal 2011, on a non-consolidated basis, the SCB achieved net income
amounting to ¥29.0 billion, thereby ensuring
a profit that was roughly in line with the initial
performance forecast.
Post-Great East Japan Earthquake Assistance for Recovery and Reconstruction
and Progress Report on Medium-Term
Management Plan
Regarding the provision of post-Great East
Japan Earthquake assistance for recovery andreconstruction as a top priority for fiscal 2011,
the SCB provided business and financial support in response to the demands and needs
that came from the shinkin banks in the disaster-affected areas. In addition, we made every
effort to contribute to recovery and reconstruction as quickly as possible, for example
by expanding the sales channels for providing
assistance to shinkin bank customers andsetting up reconstruction support funds, andmobilized the shinkin bank sector as a whole.

2

For the second year of the medium-term
management plan, we enhanced our preparedness to assist shinkin bank customers that are
expanding overseas, for example by deepening
business alliances with local banks in other
Asian countries. In addition, we improved our
preparedness to provide assistance with regard
to shinkin bank efforts aimed at resolving the
problems faced by regional businesses andSMEs, such as working to make management
improvements and revitalizing shinkin bankcustomers or providing local revitalization consultation in collaboration with shinkin banks.
Business Strategies for Fiscal 2012
The SCB has positioned fiscal 2012, the final
year of the medium-term management plan, as“the year in which we aim for greater heights
far into the future.” In addition to providing
ongoing and timely assistance in response to
the needs of the disaster-affected areas as theyhead toward recovery and reconstruction following the Great East Japan Earthquake, wewill enhance and strengthen assistance covering
management improvements and revitalization ofshinkin bank customers as a Financing Facilitation Act exit strategy. Furthermore, we willfurther strengthen our preparedness to provide
assistance to shinkin bank customers expanding
overseas with, for example, the plan to set up
a representative office in Bangkok in October
2012. We will also enhance and strengthenbusiness models that take full advantage of theshinkin bank network—said to be the true
source of the shinkin bank sector’s strength—by such means as providing sales channelexpanding assistance via Internet sites.

Strengthening Internal Management
Systems
We will continue our efforts to carry out
thorough compliance, strengthen corporate
governance, and contribute to society, so as
to become a distinguished financial institution
well respected in the society.

Recognizing our crucial responsibilities as
the central bank of the shinkin bank sector,
we will strive with the utmost commitment
to facilitate the continued development of thesector and thus contribute to development
throughout Japan.
I would like to take this opportunity
to express my sincere gratitude to all ourshareholders and other stakeholders for theircontinued understanding and support.
July 2012

Mitsuo Tanabe
President and Chief Executive Officer

Shinkin Central Bank Annual Report 2012

Corporate Management and Auditors(As of July 31, 2012)

Chairman of the Board of
Directors (Part-Time)
Koji Omae

President and Chief Executive Officer
Mitsuo Tanabe

Directors
Deputy President
Junichi Hattori

Hajime Hioki
Masami Fujita
Yasuhiko Hori

Senior Managing Director

Norihiro Takano

Koji Omae

Chairman of the Board of Directors

Katsuo Akiyama

Director and Senior Adviser
Managing Directors
Hiroyuki Shibata
Kazuyuki Okura
Mikio Ichiyanagi
Akira Ito

Shoji Mori

Directors (Part-Time)
Shinji Sugiyama
Takashi Ono
Tomio Makino
Shoichi Yokoyama

Mitsuo Tanabe

President and Chief Executive Officer

Kazumi Saito
Kazuhiko Jinbo
Koji Sato
Shigeharu Obayashi
Kenichiro Mimuro
Jiro Ogawa
Yukio Kashima
Masuo Kajita
Hiroyuki Hashimoto
Kazuyuki Takaki
Yasumasa Yamamoto
Hidetaka Nakamura
Tadatoshi Inaba

Junichi Hattori

Deputy President

AuditorOsamu Taniguchi

Katsuo Akiyama
Auditors (Part-Time)

Senior Managing Director

Yasuo Yamaguchi
Yutaka Nunogaki
Hiroshi Nakachi
Masamichi Narita

3The SCB Is a Powerful Financial Institution in Japan,
Which Is Listed on the Tokyo Stock Exchange
The SCB operates as a financial institution with the dual role of central bank forshinkin banks and an independent financial institution.
Founded in 1950, the SCB is the central bank for shinkin banks (See “What Are Shinkin Banks?”
on page 20), operating as a cooperative financial institution whose membership consists of all
shinkin banks nationwide.
The SCB plays the dual role of a central bank for shinkin banks and an independent financial institution. The SCB’s total funds mainly comprising deposits from shinkin banks and funds
acquired through the issuance of debentures had an average outstanding balance during the fiscal
year ended March 31, 2012, of ¥29,607 billion (equivalent to $360 billion), and total assets averaged¥31,126 billion (equivalent to $378 billion). The SCB is one of Japan’s leading financial institutions.

Overseas Networks and Correspondent Banks of the SCB(Number of banks with correspondent agreements by head branch; as of March 31, 2012)

The number of our overseas correspondent banks amounts to 247, with main branches covering
50 countries worldwide, as of the end of March 2012.
Shinkin International Ltd. (London)
New York Representative Office

Europe81 banksAsia
103 banks

Middle East
4 banks

North America
26 banks
Japan 9 banks
Shanghai Representative OfficeHong Kong Representative Office
Bangkok Representative Office(To be establised in October 2012)

Africa4 banks

Latin America
12 banks

Oceania
8 banks

Note: Correspondent banks refer to those banks with whom the SCB has an agreement for foreign exchange tradingin respective countries.

The SCB Is the Central Bank of the Shinkin Bank Sector
The SCB’s funds are raised mostly through deposits mainly from shinkin banks and the issuance ofdebentures. The SCB invests these funds in securities and lends them out as loans, and uses theresulting profits to support the activities of shinkin banks.
Total assets: around ¥30 trillion (equivalent to $365 billion)
Domestic network: 14
Overseas network: 4
Number of employees: 1,142
Number of member shinkin banks: 271

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

Number of banks: 271
Total assets: ¥132,056 billion (equivalent to $1,606 billion)
Number of branches: 7,535
Number of employees: 115,292
Number of members: 9,318,702(As of March 31, 2012)

4

Roles

Central Bank for Shinkin Banks(1) Supplementing the Operational
Capabilities of Shinkin Banks
Japan’s 271 shinkin banks nationwide play a keyrole in supporting regional economies by lending to local organizations and SMEs. With total
deposits held by shinkin banks reaching ¥122
trillion (equivalent to $1,490 billion), shinkinbanks occupy a very important position within
Japan’s overall financial sector.
As the central financial institution forthe shinkin bank sector, the SCB is promptly
responding to changes in the operating environment of shinkin banks. Such changes include
increasingly sophisticated and diverse customer
needs, intensified competition with other typesof institutions, and demands for very stringent
management control systems. Specifically, the
SCB provides support for shinkin banks’ financial services utilizing shinkin banks’ network,
activities in support of regional development
and the management of small and mediumsized businesses, and over-the-counter sales ofinvestment trust fund products. Furthermore,
the SCB provides support in such areas as assetliability management (ALM) and marketablesecurities portfolio analysis to assist shinkinbanks in raising profitability and strengthening
risk management systems.
Just as the Bank of Japan acts as a clearing house for domestic exchange transactions
between banks, the SCB performs the role ofa clearing house for shinkin banks, and for theyear ended March 31, 2012, the SCB settled
domestic exchange transactions with a substantial total value of ¥221 trillion (equivalent
to $2,693 billion). Moreover, the SCB acts as
the intermediary in settlement of utility bills
handled by shinkin banks.
The SCB also plays the role of supporting
other operations of shinkin banks. In addition to
supplementing international operations such as
foreign exchange operations, the SCB has been
supplementing the lending operations of shinkinbanks, by commissioning shinkin banks to lend
to local small and medium-sized businesses andbusiness owners who are their customers.
In this way, the SCB is further reinforcing
its capabilities to support shinkin banks in areasin which it is either difficult or inefficient forshinkin banks to provide services as individual
institutions.

Shinkin Central Bank Annual Report 2012

(2) E nhancing the Creditworthiness of the
Shinkin Bank Sector
The SCB acts as a “consultant” or a “homedoctor” for the shinkin bank sector as part ofits measures to proactively support the management of shinkin banks. Shinkin banks playtheir part by operating such schemes as the“Shinkin Bank Management Reinforcement
System” and the “Shinkin Bank Mutual Funding Support System.” The SCB works to maintain and enhance the creditworthiness of theshinkin bank sector through such activities as
management analysis, management consulting
and capital reinforcement for shinkin banks.
In recent decades, Japanese financial institutions have experienced several major crises,
including the collapse of the country’s asset
bubble in the 1990s, and more recently the
global financial crisis triggered by the Lehman
Brothers bankruptcy. However, amid such
unsettling periods for the financial system, the
SCB’s financial functions have played a crucialrole in maintaining confidence in the shinkinbank sector and contributed to the stability ofregional economies.

Independent Financial Institution(1) Institutional Investor
Looking at the average balance for the year
ended March 31, 2012, the SCB maintained
assets under management of ¥30,467 billion(equivalent to $370 billion). Of this total, the
SCB invested ¥20,917 billion (equivalent to$254 billion) in securities, in the form of government bonds, municipal bonds, corporate
bonds and foreign securities and ¥3,575 billion (equivalent to $43 billion) in short-termmoney markets.
The SCB manages a vast amount of money
in both domestic and international markets,
holding an important position in the financial
industry as one of Japan’s leading institutional
investors.
(2) Comprehensive Financial Services Supplier
The SCB conducts deposit-taking and lending
operations—the core functions of a financial
institution—issues debentures, and conducts
foreign exchange operations.
It also undertakes such auxiliary operations
as underwriting public bonds, handling private

placement bonds, and issuing personal loan
guarantees, as well as peripheral operations offinancial institutions, including trust, securities,
financial advisory, investment trust funds, defined
contribution pensions, venture capital, and M&A
advisory.
These operations are conducted either by
the SCB itself or through its subsidiaries.
(3) Financial Institution Contributing toRegional Development
In order to contribute to the developmentof local economy, the SCB cooperates withshinkin banks, which work closely with local
communities all around the country, andactively promotes direct lending to regional
public bodies and local companies as well as
investment in regional development projects
and PFI entities through its nationwide
network of branches.
In addition, the SCB has been actively supporting the revitalization of regional companies
and invigoration of local communities in cooperation with shinkin banks from the perspectiveof relationship banking, and has been acting as aregional financial institution.

Shinkin bank management reinforcement system

Management analysis system

SCBManagement advisory system

Shinkinbanks

Capital reinforcement system

Management analysis system

Shinkin banks submit materials on their operating and financial conditions. The SCB conducts management analyses
based on those materials, and identifies shinkin banks for recommended management consultations. The SCB also
conducts more detailed analyses on shinkin banks when certain standards apply.

Management advisory system

The SCB provides management consulting and follow-up to shinkin banks that accept consultations or meet certain standards. This
consulting covers everything from overall management to individual issues toward. The consulting reinforces the shinkin banks’ management
capabilities by proposing various measures to resolve management problems and by sharing information on good examples, etc.

Capital reinforcement system

The SCB provides capital to shinkin banks that have received management consulting when analyses indicate this isnecessary. To prevent moral hazard on the part of the shinkin banks, capital is only provided with the submission ofa business revitalization plan, and the SCB provides subsequent management and operations guidance.

5Management Issues and Strategies
In April 2010 we launched the “SCB Medium-Term Action Program 2010”—a medium-term management plan—which comprises three core plans to be implemented over three years. As the central financial institution for the shinkin bank sector, we
believe that it is essential to clearly articulate where we are headed. Hence, this action program recognizes the need to communicate the SCB’s medium- to long-term management direction.
Overview of the Management Strategy
The management strategy comprises threecore plans and four support plans. The
core plans are to (1) strengthen the SCB’s
function to support business solutions byshinkin banks on local financing and SME
financing, (2) strengthen the SCB’s function
to support shinkin banks’ ensuring of management stability, and (3) build a stable and solid
financial basis of the SCB. The four support
plans, underpinning the three core plans, areto (1) strengthen ties with shinkin banks, (2)promote business process restructuring, (3)enhance and strengthen the SCB’s governance,and (4) develop human resources.
By steadily implementing the strategies
stipulated in the management strategy, the
SCB aims to further increase the strengthof our support for shinkin banks so thatshinkin banks can exercise their role infacilitating SME financing and revitalizing
regional economies.
The strategy sets out six figures as
medium-term target, including net income of
approximately ¥30 billion (equivalent to $364
million).
All of the directors and employees arecommitted to working together to achieve thegoals outlined above.
Progress in the SCB Medium-Term Action
Program 2010
Under Core Plan 1, “strengthen the SCB’s function to support business solutions by shinkinbanks on local financing and SME financing,”
we strengthened our systems to support busi-

ness operations that are difficult or inefficient
for an individual shinkin bank to provide on its
own. Specifically, we commenced services tosupport the management improvement andbusiness regeneration of shinkin bank customers. We also formed business alliances with
Bangkok Bank, Bank of Communications, Bankof China and Bank International Indonesia asa means of supporting the overseas expansion of shinkin bank customers. The SCB also
provided a diverse array of new products andservices to shinkin banks.
Under Core Plan 2, “strengthen the SCB’s
function to support shinkin bank’s ensuring ofmanagement stability” within the industry’s
safety net, the “Shinkin Bank Management
Reinforcement System,” we reinforced precautionary measures to prevent the financial

Overall Framework of the Management Strategy
Support Plan 1:

Support Plan 2:

Strengthen ties with shinkin banks(fundamental overhaul of the interface
between the SCB and shinkin banks)Core Plan 1:

Promote business process
restructuring

Strengthen the SCB’s function to support
business solutions by shinkin banks on
local financing and SME financing

Core Plan 2:

Strengthen the SCB’s function to support
shinkin banks’ ensuring of management
stability

Core Plan 3:

Build a stable and solid financial basis of
the SCB

Support Plan 3:

Enhance and strengthen the SCB’s
governance (checks and balances on thedecision-making process)6

Support Plan 4:

Develop human resources (people who takepride in working for a central financial institution
and have a high level of professional expertise)Shinkin Central Bank Annual Report 2012

deterioration of shinkin banks. For further
details, please refer to page 5 of this report.
Under Core Plan 3, “build a stable andsolid financial basis of the SCB” while conducting investment and lending operations
that appropriately responded to changes in
the financial environment and focused moreclosely than in the past on risk–return efficiency, we implemented detailed and thoroughrisk management and worked to restructure
our asset portfolio.
As a result, in fiscal 2011, the SCB achieved
net income amounting to ¥29 billion (equivalent to $352 million).

institution and have a high level of professional
expertise.” To cultivate pride and ambition
among the SCB’s directors and employees as
members of the central financial institution forshinkin banks, we formulated the “SCB PRINCIPLE OF ACTION.” All SCB directors andemployees are expected to strongly heed theprinciples as our unified fundamental guidelines for decision-making and behavior during
the conduct of business operations.

Formulation of the “SCB PRINCIPLE OF
ACTION”
The key to whether or not the SCB will be able
to realize the policies set out in the mediumterm management plan is human resources.
One of the action program’s support plans
aims to “develop human resources—people
who take pride in working for a central financial

SCB PRINCIPLE OF ACTION
As directors and employees of the central
financial institution for shinkin banks, we will
always deal with our business under following
guideline and style of action, with awarenessof the fact and pride in it, and high spirit andstrong sense of responsibility.
GUIDELINE OF ACTION
1. Be customer-oriented
From the perspective of the customers,
including shinkin banks, we try to provide
optimum products, services, and functions.
2. Be innovative
With awareness of the issues and cost-consciousness, regardless of precedent, we will
improve our operations.
3. Be professional
With tireless self-development, we will
strive to improve our expertise and skills
in our specialties.
STYLE OF ACTION
1. Speed
2. Challenge
3. Basic

Target figures
Capital adequacy ratio(domestic standard):
At least 15%

Outlier ratio: No more than 20%

Net income: Approximately¥30 billion

Integrated risk management:
Manage within Tier I capital

Tier I ratio: At least 10%

Nonperforming-loan ratio:
No more than 1%

7

Efforts Aimed at Recovery
from the Great East Japan Earthquake
In fiscal 2011, the SCB committed to thefollowing measures, which were regarded aspriority assistance issues toward recovery
and reconstruction following the Great East
Japan Earthquake.
Provision of Products to Assist Those
Af fected by the Great East Japan
Earthquake
As a result of the nationwide promotion
at shinkin banks from May to Decemberof “ Shinkin Ear thquake Reconstruction
Assistance Fixed-Term Deposits,” which
donated 0.25% of the total amount raised,shinkin banks accordingly raised a total of¥162.8 billion, of which ¥407 million was
donated to the welfare foundation, Central
Community Chest of Japan.
In coll abor ation wit h our subsid iary Shinkin Asset Management Co., Ltd.,
we launched the “Shinkin Reconstruction
Assistance Scholarship Fund” in June. This
fund invests in government bonds and stocks
related to reconstruction assistance in thedisaster-affected areas and donates a portionof the trust fee with a view to supporting the
education and lives of affected children. For
the first round of donations approximately¥4 million in relief money was given to the
Ashinaga, the scholarship foundation in Japan,
in January 2012.

Implementation of Volunteer Activities
by S h i n k i n B a n k E xe c u t i ve s a n d
Employees in Disaster-Hit Areas
In light of the importance of volunteer activities in the areas affected by the Great East
Japan Earthquake, executives and employees
from related organizations, including the SCB
and shinkin banks throughout Japan, initiatedvolunteer activities.
Centered on the SCB’s Disaster Recovery& Reconstruction Support Office, these
activities included providing such assistanceas providing means of transportation, making
accommodation arrangements and coordinating with volunteer centers. In Iwate and Miyagi
prefectures the work carried out by executives and employees included the removal ofdebris.
A s s i s t a n ce w i t h E x p a n d i ng S a l e s
Channels for Shinkin Bank Customers
in Tohoku Region
In order to assist shinkin bank customer
SMEs in the Tohoku region in expanding
their sales channels, we collaborated with
the Tohoku Shinkin Bank Association andproduced a catalogue, in which details of thecustomers’ products were published.
Support for Shinkin Banks in DisasterAffected Areas through Revised Act on
Special Measures for Strengthening
Financial Functions
In November, the National Association of
Shinkin Banks (Zenshinkyo) and the SCB
est ablished a new suppor t system toallow the use of the special measure —known as the Act on Special Measures forStrengthening Financial Functions (hereinafter “the Financial Functions StrengtheningAct”)—toward recovery and reconstruction

Capital Participation Scheme throughAct on Special Measures for Strengthening
Financial Functions
Entrusted with Preferred
Shares

Shinkin Trust Bank, Ltd.
B
Trust Beneficiary
RightsA
Trust Beneficiary
RightsRetainCapitalSupportPreferred Shares
Underwriting

Shinkin banks in
disaster-affected
areas

8

Commencement of Shinkin no Kizuna
Reconstruction Support Fund Operations
With regard to the SMEs working to rebuild
and revitalize their businesses in the disaster-affected areas, in December 2011, the
SCB set up the reconstruction support fundnamed “Shinkin no Kizuna” (“Kizuna” means
bonds in English.). This scheme provides
capital funds for SMEs directly in order toenable shinkin banks to maintain the same
relationships as before with SMEs.
In March 2012, the decision was taken
to invest in the first project, and in June newinvestments were made in four shinkin bankcustomer companies.

Reconstruction Support Fund Scheme(Trust Beneficiary Rights Process)SCBof the disaster-affected areas and to enable
the shinkin banks in the disaster-affectedareas to perform smooth financial intermediary functions over the long term.
Four shinkin banks sustained heav ydamage in the earthquake. In order forthem to fulfill the role as a force for regional
finance and contribute to the reconstruction of their local economies, shareholder
equity was enhanced and the building up ofrobust financial bases deemed necessary. In
February 2012, their capital was enhanced bya total of ¥63.0 billion, ¥54.7 billion of which
was government capital participation, basedon the Financial Functions Strengthening Act.
The SCB will endeavor to thoroughly
support initiatives—such as personnel dispatch, giving advice covering shinkin bankpolicies and monitoring—enabling the four
shinkin banks to demonstrate strong financial intermediary capabilities and to steadily
implement measures that will contribute to
the reconstruction of the disaster-affected
regions.

Provision ofpractical expertise

Shinkin banks outside
the disaster-affected
areas

Recommendations

Disbursement
management Operational support

Purchase

Government

Collaboration

Shinkin capital

SCB

Reconstruction
Support Fund
Disbursement (Shinkin no Kizuna) Provision ofcapitalShinkin banks in
disaster-affectedareas

Fundraising assistanceSMEs

Shinkin Central Bank Annual Report 2012

Overseas Network
The SCB has overseas offices in New York,
Hong Kong, London and Shanghai. These
offices actively gather and analyze information on local economy and financial markets
and facilitate the SCB’s support for shinkinbanks.
Currently, preparations to set up a representative office in Bangkok, Thailand, in
October 2012 are ongoing, and it is expectedthat the establishment of the new office willfurther enhance active expansion of shinkinbank customers in Asia.
New York Representative OfficeEver since Overseas Economic Institute of
Shinkin Central Bank opened its New York
office in November 1983, the New York
Representative Office conducts researchon U.S. markets and assists its Head Office
to explore new investment opportunities.
Taking advantage of its location in the centerof the global financial activities, the New
York Representative Office identifies thelatest trends in the financial markets andobtains vital information for the SCB’s treasury operations.
As a common U.S. infrastructure forthe shinkin bank industry, the New York
office enthusiastically provides shinkin bankswith information on the fast-changing U.S.
economy and financial market, offering awide range of support including accepting
trainee from shinkin banks.
Hong Kong Representative OfficeEver since Shinkin Central Bank establisheda Hong Kong business office in November
1994, the Hong Kong Representative Officehas been continuously suppor ting theactivities of shinkin bank customers in Asian
countries, particularly in the South China
region, by providing information about theservices of the local banks, legal systems, tax
systems, employment, etc. The Hong Kong
Representative Office is providing shinkinbanks and their customers with the information relating to economic and financial
situations, and the investment environment
in Asian countries.
Furthermore, the Hong Kong Representative
Office also accepts trainees and visitors/missions from various shinkin banks to assist thehuman resources development program.
Shanghai Representative OfficeSince its inception in September 2004, theShanghai Representative Office has been
providing a variety of information relating
to economic and financial conditions, theinvestment and loan environment, and thelaws, taxation and employment of each region.
The Shanghai Representative Office also has
been offering detailed advice and a variety ofof support to shinkin bank customers moving
into China and those planning such a move inthe future.

relationships are part of the SCB’s policy ofstrengthening its support infrastructure forshinkin bank customers undertaking overseas
business expansion.

Shinkin International Ltd. (London)
Shinkin International Ltd., a wholly owned
subsidiary of the SCB, was established in
London in 1990 as an overseas office forsecurities business in order to expand investment opportunities for the shinkin banksector.
The company arranges Eurobonds in astrong relationship with issuing bodies andoffers these securities to the shinkin banksector in close cooperation with Shinkin
Securities Co. Ltd., another subsidiary of the
SCB. The company also serves its customers’
secondary market trading needs and provides
necessary information about the market.
The company achieved eighth placein the 2010 JPY Vanilla EMTN Dealer
Ranking—All Issuers (No size limit) publishedby MTN-i.

Support for the Expansion of Overseas
Channels

Supply of Information
With regard to shinkin banks and their customers, in addition to such printed materials as International Business Support OfficeMonthly and China Business Guidebook, weare supplying the up-to-date information ina variety of formats, for example by holding
overseas investment seminars. From time
to time we also provide investment climate
survey reports that focus on Asia and thelatest information from overseas network.
We use overseas network in Hong Kong
and China as venues for holding informationexchange meetings for shinkin bank customers that are expanding overseas.
Trade and Investment Consultation
Staff with expertise hold phone- or interview-format trade and investment consultations for the benefit of shinkin bankcustomers that are either expanding or
conducting business transactions overseas
or for shinkin bank customers examining
the prospects for overseas business or new
transactions.
In the case of the trade and investment
consultations, staff with indispensable expertise in overseas business operations offer
consultation support based on the individual
needs of customers, such as by providing
information on the local investment environment, local legal issues and domestic
and overseas market trends. These are wellreceived by shinkin bank customers that are
working to eliminate the anxieties related tooverseas expansion or to resolve local issues.

Supporting the Overseas Expansion of
Shinkin Bank Customers

Business Alliances with Asian Banks

As globalization of the international economy
advances, we anticipate that SMEs—customers of shinkin banks—will increasingly look
to expand overseas and engage in trading
activities, particularly centered on China andother countries in Asia.
For this reason, the SCB provides support to shinkin bank customers that areundertaking overseas expansion, specificallythrough SCB offices in such locations as
Hong Kong and Shanghai. Furthermore, in
2010, the SCB formed business alliance with
Bangkok Bank, Thailand’s largest bank andBank of Communications, which is basedin Shanghai, China. In May 2011, the SCB
initiated a business alliance with Bank of
China, which is headquartered in Beijing. In
July 2012, the SCB entered into a businessalliance with Bank International Indonesia
which is based in Jakarta, Indonesia. These

Expansion into Asia by Shinkin Bank Customers
South Korea: 77
China: 1,233

Hong Kong: 123
Taiwan: 50

Thailand: 238
Vietnam: 142

Philippines: 53
Malaysia: 49
Singapore: 26
Indonesia: 93
Source: Ninth Survey on the Overseas Business of Shinkin Bank Customers (2012).

9

0.9%
¥145 Billion
19.7%¥3,238 Billion

Business Overview
Earnings Performance
Reviewing the SCB’s operating results for fiscal 2011, operating income increased by ¥33
billion (equivalent to $411 million) or 10.0% to¥370 billion (equivalent to $4,502 million). This
result was mainly attributable to such factors
as an increase in gain on sales of such instruments as bonds thanks to lowering interest rate.
Meanwhile, operating expenses increased by ¥34
billion (equivalent to $425 million) or 11.6% to¥334 billion (equivalent to $4,069 million). This
result was mainly attributable to such factors asa significant increase in loss on sales of bonds andexpenses on derivatives other than for trading or
hedging.
As a result, ordinary income decreased by ¥1billion (equivalent to $13 million) from the previous fiscal year to a profit of ¥35 billion (equivalent to $432 million). Net income increased by¥1.6 billion (equivalent to $197 million) from theprevious fiscal year to a net profit of ¥29 billion(equivalent to $352 million).
Funding
During fiscal 2011, the total amount of funding
decreased by ¥1,345 billion (equivalent to $1,636
million) or 4.5% to ¥28,398 billion (equivalent to$345,401 million) at the end of the fiscal year.
Deposits received during the fiscal year was¥21,608 billion (equivalent to $262,814 million),
which was almost the same amount in fiscal year
2010.
The SCB issued ¥579 billion (equivalent to$7,044 million) worth of debentures during the
fiscal year. The outstanding amount of debentures decreased by ¥374 billion (equivalent to$4,557 million) or 8.6% to ¥3,965 billion (equivalent to $48,234 million).
Asset Management
The amount of assets under management in fiscal 2011 decreased by ¥1,095 billion (equivalent
to $13,321 million) or 3.5% to ¥29,652 billion(equivalent to $360,650 million).
Owing to a decrease in foreign government
bonds, the outstanding amount of invested securities decreased by ¥923 billion (equivalent to$11,233 million), or 4.2%, during the fiscal year,to ¥20,624 billion (equivalent to $250,841 million) at the end of the fiscal year.
Loans and bills discounted increased by ¥119
billion (equivalent to $1,457 million) or 2.2% during the fiscal year to ¥5,374 billion (equivalent to$65,368 million) at the end of the fiscal year.

5.1%¥835 Billion

1.3%¥214 Billion

59.5%¥9,767 Billion

9.5%¥1,558 Billion

Out of the total loans and bills discounted,
agency loans to shinkin bank customers (small
and medium-sized businesses) through shinkinbanks decreased by ¥55 billion (equivalent to$676 million) or 15.1% to ¥312 billion (equivalent
to $3,795 million).
Owing to an increase by national or governmental agencies and organizations, the amountof direct loans increased by ¥109 billion (equivalent to $1,326 million) or 2.3%. The outstanding
amount of direct loans was ¥4,717 billion (equivalent to $57,378 million) at the end of the fiscal
year.
The outstanding amount of short-termmoney market assets decreased by ¥265 billion(equivalent to $3,230 million), or 7.9%, during the fiscal year, to ¥3,085 billion (equivalent
to $37,522 million). This decrease primarilyreflected decreases in monetary claims and callloans.

Breakdown4.0%
of Funding¥651 Billion(As of March 31, 2012)
9.9%¥2,824 Billion
14.0%¥3,965 Billion
19.7%¥3,238 Billion

5.1%¥835 Billion76.1%¥21,608 Billion
59.5%¥9,767 Billion

1.3%
0.0%
¥214
Billion¥0.4
Billion
9.5%¥1,558 Billion

4.0%

Deposits
Government
Bonds
Negotiable
Deposits
Municipal Bonds
Debentures
Corporate
Bonds
Borrowed Money
Securities
Investment Trusts
Foreign Securities
OthersBreakdown ¥651
of Asset
Billion Management(As of March 31, 2012)
0.6% ¥181 Billion

10.4%¥3,085 Billion

1.3% ¥387 Billion
18.1%¥5,374 Billion

Short-Term Market
Operation
69.6%¥20,624 Billion

Securities
Loans and Bills
Discounted
Trading Assets

Securities

Money Held in Trust

As of March 31, 2012, the outstanding amountof securities was ¥20,624 billion (equivalent to$250,841 million). Government bonds, corporate
bonds and other domestic securities accountedfor ¥16,089 billion (equivalent to $195,693 million) while foreign securities accounted for¥4,534 billion (equivalent to $55,148 million). In
foreign securities, the SCB mainly invests in safe
assets which include government-secured financial institution bonds and government-agency
bonds in major developed countries.
In order to advance its diversified investment
portfolio, the SCB also invests risk assets such as
stocks which are not related interest risk.

Loans and Bills Discounted

The SCB has conducted a variety of loan businesses. As of March 31, 2012, the outstanding
amount of loans and bills discounted was ¥5,374
billion (equivalent to $65,368 million).
Out of the total loans and bills discounted,
agency loans to shinkin bank customers (small
and medium-sized businesses) through shinkinbanks accounted for ¥312 billion (equivalent to$3,795 million), while direct loans to parties suchas national or governmental agencies and organizations, regional public corporations and charitable organizations accounted for ¥2,319 billion(equivalent to $28,212 million). Direct loans tobusiness corporations accounted for ¥2,296 billion (equivalent to $27,925 million).

Breakdown of Securities(As of March 31, 2012)

1.3%¥260 Billion
22.0%¥4,534 Billion
1.6%¥323 Billion
19.7%¥3,238 Billion
6.9%¥1,430 Billion
1.3%¥214 Billion

66.8%¥13,779 Billion
5.1%¥835 Billion

9.5%¥1,558 Billion

1.4%
59.5%
¥296 Billion ¥9,767 Billion

Government Bonds
Municipal Bonds
Corporate Bonds
Stocks & Investment
Trust
Funds Bonds
Government
Foreign
Securities
Municipal
Bonds
OthersCorporate Bonds
Securities
Investment Trusts

Breakdown4.0%
of Loans and Bills
Foreign Securities¥651 Billion
Discounted (As of March 31, 2012) Others
8.3%¥446 Billion

National andGovernmental
Agencies andOrganizations

5.8%¥312 Billion
32.4%¥1,738 Billion
42.7%¥2,296 Billion

Regional Public
Corporations
and Charitable
Organizations
and Others
Business
Corporations

10.8%¥581 Billion

Ordinary Income and Net Income (Non-Consolidated)

10

Government Bonds
Municipal Bonds
Corporate Bonds
Securities
Investment Trusts
Foreign Securities
OthersAgency Loans
Others(Millions of Yen)

FY2007

FY2008FY2009FY2010FY2011

Ordinary Income (Loss)

48,947(220,090)

17,186

36,66235,575Net Income (Loss)

34,830(183,812)

28,36527,38729,007

Shinkin Central Bank Annual Report 2012

Capital Adequacy
OutlineThe SCB’s equity capital mostly comprises basic (Tier I) and supplementary (Tier II) items.
The Tier I items comprise common shares
held by member shinkin banks nationwide,
preferred shares issued in public which supplement the common shares and the internal
reserves which the SCB has accumulated todate. The Tier II items comprise fixed-period
subordinated loans from shinkin banks andinstitutional investors, perpetual subordinateddebt and other instruments.
Measures to Enhance Capital Adequacy
Based on the recognition that increasing
equity capital is the most important way tosecure the sound management of financial
institutions, the SCB has raised capital inphases while working to accumulate internal
reserves. In June 2009 the SCB raised ¥200
billion (equivalent to $2,432 million) in common shares (Tier I capital) from the shinkinbank sector in order to improve equity capitalquality by increasing core capital, and thus
strengthen the SCB’s financial constitution,and to stably carry out functions as the central financial institution of the shinkin banksector.
Consequently, the SCB’s core capitalincreased and quality of the SCB’s capital
improved.

Consolidated Capital Adequacy Ratio
The SCB’s consolidated capital adequacy
ratio rose 0.67 percentage points year-onyear to 32.43% as of March 31, 2012, measured by the domestic standard. Calculated
according to the BIS standard, the consolidated
capital adequacy ratio was 30.36%.
The amount of capital, which is the numerator for calculating the capital adequacy ratio,
increased by ¥34 billion (equivalent to $419 million), or 2.5%, to ¥1,379 billion (equivalent to$16,776 million).
Risk assets, which are the denominator for
calculating the capital adequacy ratio, increasedby ¥19 billion (equivalent to $238 million), or
0.4%, to ¥4,253 billion (equivalent to $51,729
million).

Risk Management and Capital Adequacy
Assessment
To maintain capital adequacy against the risk
level, the SCB has implemented policies tomanage its capital adequacy. As part of its integrated risk management, the capital assessment division evaluates the capital adequacy
using a holistic approach, measuring various
types of risks under the uniform criteria
and comparing quantified risks with the
SCB’s capital.
By adopting integrated risk management
as a method of assessing capital adequacy, the
SCB sets limits on the amount of risks according to the amount of capital allocated to eachcategory and thereby controls risks withinthese limits.
In order to monitor the potential impactsof shocks on its capital, the SCB further
conducts stress testing to estimate losses
under various scenarios, taking into accountthe gravity of each case and probability of its
occurrence.
The situation regarding risk limits and theamount of risk exposure is reported to senior
management at the Risk Management Committee and at other meetings. Furthermore,in principle, the Risk Management Committee
deliberates on measures in response to theresults of capital adequacy assessments andimplements measures as deemed necessary.

Capital Adequacy Ratio

Capital Adequacy Ratio
Consolidated

Amount of Capital
Amount of Risk-weighted
Assets

Non-Consolidated

Capital Adequacy Ratio(%, billions of yen)
BIS Standard
Domestic Standard
BIS Standard
Domestic Standard
BIS Standard
Domestic Standard
BIS Standard
Domestic Standard

FY2007
15.84
–
886
–
5,595
–
15.64
–

FY2008FY2009FY2010

–
22.56
–
1,137
–
5,041
–
22.43

–
28.17
–
1,312
–
4,659
–
28.06

–
31.76
–
1,344
–
4,233
–
31.78

FY2011
–
32.43
–
1,379
–
4,253
–
32.54

Note: As the SCB converted the New York Branch and Hong Kong Branch into representative offices in March 2009, the capital adequacy ratio of the SCB is based on the domestic
standard since fiscal 2008. Calculated according to the BIS standard, the consolidated capital adequacy ratio was 30.36% and the non-consolidated capital adequacy ratio was
30.50% as of March 31, 2012.

11

Asset Quality
Risk-Monitored Loans

The amount of risk-monitored loans as ofthe end of March 2012 was ¥415 million(equivalent to $5 million) for loans tobankrupt borrowers, ¥12,380 million(equivalent to $150 million) for delinquentloans, ¥77 million (equivalent to $0.9 million)

for loans past due three months or more, and¥23,725 million (equivalent to $288 million)
for restructured loans. Total risk-monitoredloans increased by ¥17,375 million(equivalent to $211 million) to ¥36,599
million (equivalent to $445 million) during the

Risk-Monitored Loans (Non-Consolidated)fiscal year.
The ratio of total risk-monitored loans
to total loans remained as low as 0.68%, andthe soundness of the SCB's loan assets
remained high.

(Million yen, %)Loans to Bankrupt Borrowers
Delinquent Loans
Loans Past Due Three Months or More
Restructured Loans
Total Risk-Monitored Loans (A)End of March2011
599
12,122295
6,207
19,224End of March2012
415
12,38077
23,72536,599

Increase or
decrease
(184)
258
(218)
17,51817,375

659

1,022

363

5,254,796
0.36

5,374,685
0.68

119,889
0.32

End of March2011
599
12,122295
6,207
19,224End of March2012
415
12,38077
23,72536,599Partial direct write-offs
Total Loans (B)Ratio of Total Risk-Monitored Loans to Total Loans (%) (A/B)

Risk-Monitored Loans (Consolidated)(Million yen, %)Loans to Bankrupt Borrowers
Delinquent Loans
Loans Past Due Three Months or More
Restructured Loans
Total Risk-Monitored Loans (A)Partial direct write-offs
Total Loans (B)Ratio of Total Risk-Monitored Loans to Total Loans (%) (A/B)

Increase or
decrease
(184)
258
(218)
17,51817,375

659

1,022

363

5,254,813
0.36

5,374,701
0.68

119,888
0.32

Asset Assessment under the Financial
Reconstruction Law

As of the end of March, 2012, bankrupt andquasi-bankrupt assets amounted to ¥1,762
million (equivalent to $21 million), doubtful
assets were ¥11,033 million (equivalent to$134 million), and substandard assets were
¥23,803 million (equivalent to $289 million).
Accordingly, the total amount of bad
debts under the Financial Reconstruction Law
increased by ¥17,375 million (equivalent to$211 million) to ¥36,599 million (equivalent
to $445 million).

The coverage ratio of bad debts (the totalof claims deemed collectible with collateraland guarantees and the allowance for possible
loan losses divided by total bad debts) was
72.88%.
Bankrupt and quasi-bankrupt assets arerecorded for the remaining amount after
deducting the amounts deemed collectible
with collateral and guarantees, while doubtful
assets are recorded for the loss-expectedamount of the remaining amount after

similarly deducting the amounts deemed
collectible with collateral and guarantees,
respectively, in the specific allowance forpossible loan losses.
For substandard assets, the anticipatedloss ratio is calculated based on the loan loss
ratio and recorded in the general allowancefor doubtful accounts.

Asset Assessment under the Financial Reconstruction Law (FRL) (Non-Consolidated) (Million yen, %)Bankrupt and Quasi-Bankrupt Assets
Doubtful Assets
Substandard Assets
Total Claims under the 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 March
2011
1,356
11,365
6,502
19,224
5,280,703

End of March
2012
1,762
11,03323,80336,5995,395,073

Increase or
decrease
406(332)
17,301
17,375
114,370

659

1,022

363

5,299,928
0.36

5,431,673
0.67

131,7450.31

18,11494.22

26,67472.88

8,560(21.34)

Shinkin Central Bank Annual Report 2012

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

Capital Adequacy Ratio (%)(As of September 30, 2011)

NPL Ratio (%)(As of September 30, 2011)32.57%

3.11%

1.99%

17.15%
12.78%

Long-Term Credit Rating(As of July 31, 2012)

0.39%
SCB

City Banks Regional BanksSCBCity Banks Regional Banks

32.43%

0.68%(As of March 31, 2012)(As of March 31, 2012)

Notes	1. City Banks: Average of 6 Banks
2. Regional Banks: Average of 63 Banks
Source Bank disclosure documents

Note
SourceNPL ratio = Total risk-monitored loans/Total loans
Financial Services Agency

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 continuous
drastic restructuring.

Funds per Employee(Millions of U.S. dollars)(As of September 30, 2011)

Ratio of Expenses (%)(As of September 30, 2011)
1.07%

305
0.85%

41
SCB

20

City Banks Regional Banks

0.09%
SCB

City Banks Regional Banks$271Million

0.09%(As of March 31, 2012)(As of March 31, 2012)

Notes	1. Total funds = Deposits+CDs+Debentures
2. U S dollar amounts are conver ted forconvenience only, at ¥76.62 and ¥82.22 perdollar, the prevailing rate on September 30,
2011 and March 31, 2012 , respectively.
Source Japanese Bankers Association

Note
SourceRatio of expenses = Total expenses/(Deposits+CDs+Debentures) Average
outstanding balance
Japanese Bankers Association

13

Corporate Governance
The SCB strives to maintain fairness andtransparency in its management by fortifying
our corporate governance system as the SCB
implements various operational strategies.
The SCB’s goal is to gain the trust of all the
SCB’s stakeholders by demonstrating thestrong commitment to establishing a rigorous
corporate governance system and to becomea distinguished f inancial institution wellrespected in society.

General Meeting for Preferred Shares

Institutional Structure

Support System for Part-Time Directors
and Part-Time Auditors

General Assembly of Representatives(General Meeting)

The SCB is a cooperative financial institution
consisting of 271 shinkin banks nationwide(as of March 31, 2012) as its members andinvestors. The General Assembly of Representatives is equivalent to the general meetingof shareholders in a joint-stock company, andis held annually to elect directors and resolve
important issues.

Board of Directors

The SCB’s Board of Directors currently comprises 30 members, 12 full-time directors and18 part-time directors. It meets regularly ninetimes a year, making decisions about businessmatters vital to the SCB’s management andoperations. Part-time directors check the
SCB’s management from the perspective ofoutside directors. Part-time directors are
selected from shinkin banks.
In addition to 12 full-time directors, the
SCB’s Articles of Incorporation stipulate that
more than one-half of the total number ofboard members shall be executive officersof shinkin banks. In accordance with thisstipulation, persons serving as president orboard chair of a shinkin bank are chosen fromeach region throughout Japan as part-time
directors of the SCB. In addition, an academic
expert serves as a part-time director of
the SCB.

Auditors

The auditors of the SCB currently comprise
5 members, one full-time auditor appointed
from its employees, two part-time auditors
elected from shinkin banks and two otherpart-time auditors from disinterested parties
other than the SCB and shinkin banks.
Part-time auditors appointed carry out
management checks in what might be called
an outside auditor capacity, working toensure transparency.
In addition, auditors hold regular reporting meetings to inform the directors of theaudit situation. This is to ensure the effectiveness of the audit system.

14

The SCB’s preferred shares are listed on theTokyo Stock Exchange (see page 22).
Preferred shareholders have no voting
rights at the General Assembly of Representatives. However, a general meetingfor preferred shareholders may be held toprotect their property rights under the Law
Concerning Preferred Shares of Cooperative
Financial Institutions.

The G e ner al Af f air s Division provide s
information and other support for part-time
directors, and staff exclusively assisting theauditors provide the same for part-time auditors to facilitate timely and precise decision
making by part-time directors and auditors.
Checks on the Execution of 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 the Boardof Directors and ones to be reported to theBoard 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 resolutions are carried out
on a cross-organizational basis, each committee comprises several directors and generalmanagers of divisions.

Supervision and Checks

At the SCB, the Board of Directors supervises
the execution by the directors. More thanhalf of the Board of Directors are executive
officers of shinkin banks, thereby ensuringthat the Board of Directors fulfills its check
functions.

Audits by Auditors

At the SCB, to facilitate audits of the directors’ execution of duties, the auditors attend
meetings of the Board of Directors and otherimportant meetings. The auditors also receive
reports from directors regarding their execution of duties and inspect the minutes of the
Executive Committee and other important
documents. In addition, the auditors conduct
regular meetings with the independent audi-

tors to exchange opinions and information.
Exclusive staffs are assigned to assist theauditors in the execution of their duties so as
to facilitate the timely and precise executionof duties by the auditors.

The Internal Audit System

The SCB is building an internal audit systemthat aims at the realization of efficient andeffective business operations by utilizing theInternal Audit Division that is independent
from operational divisions and branches.
The Internal Audit Division examines andassesses the legal and regulatory compliancestatus, risk management status and operations
management status of each division, branch
and affiliated company of the SCB to makesure that they are functioning appropriately
and effectively. Where deemed necessary,
the Internal Audit Division issues guidance toundertake corrective measures.
In addition, each division and branch is
required to undertake their own internal
inspections for prevention and early detectionof administrative errors.

The Use of Outside Specialists

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 consultswith and receives advice from such specialists
on a regular basis and as the need arises.

Appropriate Disclosure of Corporate
Information

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 basic premiseof all business activities. The SCB continues tostrengthen and operate the internal control
systems, based upon policy to maintain reliability of financial reporting, to manage risks
flexibly and effectively in response to thosecharacteristics, and to implement internal
audit by utilizing the Internal Audit Division,
which is independent from the operational
divisions and branches.

Shinkin Central Bank Annual Report 2012

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 tofurther strengthen its compliance system.
Compliance System
1. The SCB has formulated the Shinkin
Centr al B ank Code of E thics, which
stipulates the ethical rules and behavior
standards that must be upheld by all the
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
Progr am, which lays out it s specif ic
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 are establishedand their respective roles are clarified.
A compliance supervisor, personnel responsible for compliance and personnel deputy
responsible for compliance are appointed atevery division and branch of the SCB.
6. In order to deliberate compliance issues,customer protection issues and serious
accidents, the SCB has established theCompliance 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 list of audit items used by the Internal
Audit Division includes compliance-related
items, and internal audits include investigation on whether or not the compliancesystem is functioning adequately.
9. In cases of compliance violation, reports fromthe heads of concerned divisions or branches
are promptly called for and appropriate
actions are taken to prevent recurrence.
10. The SCB operates a hotline system to facilitate reporting of compliance breaches
by directors or 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 web site. The SCB takes
necessary and appropriate safety measures
to protect personal information.
13. In addition to publishing its “Outline forManaging Conflicts of Interest” on its
Internet web site pursuant to the Shinkin
Bank Law and the Financial Instruments
and Exchange Law, the SCB is implementing appropriate management to ensurethat customers’ interests are not wrongfully violated.
14. Based on the financial Alternative Dispute
Resolution (ADR) system, to respond
expeditiously, fairly and appropriately tocustomers’ enquiries, 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 directors andemployees of the SCB 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
lawyerAuditors

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

Gene

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 recent financial crisis, the SCB is exhaustively implementing more highly detailed andthorough risk management by pursuing more sophisticated integrated risk management, market risk management, credit risk
management and other measures while 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 believes that its future depends onrisk management and that a strong risk management system is a prerequisite for maintaining
sound management and securing adequate profits.
The SCB classifies “risk” into two broad
categories—risk that must be controlled andrisk that must be absolutely minimized—andmanages these risks accordingly. The types ofrisk that must be controlled are market risk,
liquidity risk and credit risk. The type of riskthat must be minimized is operational risk.
Risk is managed by divisions which are independent from divisions involved in business
operations. The Risk Management Division
coordinates management of differing risks toprovide comprehensive risk management.
The SCB has also established five 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 independent 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-at-Risk(VaR) method and comparing their aggregated value to the institution’s overall financial
strength (i.e., capital adequacy).
For market risk and credit risk, the SCB
calculates Value-at-Risk. For the calculationof operational risk capital requirements, theSCB employs the basic indicator approach
proposed under the Basel II Capital Accord.
The SCB defines capital under its integrated risk management system and allocatesrisk limit amounts for operational risk andother types of risk (note). Separately, theSCB estimates losses under various stressscenarios as part of its efforts to monitor
potential impacts on capital.
The quantitative risk limits and reserveamounts for each fiscal year are determinedby the Executive Committee after deliberationby the Risk Management Committee. The Risk
Management Division, which oversees integrated risk management, measures the amountof risk exposure both during and at the end ofeach month 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.
Note: W ith regard to subsidiaries within the SCB’s
scope of consolidation, the SCB monitors risk
exposure at each subsidiary and allocates capitalcommensurate with the amount of risk. These
allocations provide for risk taking by subsidiaries.

Risk Categories and Definitions

Risk categories
Market Risk

Risks That Must
Be Controlled

Risks That Must
Be Minimized

Risk Definitions
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 or
exchange rates. This includes the risk of loss due to changes in earnings generated by assets andliabilities.

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 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 off-balancesheet assets), owing to such factors that 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 risks other than those mentioned above that may be defined, as necessary,O t h e r O p e r at i o n a lby the divisions responsible for the overall management of operational risk (excluding market risk,
Risk
liquidity risk and credit risk).

16

Shinkin Central Bank Annual Report 2012

Overview of the SCB’s Risk Management System
Board of Directors

Executive Committee

Risk Management
Committee

ALM
Committee

Divisions responsible forthe overall management of operational risk

Division responsible for integrated
risk management

Division responsible for market risk
management

Risk Management Division

Risk Management Division

Risk Management Division

Division responsible for administrativerisk management

Divisions responsible for capital
adequacy

Divisions responsible for liquidity risk
management

Operations Division

Risk Management Division(Assessment)

Division responsible for information
technology risk management

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

Divisions responsible for the
management of other operational risk

Risk Management Division

Systems Division

Financial Management Division

Divisions stipulated by Risk
Management Division

The SCB’s Market Risk Management Framework
Board of Directors
Executive Committee
Decisions

Matters for discussion

Risk Management Committee
ALM Committee
Decisions

Decisions

Reports, etc.

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 tomarket risk management. The ALM Committee comprises senior management and headsof divisions related to market risk. Based on

CreditCommittee

risk status information—obtained via reports
from divisions responsible for managing market risk and other sources—the ALM Committee deliberates widely and expeditiously onpolicy relating to fund-raising 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 and managed
according to risk limits allocated to eachcategory.
Note: M arket risk includes interest rate risk and such
equity-related risk as stock price fluctuation risk.

Divisions responsible for
credit risk management
Divisions responsible for credit control
Risk Management Division, Credit
Planning & Supervision Division
Division responsible for
credit assessment
Credit Planning & Supervision Division
Division responsible forasset assessment
Credit Planning & Supervision Division

In addition, the SCB manages market
risk by monitoring a wide range of measures
under various scenarios. These include theinterest rate risk amount calculated using
outlier standards; the possible stress loss
during a period of very high market volatility;
the basis-point-value (BPV) indicator, whichmeasures the potential change in portfolio
market value for every 0.01 percentage point
fluctuation in interest rates; and the market
risk equivalent amount.
The status of these risk management
activities is reported to senior management at
biweekly meetings of the ALM Committee.
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 understanding of
liquidity risk and rigorously manage this risk,
the SCB has formulated a liquidity risk management policy. Divisions responsible for liquidity
risk management are clearly separated fromdivisions involved in cash management andmarket operations, allowing internal checks
to be maintained through the independentfunctions. In addition, the ALM Committee
deliberates and makes decisions on mattersrelating 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 carried17

out for individual currencies and periods. In
the event that a significant liquidity risk arises,
the SCB has preparations to respond rapidly,
including the securing of funding sources.
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 as the body responsible for deliberating and making decisions on matters relatingto credit risk management. The Credit Committee is comprised of senior management
and general managers of related divisions. The
Credit Committee deliberates widely andthoroughly on credit transactions that exceed
a designated amount.
The Executive Committee deliberates on,
and makes decisions regarding, the results ofself-assessment of assets and matters 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 the credit rating of the borrower.
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 within the particular industry it operates in. Based on these assessments of credit
strength, each borrower is given a credit
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

18

analyze the SCB’s overall credit por tfolio
according to credit rating, industry, country
and other criteria. These analyses are used tomonitor the diversification of credit risk as well
as changes in portfolio credit risk. Furthermore,credit risk is quantified and managed within therisk 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 checks whether theclient service division is conducting appropriate credit control, and provides guidanceas necessary. In the case of any problem on
the side of borrowers, the Credit Planning& Supervision Division rapidly makes assessments of the borrower’s management situationand provides supervision. Where necessary,an 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.
Note: C redit risk includes such risk as counterpar ty
risk for derivative transactions and securitizationtransaction risk.

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 risk 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 necessity 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
and makes decisions on comprehensive
methods for managing operational risk,
including administrative risk and systems risk.
To calculate its operational risk capitalrequirements, the SCB uses the basic indicator approach proposed under the Basel
II Standards.

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 further automation of administrative
processing, training programs tailored for eachstaff and management level, and programs toencourage staff to submit proposals to improveadministrative processes. The SCB also controls the entire process of administrative risk
management from the identification of risk to
the implementation of corrective measures.

Information Technology Risk
Management
T h e Sy s t e m s D i v i s i o n t a ke s c h ar ge of
information technology risk management. It
provides control and guidance to divisions
involved in system development, operation
and utilization.
In the event of a system failure that
seriously affects the execution of business
operations, a Bank-wide response is triggered
based on crisis management procedures(contingency plan). The SCB also conducts
crisis response drills periodically based on
system-failure crisis scenarios.
To prevent damage caused by system
failure, the SCB has issued a security policy
and undertakes internal communications
programs to ensure that all directors andemployees have a thorough understanding of
the SCB’s security policy.

Shinkin Central Bank Annual Report 2012

Corporate Social Responsibility (CSR) Activities
The SCB aims to be a financial institution highly valued throughout society.
Activities as a Regional Financial Institution
Since the SCB’s funds are principally deposits
received from many local shinkin banks, we
believe that it is ideal to contribute to thesocial and economic development of local
communities with its funds.
For this reason, in cooperation withshinkin banks, the SCB actively provides
financing to local governments, public interest corporations, and locally based businessenterprises.
Fur thermore, in collabor ation withshinkin banks, the SCB contributes to thedevelopment and revitalization of local communities with a very extensive variety ofactivities, including syndicated loans, private
finance initiatives (PFI), support for the improvement of SME managements, regional
industry research, and the implementation of
local contribution programs.
Activities Implemented through theProvision of Financial Products

Charitable Trusts
Shinkin Trust Bank Ltd., a wholly owned
subsidiary of the SCB, sets up and manages
charitable trusts on behalf of individuals andcompanies in order to contribute to activities
for the public good, such as environmental
conservation, scholarships, academic researchand subsidies for social welfare.

Socially Responsible Investing (SRI)
Funds
Shinkin Asset Management Co. Ltd., a wholly
owned subsidiary of the SCB, offers the
Shinkin SRI Fund, in which it focuses on thesocial responsibility of the companies andinvests.
SRI is based on the philosophy according
to which “companies with the best potential
for steady growth are those that maintainsustainable economic growth by fulfilling
their corporate social responsibilities.” Consequently, SRI funds carry out investments
based on research and analysis from a broad
range of perspectives, including financial,environmental, social and ethical.

Revitalizing Local Communities andPursuing Activities to Promote Environmental Sustainability
As part of its efforts to contribute to local
communities, the SCB sponsors Metrolink Nihonbashi, to realize human- and environmentfriendly transportation set in the Tokyo metropolitan government’s urban planning vision.
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 thatruns through Nihonbashi and Yaesu, near to
the SCB’s head office, providing shoppers andpeople working in the area with a transportation option that is convenient and free ofcharge. This service aims to revitalize the local
area by helping to improve the environmentand by attracting shoppers and sightseers.

students, who will be responsible for the
future of their communities, to create new
business ideas, new jobs and new frameworks
to solve local problems.

Metrolink Nihonbashi

Activities That Aim to Contribute toSociety
With branches and offices throughout Japanand overseas, the SCB aims to contribute not
only to local communities but also to society
in the broadest possible way.
The SCB has become a supporter of the“Table For Two” program, a social contribution project that began in Japan. Table For
Two enables consumers to contribute to famine relief efforts in developing countries while
enhancing their health. When a customer
purchases an item on the “healthy menu” offered at the SCB head office cafeteria, partof the price of the meal (¥20) is donated to adeveloping country.
Shinkin Bank Contributions to Local Society
The shinkin bank sector has established the
Shinkin Bank Social Contribution Award torecognize local social contribution activities that can only be made by shinkin banks,
which are established and grow together withlocal communities. The award honors local
economic promotion, social welfare, arts andcultural support activities advanced by shinkinbanks nationwide.
Shinkin banks have also initiated the “High
School and Technical College Student Our
Town Business Idea Contest – Creating Workthat Benefits Society” as an opportunity for

19

What Are Shinkin Banks?
Shinkin banks are cooperative financial institutions. Their membership is composed of local
residents and small and medium-sized companies. Shinkin banks' distinctive characteristics
are (1) they are close and convenient, (2) they
offer fine-tuned and personalized services and(3) they have a strong relationship of mutual
trust with their customers and communities.
Cooperative financial institutions are organizations 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 various payments
including those for public utilities, and engaging in over-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 as support for management improvement and enterpriserenewal, business succession support, businessstart-up support and local-area revitalization.
Outline of Shinkin Banks
Shinkin banks dedicate themselves to providing
high-quality services to local residents, as financial institutions that are deeply rooted in theirrespective regions and contribute to regional
development.
Total deposits outstanding at 271 shinkinbanks as of March 31, 2012, reached approximately ¥122 trillion (equivalent to $1,490 billion), which ranks after Japan’s city and regionalbanks, and gives shinkin banks an important position in Japanese financial markets. The numberof shareholders at shinkin banks is 9.31 million.
Shinkin banks also possess one of the largest
branch networks among the financial businesscategories, forming a strong network throughout Japan.
Shinkin banks continue to further deepen
their presence and roles as important infrastructure for regional economies and communities.

Shinkin bank services

Regional Banks
Shinkin Banks

7,535

Succession support / M&A

Product and service expansion

Overseas expansion

Personal lending businessBusiness start-up

Local-area revitalization

3,136

2,400

1,751
642

Shinkin
Banks

Regional
Banks

Second-tier
Regional
Banks

City
Banks

CreditCooperatives

Labor
CreditAssociations

Note	
The number of shinkin banks is as of March 31, 2012. The numbers of regional banks, second-tier regionalbanks, city banks, credit cooperatives and labor credit associations are as of September 30, 2011.
Sources	Japanese Bankers Association, National Central Society of Credit Cooperatives, National Association of Labour
Banks and SCB

Deposit Outstandingat Shinkin Banks (Billions of Yen)

113,727.5<1,135>

2008

115,453.1<1,175>

2009

117,380.6<1,261>

2010

119,746.5<1,440>Loan and Bills Discounted
Outstanding at Shinkin Banks(Billions of Yen)

122,588.4<1,490>2011

63,543.3
<634>

2008

2012

(Billions of U.S. Dollars) Note
Items in angular brackets are U.S. dollar amounts.
	U.S. dollar amounts are converted for convenience$3,326
only at ¥100.16, ¥98.20, ¥93.05 and ¥83.15,
82.22 per dollar, the prevailing rate on March 31,
2,683
2008, 2009, 2010, and 2011, 2012 respectively.
Source SCB

1,490

Agricultural Cooperatives

1,072

Second-tier Regional Banks

725

Credit Cooperatives

216

Labor Credit Associations212

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, Norinchukin
Bank, National Central Society of Credit
Cooperatives, National Association of Labour
Banks and SCB

Shinkinbankcustomers

7,481

64,878.6
<660>

2009

64,157.4<689>

63,755.0<766>

63,788.8
<775>

2010

2011

2012

Note
Items in angular brackets are U.S. dollar amounts.
	U.S. dollar amounts are converted for convenience
only at ¥100.16, ¥98.20, ¥93.05 and ¥83.15,
82.22 per dollar, the prevailing rate on March 31,
2008, 2009, 2010, and 2011, 2012 respectively.
Source SCB

Growth of Number of Shareholders (Millions) (As of March 31, 2012)
7.36
5.51
3.67

Notes

20

Co-financing

Domestic Branches by Bank Segment (Number of branches)

Deposits Outstanding by
Bank Segment (As of March 31, 2012)
City BanksManagement improvement / enterprise renewal

Shinkin
bank

8.11

8.87

9.13

9.31

2005.32012.3

6.20

4.25

2.58
1.31
1955.3

1.81

1960.3

Source SCB

1965.3

1970.31975.3

1980.3

1985.3

1990.3

1995.3

2000.3

Shinkin Central Bank Annual Report 2012

The capital adequacy ratio of shinkin banks
as of the end of March 2012 increased by 0.18
percentage point over the previous fiscal
period to 12.85% (preliminary figure).
The capital adequacy ratio of shinkin banks
maintains a standard which is by no means inferior even compared to other business categories, and is outperforming the standardsof other domestic regional banks (11.63%) or
second-tier regional banks (10.41%).

Capital Adequacy Ratio of Shinkin Banks
12.85%

12.67%
12.34%
11.80%

11.74%

2008

2009

2010

2011

2012
(Preliminary Figure)

Note 	Capital adequacy requirements with flexibility measures are not applied before 2008.
Source SCB

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

Nonperforming-Loan Ratioof Shinkin Banks (%)(as of March, 31, 2012)18.25%

6.97%
12.85%

ShinkinBanks

11.63%

City Banks(Preliminary Figure)10.41%

2008

Regional Second-tierBanks Regional Banks

6.80%
6.25%

6.27%

6.44%

2009

2010

2011

Sources Bank disclosure document
Regional Banks Association of JapanThe Second Association of Regional Banks

2012(Preliminary Figure)(Domestic)

Source SCB

Reference:
The Difference between Shinkin Banks and Commercial Banks
Category

Shinkin Banks

Commercial Banks

Legal Foundation

Shinkin Bank Act

Banking Act

Organization

Cooperative organizationFor-profit joint stock
corporations

Membership Qualifications• Those who have an address or location inNone

the region.
• Those who have a business office in the region.
• Those who work in the region.

21

Preferred Shares
The SCB’s 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.
Listing of Preferred Shares
The SCB has issued preferred shares since fiscal 1995, and the preferred shares were listedon the Tokyo Stock Exchange on December
22, 2000 (Securities Identification Code 8421)
for the first time in Japan. The SCB’s preferredshares are marketable securities that are very
similar to preferred stocks, and basically apply
the same listing criteria and disclosure ruleswith them.
Trading of Preferred Shares
Like listed stocks, the SCB’s preferred sharescan be traded anytime during trading hours of

the Tokyo Stock Exchange through a securities company. Credit transactions are also
possible for preferred shares just as they arefor stocks.
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 at the Law Concerning Preferred
Shares of Cooperative Financial Institutions,
the SCB does not pay interim dividends.
Dividends of preferred shares are comprised of 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.
The SCB’s preferred shares have the same
treatment as stocks in the taxation system, andthey are given the same preferential treatment
concerning tax as stocks.
For fiscal 2011, a dividend for preferredshare was ¥6,500 (equivalent to $79) per

Composition of Preferred Shares (March 31, 2012)
・Number of Investors (Total 16,767)
Foreign Institutions
and Others
11(0.1%)
Financial Institutions
226(1.3%)
Other Corporations229(1.4%)

Price(closing price,
in yen)Other Corporations
43,096(6.1%)First Day of Listing (December 22, 2000) 200,500
Securities Companies
6,597(0.9%)

Highest Price (March 15, 2006)

311,500

Lowest Price (April 14, 2009)

102,400

Closing Price (July 31, 2012)

162,500

Note: P rices of preferred share are split-adjusted,reflecting the stock split of preferred shares witha record date of July 31, 2009.

Individuals
104,376(14.7%)
Individuals
16,292(97.2%)

22

Price of Preferred Shares

・Number of Subscription (Total 708,222)
Foreign Institutions
and Others
288(0.1%)

Securities Companies
9(0.0%)

share, which comprised a preferred dividend of¥3,000 (equivalent to $36) and a participating
dividend of ¥3,500 (equivalent to $42). For
fiscal 2012, a dividend for preferred share is
expected to remain ¥6,500 (equivalent to $79)
per share.

Financial Institutions
553,865(78.2%)

Financial Section

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

23Five-Year Summary(Consolidated)
Five-Year
Summary(Consolidated)
FY2007

FY2008(Millions of yen)
FY2010FY2011

FY2009Total Income

445,869

484,598

392,849

361,820395,277

Total Expenses

392,579

701,720

373,135

322,361

357,662

Net Income (Loss)

38,727(182,518)

29,20627,88729,805－－－35,97063,791Net Assets

747,431443,564

1,020,800

1,043,267

1,092,354

Total Assets

26,400,125

27,505,115

28,575,669

31,502,697

30,248,492

Net Assets per Share (yen)313,698.61

185,280.93

214,698.35

219,425.69

229,768.12

Net Income (loss) per Share (yen)15,548.57(77,531.92)

6,425.11

5,471.96

5,879.26

12,603－

13,37014,603

14,603

Common Shares

8,000

－

8,767

10,00010,000Preferred Shares

4,603

－

4,603

4,603

4,603

15.84

－

－

－

－

－

22.56

28.17

31.76

32.43

Comprehensive Income

Dividends

Capital Adequacy Ratio(International Standard) (%)
Capital Adequacy Ratio(Domestic Standard) (%)

Notes:
1. Consumption tax and local consumption tax incurred by the Bank and its domestic consolidated subsidiaries are excluded
from transaction amounts.
2. Net assets per share was obtained by deducting preferred dividends from net assets and was divided by the number of sharesat term-end. This calculation complies with ASBJ (Accounting Standards Board of Japan) statement No. 2, September 25,
2002 “Accounting Standards for Earnings Per Share” and ASBJ Guidance No. 4, September 25, 2002 “Guidance on
Accounting Standards for Earnings Per Share”.
3. Net income per share was obtained by dividing the value obtained by deducting preferred dividends from current profit. This
calculation complies with ASBJ statement No. 2, September 25, 2002 “Accounting Standards for Earnings Per Share” andASBJ Guidance No. 4, September 25, 2002 “Guidance on Accounting Standards for Earnings Per Share”.
4. The Bank’s capital adequacy ratio is calculated using the formula stipulated in “Financial Services Agency Notification No.
21 (2006).” This notification is pursuant to the standards set forth in Article 14-2 of the Banking Law, which is stipulated for
application by Article 89-1 of the Shinkin Bank Law. In addition, the Bank adopted international standard until fiscal
2007. However, the Bank has adopted domestic standard for fiscal 2008 since overseas branch was closed down in March2009.
5. Beginning with fiscal 2010, the Bank had adopted the Accounting Standard for Presentation of Comprehensive Income(ASBJ Statement No.25; June 30, 2010).

Shinkin Central Bank

24

1

Consolidated Balance Sheets

Consolidated Balance Sheets

Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks (Note 2 (2), 9, 23)
Bills Bought and Call Loans (Note 23)
Receivables under Resale Agreements (Note 23)
Receivables under Securities Borrowing Transactions (Note 23)
Monetary Debts Purchased (Note 23)
Trading Assets (Note 3, 9, 23, 24)
Money Held in Trust (Note 23, 24)
Securities (Note 4, 7, 9, 23, 24)
Loans and Bills Discounted (Note 5, 6, 9, 23)
Foreign Exchanges Assets
Other Assets (Note 9)
Tangible Fixed Assets (Note 8, 13, 22)
Intangible Fixed Assets (Note 22)
Deferred Tax Assets (Note 20)
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Reserve for Investment Losses
Total Assets
Liabilities and Net Assets
Liabilities
Deposits (Note 23)
Debentures (Note 12, 23)
Trading Liabilities (Note 10, 23)
Borrowed Money (Note 9, 11, 23)
Bills Sold and Call Money (Note 9, 23)
Payables under Securities Lending Transactions (Note 9, 23)
Foreign Exchanges Liabilities
Other Liabilities
Reserve for Employee Bonuses
Reserve for Directors' Bonuses
Reserve for Employee Retirement Benefits (Note 21)
Reserve for Directors' Retirement Allowances
Reserve under Specific Law
Deferred Tax Liabilities (Note 20)
Deferred Tax Liabilities for Land Revaluation (Note 13)
Acceptances and Guarantees
Total Liabilities
Net Assets
Common Shares and Preferred Shares (Note 19)
Capital Surplus
Retained Earnings
Total Shareholders' Equity
Net Unrealized Gains on Other Securities (Note 20, 24)
Net Deferred Gains(Losses) on Hedging Instruments (Note 20, 25)
Land Revaluation Excess (Note 13)
Foreign Currency Translation Adjustments
Total Accumulated Other Comprehensive Income
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of these financial statements.

2012

Millions of Yen

2011

Millions of
U.S. Dollars(Note 1)2012

1,963,108
663,867
73,99071,529392,916
463,463
181,193
20,592,299
5,374,701
3,126
292,485
74,653
15,77810,853
102,672(28,069)(78)
30,248,492

2,026,383
750,984
86,983
93,138495,643466,569
211,106
21,516,667
5,254,813
4,001
419,077
76,745
14,271
28,82381,515(23,811)(215)
31,502,697

23,876
8,074
899
869
4,778
5,636
2,203
250,453
65,369
38
3,557
907
191
132
1,248
(341)
(0)
367,897

21,595,878
3,953,960
136,023
792,410497,739
1,605,617
162
441,464
1,476
69
21,609
529
1
23
6,499
102,672
29,156,138

21,569,331
4,323,600
139,458
630,950
435,272
2,843,378
144
406,0501,413
64
20,363
498
1
22
7,366
81,51530,459,430

262,659
48,090
1,654
9,637
6,053
19,528
1
5,369
17
0
262
6
0
0
79
1,248
354,611490,998
100,678
410,6211,002,298
156,850(85,557)
14,495(4,163)81,6258,430
1,092,354
30,248,492

490,998
100,678395,280
986,957
35,7832,490
13,875(3,876)48,272
8,037
1,043,267
31,502,697

5,971
1,224
4,994
12,1901,907(1,040)
176
(50)
992
102
13,285367,89725

Consolidated Statements of Income

Consolidated Statements of Income

Shinkin Central Bank For the years 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
OthersFees and Commissions (Note 14)
Trading Income (Note 15)
Other Operating Income
Other Income
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 14)
Trading Losses (Note 16)
Other Operating Expenses
General and Administrative Expenses
Other Expenses (Note 17)
Total Expenses

Income before Income Taxes and Minority Interests
Income Taxes (Note 20):
Current
Deferred
Total Income Taxes
Income before Minority Interests
Minority Interests in Net Income
Net Income

Net Income per Share (Note 28)
Dividend Declared per Share (Common Shares)
Dividend Declared per Share (Preferred Shares)
The accompanying notes are an integral part of these financial statements.

26

2012

Millions of Yen

Millions of
U.S. Dollars(Note 1)
2012

2011

264,149
45,247
6,215
2,639
79
311
206,445
3,209
31,861
15,36379,4494,453
395,277

279,30352,480
6,926
2,322
148
360
212,809
4,255
31,111
12,91929,6108,874
361,820

3,212
550
75
32
0
3
2,510
39
387
186
966
54
4,807

197,241
81,91646,927
12,716827
84,415
50,430
10,48326
85,31046,14818,451
357,662

223,574
116,11255,693
12,675624
1
5,249
33,217
10,808734
22,98445,606
18,652
322,361

2,398
996
570
154
10
0
53
613
127
0
1,037
561
224
4,350

37,61439,458

457

1,251
6,097
7,349
30,265459
29,805790
10,437
11,228㻞㻤㻘㻞㻟㻜
342
27,887

15
74
89
368
5
362

2011
5,471.96
2,500.00
6,500.00

U.S. Dollars
2012
71.50
30.40
79.05

Yen
2012
5,879.26
2,500.00
6,500.00

Consolidated
Statementsof Comprehensive
IncomeConsolidated
Statementsof Comprehensive
IncomeShinkin Central Bank For the years ended March 31,
Income before Minority Interests
Other Comprehensive Income (Note 18)
Net Unrealized Gains on Other Securities
Net Deferred Gains (Losses) on Hedging Instruments
Land Revaluation Excess
Foreign Currency Translation Adjustments
Comprehensive Income
Comprehensive Income attributable to owners of the parent
Comprehensive Income attributable to minority interests

2012

Millions of Yen

30,26533,526
121,067(88,047)
793(286)
63,791
63,332459

2011
㻞㻤㻘㻞㻟㻜
㻣㻘㻣㻠㻜㻞㻡㻘㻜㻜㻢
㻔㻝㻢㻘㻠㻜㻢㻕
㻙㻔㻤㻢㻜㻕㻟㻡㻘㻥㻣㻜
㻟㻡㻘㻢㻞㻣
㻟㻠㻞

Millions of
U.S. Dollars(Note 1)
2012
368
407
1,472
(1,070)
9
(3)
775
770
5

27

Consolidated
Statements
Changes in Net Assets
Consolidated Statementsof Changes inof
Net Assets

28

Shinkin Central Bank For the years ended March 31,
Shareholders' Equity
Common Shares and Preferred Shares
Balance at Beginning of Year
Fluctuation Amount during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Capital Surplus
Balance at Beginning of Year
Fluctuation Amount during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Retained Earnings
Balance at Beginning of Year
Fluctuation Amount during the Fiscal Year
Surplus Dividends
Net Income
The revarsal of Land Revaluation Excess
Decrease due to decrease in subsidiaries
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Total Shareholders’ Equity
Balance at Beginning of Year
Fluctuation Amount during the Fiscal Year
Surplus Dividends
Net Income
The revarsal of Land Revaluation Excess
Decrease due to decrease in subsidiaries
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Accumulated Other Comprehensive Income
Net Unrealized Gains (Losses) on Other Securities
Balance at Beginning of Year
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 YearNet Deferred Gains (Losses) on Hedging Instruments
Balance at Beginning of Year
Fluctuation Amount during the Fiscal YearNet Changes in Items Other Than Shareholders’ Equity
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Land Revaluation Excess
Balance at Beginning of Year
Fluctuation Amount during the Fiscal YearNet Changes in Items Other Than Shareholders’ Equity
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Foreign Currency Translation Adjustments
Balance at Beginning of Year
Fluctuation Amount during the Fiscal YearNet Changes in Items Other Than Shareholders’ Equity
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Total Accumulated Other Comprehensive Income
Balance at Beginning of Year
Fluctuation Amount during the Fiscal YearNet Changes in Items Other Than Shareholders’ Equity
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Minority Interests
Balance at Beginning of Year
Fluctuation Amount during the Fiscal YearNet Changes in Items Other Than Shareholders’ Equity
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
Total Net Assets
Balance at Beginning of Year
Fluctuation Amount during the Fiscal Year
Surplus Dividends
Net Income
The revarsal of Land Revaluation Excess
Decrease due to decrease in subsidiaries
Net Changes in Items Other Than Shareholders’ Equity
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year
The accompanying notes are an integral part of these financial statements.

2012

Millions of Yen

Millions of
U.S. Dollars(Note 1)
2012

2011

490,998

490,998

5,971－
490,998－
490,998－
5,971

100,678

100,678

1,224－
100,678－
100,678㻙
1,224

395,280

380,630

4,807(14,603)29,805173(34)
15,341
410,621㻔㻝㻟㻘㻟㻣㻜㻕
27,887
㻝㻟㻞－
14,649395,280

(177)
362
2
(0)
186
4,994

986,957

972,307

12,003(14,603)29,805173(34)
15,341
1,002,298(13,370)
27,887132－
14,649986,957

(177)
362
2
(0)
186
12,19035,783

10,776435

121,067
121,067
156,850

25,00625,00635,783

1,472
1,472
1,907

2,490

18,89630(88,047)(88,047)(85,557)(16,406)(16,406)
2,490(1,070)(1,070)(1,040)13,87514,007

168

㻢㻝㻥
㻢㻝㻥
14,495㻔㻝㻟㻞㻕㻔㻝㻟㻞㻕
13,875㻣㻣
176(3,876)(3,016)

(47)

(286)
(286)
(4,163)

(860)
(860)
(3,876)

(3)
(3)
(50)

48,272

40,664587

33,35333,35381,625

7,607
7,607
48,272

405
405
992

8,037

7,828

97

392
392
8,430

209
209
8,037

4
4
102

1,043,267

1,020,800

12,688(14,603)29,805173(34)
33,74649,087
1,092,354(13,370)
27,887
㻝㻟㻞－
7,816
22,466
1,043,267

(177)
362
2
(0)
410
597
13,285

Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows

Millions of
U.S. Dollars
Shinkin Central Bank For the years ended March 31,
Cash Flows from Operating Activities:
Income before Income Taxes and Minority Interests
Depreciation
Loss on Impairment of Fixed Assets
Increase (Decrease) in Reserve for Possible Loan Losses
Increase (Decrease) in Reserve for Investment Losses
Increase (Decrease) in Reserve for Employee Bonuses
Increase (Decrease) in Reserve for Directors' Bonuses
Increase (Decrease) in Reserve for Employee Retirement Benefits
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 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 Refund (Paid)
Net Cash Provided by (Used in) Operating Activities

2012

Millions of Yen(Note 1)
2012

2011

37,614
8,089
268
4,258
(136)
62
5
1,245
31
(264,149)
197,241(39,083)(1,005)76,90415
3,106(3,435)(43,203)(119,888)
26,546(369,640)
153,310(78,794)
100,110
21,60862,466(1,237,760)
102,726874
18(99)406,810(361,810)
59,205(1,256,483)
717(1,255,766)

39,4588,278
㻞㻡㻟
(17,136)
(111)
147
19
1,374
14
(279,303)
223,5742,810(22)234,293
95(8,036)36,561
44,1881,009,010
1,845,877(479,320)
2,000
271,093(195,764)(26,213)(16,829)
1,545,990
147,265928
21(3,564)
414,723(334,926)(98,901)
4,367,852(2,227)4,365,625

457
98
3
51
(1)
0
0
15
0
(3,212)
2,398
(475)
(12)
935
0
37
(41)
(525)
(1,458)322(4,495)
1,864
(958)
1,217
262
759
(15,054)
1,249
10
0
(1)
4,947
(4,400)720(15,281)8(15,273)

Cash Flows from Investing Activities:
Acquisitions of Securities
Proceeds from Sales of Securities
Proceeds from Redemption of Securities
Acquisitions of Tangible Fixed Assets
Acquisitions of Intangible Fixed Assets
Proceeds from Sales of Tangible Fixed Assets
Net Cash Provided by (Used in) Investing Activities(5,334,246)
3,010,246
3,451,941(1,906)(5,857)138
1,120,316(14,165,756)
4,250,791
5,377,038(1,009)(1,221)－(4,540,156)(64,877)
36,612
41,984(23)(71)
113,625

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

108,150(100,000)(14,603)(66)(6,520)－－㻔㻝㻟㻘㻟㻣㻜㻕
(133)(13,504)

1,315(1,216)
(177)
(0)
(79)

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) )(0)(141,970)
392,142
250,171(0)(188,035)
580,177
392,142(0)(1,726)
4,769
3,042

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

29

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 ¥82.22 to U.S.$1, the exchange
rate prevailing as of March 31, 2012. 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.

2. Significant Accounting Policies:(1) Principles of Consolidation
The consolidated financial statements include the accounts of
the Bank and its eight consolidated subsidiaries as of March 31, 2012listed below:
Ownership
Location
Percentage
Name
The Shinkin Banks Information
System Center Co., Ltd.
Tokyo
 50.7%
Shinkin International Ltd.
London 100%
Shinkin Central Business Co., Ltd.
Tokyo
 100%
Shinkin Asset Management Co., Ltd.
Tokyo
 100%
Shinkin Trust Bank, Ltd.
Tokyo
 100%
Shinkin Securities Co., Ltd.
Tokyo
 100%
Shinkin Capital Co., Ltd.
Tokyo
 100%
Shinkin Guarantee Co., Ltd.
Tokyo
 100%（Change of the range of consolidated subsidiaries）

Shinkin Partners Co., Ltd. merged with Shinkin Central
Business Co., Ltd. in October 2011, the surviving company
retaining the latter’s name.

30

Unconsolidated subsidiaries
Shinkin Capital No. 1 Limited Liability Investment Partnership
Shinkin Capital No. 2 Limited Liability Investment Partnership
Shinkin no Kizuna Limited Liability Investment Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because their total assets, ordinary income, net income(amount based on the equity method) and retained earnings (amountbased on the equity method) are immaterial and do not hinder arational judgment of the Bank’s financial position and results ofoperation 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 the2 Shinkin Central Bank

subsidiary, the Bank makes appropriate adjustments for any materialtransactions subsequent to December 31.
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 acquisitionis expensed when incurred.
The application of equity-method to unconsolidated subsidiaries
and affiliates is as follows: Non-consolidated equity-method subsidiaries:
N/A Affiliated equity-method companies:
N/A
Unconsolidated subsidiaries that are not accounted for by theequity method: Shinkin Capital No. 1 Limited Liability Investment Partnership Shinkin Capital No. 2 Limited Liability Investment Partnership Shinkin no Kizuna Limited Liability Investment 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.
Affiliated companies to which the equity method is not applied
due to immateriality:
Aozora Loan Services Co., Ltd.
(2) Cash and Cash Equivalents
In the consolidated statements of cash flows, “Cash and Cash
Equivalents” consist of Cash and Due from Central Bank.
Reconciliation of Cash and Cash Equivalents with the amounts
disclosed in the consolidated balance sheets at March 31, 2012 and2011 is as follows:
Millions ofMillions of Yen
U.S. dollars
2012
2011
2012
Cash and Due fromBanks

1,963,108

2,026,383

23,876Due from Banks(Excluding Duefrom Central Bank )(1,712,936)(1,634,240)(20,833)

250,171

392,142

3,042

Cash and Cash
Equivalents(3) Trading Assets & Liabilities
Transactions for “Trading Purposes” (for purposes of seeking
to capture 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 sheets 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 statements 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 thedeemed amounts that would be received or paid for settlement if suchtransactions 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. Among other securities, stocks andinvestment trusts with quoted market prices are stated based on the
average quoted market price over the month preceding the balance
sheet date. Other securities with quoted market prices other thanstocks and investment trusts are stated at fair value based on quoted
market prices and other applicable information at the balance sheet
date (and the cost of securities sold is mainly determined using theweighted-average method). Other securities where there is significant
difficulty in determining fair value are stated at cost using theweighted-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
described in the Japanese Institute of Certified Public Accountants(JICPA) Industry Audit Committee Report No. 24 “Accounting and
Auditing Treatment of Accounting Standards for Financial
Instruments in Banking Industry” to transactions to hedge againstinterest rate risk arising from the financial assets and liabilities.
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 totransactions to hedge against foreign exchange fluctuation risks
associated with monetary assets and liabilities denominated inforeign currencies in accordance with the regulations set forth in
JICPA Industry Audit Committee Report No. 25 “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.
3 Shinkin Central Bank

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 and forward liabilities exceeding the acquisition costs of theforeign currency securities designated as hedged items on a foreign
currency basis.
(c) Internal Derivative Transactions
Internal derivative transactions between trading accounts andother accounts, which are designated as hedges, are not eliminatedand related gains and losses are recognized in the consolidated
statement of income or deferred under hedge accounting because theinternal interest 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
declining balance method, except for buildings acquired on or after
April 1, 1998 (excluding facilities installed in buildings), which 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 thestraight-line method, mainly over a 5 year period (the estimateduseful life of the software).
(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 theamount deemed necessary based on the borrower’s capability of
repayment after deduction of expected collection from the disposal ofcollateral and the execution of guarantees.
For all other loans, a reserve is provided based on the ratio of31

actual defaults for a certain period in the past.
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 gap
between the amounts calculated by discounting the cash flow by thecontracted interest rate prior to relaxation of terms and conditions ofloans and their book values.
All claims are assessed by the Operating Related Division
based on internal rules for self-assessment of asset quality.
Subsequently, the Asset Auditing Division, that is independent fromthe Operating Related Division, audits these self-assessments. The
reserve is provided based on the results of the assessments.
For loans to bankrupt and substantially bankrupt borrowers,
amounts deemed uncollectible, which are calculated after deductionof expected collection from the disposal of collateral and theexecution of guarantees, are written off. The amount written off was¥1,022 million ($12 million) as of March 31, 2012 and ¥659 million
as of March 31, 2011.
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 Investment Losses
An investment loss reserve is allocated in an amountconsidered necessary to provide against possible future losses frominvestments, taking into consideration the financial position of thecompany issuing the securities and other factors.
(11) Reserve for Employee Bonuses
Reserve for employee bonuses is set aside to pay employee
bonuses with respect to the portion of estimated bonus payments toemployees that correspond to this fiscal year.
(12) 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.
(13) Reserve for Employee Retirement Benefits
Reserve for employee retirement benefits represents theestimated projected retirement benefit obligations in excess of thefair value of related pension plan assets at the end of the fiscal year.
Prior service costs and actuarial differences are charged to income asfollows:
Prior service costs:
Prior service costs are amortized, using the straight-line
method over 10 years within the average remaining service
years of the current employees.
Actuarial differences:
Actuarial differences will be amortized from the following
fiscal year, using the straight-line method over 10 years within
the average remaining service years of the current employees.

32(14) 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
4 Shinkin Central Bank

up to the end of this fiscal year.
(15) Reserve under Specific Law
This reserve amount is calculated pursuant to Article 46-5,
Paragraph 1 of the Financial Instruments and Exchange Law and
Article 175 of the Cabinet Office Ordinance on Financial Instruments
Business to indemnify any losses incurred from accidents in the
conduct of market derivative transactions on behalf of clients.
(16) Translation of Foreign Currencies
Foreign currency-denominated assets and liabilities aretranslated 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.
(17) Leases
Finance leases for the Bank and its domestic consolidated
subsidiaries that do not transfer ownership and contracted for before
the fiscal year beginning April 1, 2008 are accounted for as operatingleases.
(18) Consumption Tax
Consumption tax and local consumption tax incurred by the
Bank and its domestic consolidated subsidiaries are excluded fromtransaction amounts. However, consumption tax and local
consumption tax paid on purchases of tangible fixed assets andintangible fixed assets, which are not deductible as a tax credit, arecharged to income at the end of the fiscal year.
(19) Amortization of Goodwill
Goodwill is fully amortized in the fiscal year incurred.
(20) Additional information
For the accounting changes and corrections to past errors madeafter the beginning of the consolidated fiscal year ended March 31,
2012, the Bank has adopted Accounting Standard for Accounting
Changes and Error Corrections (ASBJ Statement No. 24, dated
December 4, 2009) and the Guidance on the Accounting Standard for
Accounting Changes and Error Corrections (ASBJ Guidance No. 24,
dated December 4, 2009).

3.

Trading Assets:
The details of Trading Assets as of March 31, 2012 and 2011
are as follows:
Millions ofMillions of Yen
U.S. Dollars

5.

Loans and Bills Discounted:
Loans and Bills Discounted include the following non-performing
loans:
Millions ofMillions of Yen
U.S. Dollars
2012

2012

2011

76,00583,027924

Loans to Bankrupt
Borrowers

415

599

5

Trading Bonds-Related
Financial Derivatives

18

－

0

Delinquent Loans

12,38012,122150

Derivatives of Securities
related to Trading
Transactions

－

6

－

Loans Past Due Three
Months or More

77

295

0

Trading-Related
Financial Derivatives

61,69963,578750

Restructured Loans

23,725

6,207

288

Other Trading Assets

325,740

319,957

3,961

Total

36,59919,224445

Total

463,463466,569

5,636

The above amounts are the amounts before exclusion ofreserves for possible loan losses.
Loans to Bankrupt Borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Article 96-1-3 or 4of the Japanese Tax Law Enforcement Regulations (Article 97 of
1965 Cabinet Order).
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, theextension of maturity dates, and the renunciation of claims in order toassist or facilitate the business restructuring of borrowers underfinancial 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 ¥104,200 million ($1,267 million) as of March 31, 2012and ¥114,450 million as of March 31, 2011, respectively. Of theseamounts, ¥27,400 million ($333 million) as of March 31, 2012, and¥34,800 million as of March 31, 2011, 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“Accounting and Auditing Treatment of Accounting Standards for
Financial Instruments in Banking Industry”. The face value of bills of
lading amounted to ¥189 million ($2 million) as of March 31, 2012and ¥286 million as of March 31, 2011, respectively. The Bank has
the right to freely dispose of, sell or re-collateralize such bills.
With respect to loan participation, in accordance with the
JICPA Accounting Committee Report No. 3, dated June 1, 1995, theamount of the participation principal is accounted for as capitalloaned to the original debtor, and this amounted to ¥112,712 million($1,370 million) as of March 31, 2012 and ¥139,668 million as ofMarch 31, 2011.

Trading AccountSecurities

2012

2011

2012

4.

Securities:
The details of Securities as of March 31, 2012 and 2011 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2012
2011
2012
Japanese Government
13,793,428 13,996,011
167,762
Bonds
Municipal Government
Bonds

296,803

370,446

3,609－

19,990－1,430,556

1,307,145

17,399Stocks53,083

83,419645

Others5,018,427

5,739,654

61,036

Total

20,592,299 21,516,667

250,453

Short-term Corporate
Bonds
Corporate Bonds

Notes:
1. Stocks include investments in affiliated companies totaling ¥189
million ($2 million) as of March 31, 2012 and 2011.
2. Others include common shares and investment in unconsolidated
subsidiaries totaling ¥6,901 million ($83 million) as of March 31,
2012 and ¥2,382 million as of March 31, 2011. Others also include
preferred shares issued by Shinkin Banks which were contributedin accordance with the Shinkin Bank Management Reinforcement
System. The amount was ¥252,980 million ($3,076 million) as ofMarch 31, 2012 and ¥251,180 million as of March 31, 2011,
respectively. Others also include foreign bonds and equities.

33
5 Shinkin Central Bank

6.

Commitments to Overdrafts and Loans:
Commitments related to overdrafts and loans represent
agreements to extend overdrafts or loans up to a pre-agreed amount at
the customer’s request as long as there is no violation of theconditions 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 ¥17,335,508 million ($210,842 million) as of March
31, 2012 and ¥15,367,602 million as of March 31, 2011, respectively.
The amounts which the Bank could cancel at any time without
penalty or the period of the original contract is less than one year are¥17,257,824 million ($209,898 million) as of March 31, 2012 and¥15,301,753 million as of March 31, 2011, respectively.
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 ¥97,988 million ($1,191 million) as of March 31, 2012 and¥99,665 million as of March 31, 2011.
Of cash-collateralized securities borrowings, those freely
disposable for sale or re-collateralized, and pledged as collateralamounted to ¥8,872 million ($107 million) as of March 31, 2012 and¥7,487 million as of March 31, 2011.Those held by the Bank without
being disposed of as of March 31, 2012 amounted to ¥319,304
million ($3,883 million) and as of March 31, 2011 amounted to¥394,339 million.
8.

Tangible Fixed Assets:
Millions of Yen
2012
2011

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

34
6 Shinkin Central Bank

Millions of
U.S. Dollars
2012

81,93380,286

996

1,764

1,822

21

（－)

（－)

（－)

9.

Assets Pledged as Collateral and Associated Liabilities:
Assets pledged as collateral for the fiscal years ended March 31,
2012 and 2011 are as follows:
Millions of U.S.
Millions of Yen
Dollars
2012
2011
2012
Assets Pledged as Collateral
Trading Assets

32,019302

4,591,392 5,313,521

55,842Loans and Bills Discounted 1,415,656 1,022,941

17,217

Total

73,363

Securities

24,894

6,031,942 6,368,481

Liabilities associated with
Assets Pledged as Collateral
Borrowed Money

155,310

2,000

1,888

Bills Sold and Call Money

276,300

260,000

3,360

Payables under Securities
1,596,740 2,835,860
Lending Transactions

19,420Cash and Due from Banks of ¥10 million ($0 million) as ofMarch 31, 2012, Trading Assets of ¥835 million ($10 million) as ofMarch 31, 2012 and ¥816 million as of March 31, 2011 andSecurities in the amount of ¥991,750 million ($12,062 million) as ofMarch 31, 2012 and ¥936,152 million as of March 31, 2011,
respectively, were secured as collateral for exchange settlementtransactions, etc. or futures or as substitute for margin money infutures transactions, etc.
Other Assets included margin money. The amount was ¥232
million ($2 million) as of March 31, 2012, and ¥244 million as ofMarch 31, 2011. Other Assets also included guarantee money
amounting to ¥331 million ($4 million) as of March 31, 2012, and¥270 million as of March 31, 2011, respectively.
10. Trading Liabilities:
The details of Trading Liabilities as of March 31, 2012 and2011 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2012
2011
2012
Trading Bonds Sold

61,39478,873

746

2

－

0

Trading-Related Financial
Derivatives

74,626

60,584907

Total

136,023

139,458

1,654

Derivatives of Securities
related to Trading Transactions

11. Borrowed Money and Lease Obligations:
Balance as ofApril 1, 2011
(Millions of Yen)

Balance as ofMarch 31, 2012
(Millions of Yen)

Balance as ofMarch 31, 2012
(Millions of U.S.
Dollars)

Borrowings

630,950

792,410

Borrowed Money630,950

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

Category

Average
Interest Rate (%)

Maturity

9,637

1.54

－

792,410

9,637

1.54

Apr. 2012～
No maturity

599

829

10

2.44

－

3,597

4,370

53

2.34

Apr. 2013～
Nov. 2019

Notes:
1. Average interest rates were computed by the weighted average method using the interest rates and the balances at 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,
One year or lessup to 2 years
up to 3 years
up to 4 years
up to 5 years
155,310－－－－
Borrowed Money
829
839
840
846
851
Lease Obligations

One year or less
1,888
10

Borrowed Money
Lease Obligations

Millions of U.S. Dollars
Over 1 year,
Over 2 years,
Over 3 years,
up to 2 years
up to 3 years
up to 4 years
－
－
－
10
10
10

Over 4 years,
up to 5 years－
10

12. Debentures:
IssuerThe Bank
 TotalName of Issue

No.197-268
5-yearInterest-bearing
debentures

Issuance Date

Balance as of Balance as of Balance as ofApril 1,March 31,
March 31,
2011
2012
2012
(Millions of (Millions of (Millions of
Yen)
Yen)
U.S. Dollars)Interest
Rate (%)

Collateral

Redemption
Date

Apr. 2006～
Mar. 2012

4,323,600

3,953,960

48,090

0.35～
1.75

－

Apr. 2011～
Mar. 2017－

4,323,600

3,953,960

48,090

－

－

－

Note:
The redemption schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
One year or less
997,050

Over 1 year,
up to 2 years
1,007,980

Over 2 years,
up to 3 years
798,160

Over 3 years,
up to 4 years
573,810

Over 4 years,
up to 5 years
576,960

Over 3 years,
up to 4 years
6,978

Over 4 years,
up to 5 years
7,017

Millions of U.S. Dollars
One year or less
12,126

Over 1 year,
up to 2 years
12,259Over 2 years,
up to 3 years
9,707

7 Shinkin Central Bank35

13. Land Revaluation:
Based on the Law on the Revaluation of Land (Law 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.
Date of Revaluation: March 31, 1999
Revaluation method in accordance with Article 3-3 of Law 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 2-4 of theOrdinance Implementing the Law Concerning Land
Revaluation (Government Ordinance No. 119, dated March 31,
1998), with appropriate adjustments.
The difference between the total fair value at the end of thisfiscal year and the total post-revaluation book value of landthat is used for business and has been revalued pursuant to
Article 10 of Law 34.: 7,578 million ($92 million) as of March
31, 2012, and ¥7,801 million as of March 31, 2011.
14. Fees and Commissions:
The details of Fees and Commissions for the fiscal years ended
March 31, 2012 and 2011 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2012
2011
2012
Deposit, Fixed Income
655
632
7
Securities and Lending
454

497

5

Securities Related Business

5,904

6,147

71

Agency Business

2,191

2,132

26

Guarantee Business

3,876

3,349

47

Trustee Business

18,251

17,198

221

528

1,153

6

31,861

31,111

387

Exchange

121

128

1

Others

10,361

10,680126

Expenses on Fees andCommissions Businesses

10,483

10,808127

Exchange Business

OthersIncome on Fees andCommissions Businesses

8 Shinkin Central Bank

36

15. Trading Income:The details of Trading Income for the fiscal years ended March 31,
2012 and 2011 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2012
Income from Trading
Account Securities
Income from Trading-Related
Financial Derivatives
Other Trading Income
Total

2011

2012

530

352

6

14,41912,034

175

413

532

5

15,363

12,919186

16. Trading Losses:
The details of Trading Losses for the fiscal years ended March 31,
2012 and 2011 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2012
2011
2012
Expenses from26734
0Trading-Related Securities
Total

26

734

17. Other Expenses:
Other Expenses include Losses on sale of stocks and othersecurities and Losses on devaluation of stocks and other securities. The
amount of Losses on sale of stocks and other securities was ¥12,179
million ($148 million) and ¥10,056 million for the fiscal years ended
March 31, 2012 and 2011, respectively. The amount of Losses ondevaluation of stocks and other securities was ¥1,273 million ($15
million) and ¥4,575 million for the fiscal years ended March 31, 2012
and 2011, respectively.

018. Consolidated Statements of Comprehensive Income

Millions of㻌 For the fiscal year ended March 31, 2012

U.S. Dollars

Reclassification adjustment amount and tax effect amountrelated to Other Comprehensive Income
Millions of
Yen
Net Unrealized Gains on Other Securities:
The Amount Arising during the Period

200,733

Reclassification Adjustment Amount(33,681)

Prior to Tax Effect Adjustment

167,052

Tax Effect Amount(45,984)

Net Unrealized Gains on Other Securities

121,067

Net Deferred Gains (Losses) on Hedging Instruments :The Amount Arising during the Period(234,236)

Reclassification Adjustment Amount

111,998

Prior to Tax Effect Adjustment(122,237)

Tax Effect Amount34,190Net Deferred Gains (Losses) on Hedging Instruments(88,047)

Land Revaluation Excess:

Net Unrealized Gains on Other Securities:
The Amount Arising during the Period

2,441Reclassification Adjustment Amount(409)

Prior to Tax Effect Adjustment

2,031

Tax Effect Amount(559)

Net Unrealized Gains on Other Securities

1,472

Net Deferred Gains (Losses) on Hedging Instruments :The Amount Arising during the Period(2,848)

Reclassification Adjustment Amount

1,362

Prior to Tax Effect Adjustment(1,486)Tax Effect AmountNet Deferred Gains (Losses) on Hedging Instruments

415(1,070)Land Revaluation Excess:
The Amount Arising during the Period－

Reclassification Adjustment Amount－Prior to Tax Effect Adjustment－

Tax Effect Amount

9

Land Revaluation Excess

9

The Amount Arising during the Period－

Reclassification Adjustment Amount－Prior to Tax Effect Adjustment

Foreign Currency Translation Adjustments:－

Tax Effect Amount793

The Amount Arising during the Period(3)－Land Revaluation Excess

793

Reclassification Adjustment AmountPrior to Tax Effect Adjustment－

Tax Effect Amount－Foreign Currency Translation Adjustments:
The Amount Arising during the Period(286)

Reclassification Adjustment Amount－Prior to Tax Effect Adjustment－

Tax Effect Amount－Foreign Currency Translation Adjustments(286)

Other Comprehensive Income

33,526

Foreign Currency Translation Adjustments(3)

Other Comprehensive Income

407

9 Shinkin Central Bank37

19. 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, 2012
April 1, 2011 (Thousand
Year (Thousand Units)
Year (Thousand Units)(Thousand Units)
Units)
Shares Outstanding
General Common Shares

4,000

－

－

4,000

Preferred Shares (Type-A)

708

－

－

708

4,708

－

－

4,708

General 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, 2012
Resolution

Annual General Meeting of
Shareholders, June 22, 2011

Class of share

Total Dividend
Amount (Million Yen)

Common shares

10,0002,500

Mar 31, 2011

Jun 22, 2011

Preferred shares

4,603

6,500

Mar 31, 2011

Jun 22, 2011

In the case of dividends for which the record date falls in the fiscal year ended March 31, 2012, the effective date of the dividend falls in
the following fiscal year:
Resolution

Annual General Meeting of
Shareholders, June 20, 201210 Shinkin Central Bank

38

Class of share

Total Dividend
Amount (Million Yen)

Resource ofDividends

Amount Per Share(Yen)

Record Date

Effective Date

Common shares

10,000Retained Earnings

2,500

Mar 31, 2012

Jun 20, 2012

Preferred shares

4,603

Retained Earnings

6,500

Mar 31, 2012

Jun 20, 2012

20. Income Taxes:(1) Breakdown of Deferred Tax Assets and Liabilities is as follows:
Millions ofMillions of Yen
U.S. Dollars
2012

2011

2012

3,089

3,382

37

2,178

1,583

26

6,120

6,377

74

Write-Downs for Securities

11,18317,019136

Net Deferred Losses on
Hedging Instruments

33,058－402

Tax Loss Carryforwards

25,45532,082309

Others

2,537

3,295

30

Valuation Allowances(13,645)(20,532)(165)

Total Deferred Tax Assets

69,977

43,208851(12,756)(714)(1,132)

－

(406)

(519)

(4)

Total Deferred Tax Liabilities(59,148)(14,408)(719)

Net Deferred Tax Assets

10,82928,800131

Deferred Tax Assets:
Depreciation
Reserve for Possible Loan
LossesReserve for Employee
Retirement Benefits

Deferred Tax Liabilities:
Net Unrealized Gains on Other(58,742)
Securities
Net Deferred Gains on Hedging－
Instruments
Others(2) Reconciliation between the effective statutory tax rate and theactual effective tax rate for the fiscal years ended March 31, 2012
and 2011:

Statutory effective tax rateof the Income Tax Law, etc. for the Purpose of Creating a Taxation
System Responding to Changes in Economic and Social Structures(Law No. 114 of 2011) and the Law on Special Measures for Securing
Financial Resources Necessary to Implement Measures for
Reconstruction following the Great East Japan Earthquake (Law No.
117 of 2011) on December 2, 2011, the reduction in the corporate
income tax rate and the introduction of a new income tax (special
corporate tax for reconstruction) became effective for fiscal years
beginning on or after April 1, 2012.
In conjunction with these changes, the statutory tax rate used tomeasure deferred tax assets and liabilities for the temporary
differences estimated to be resolved in or after the fiscal year
beginning on April 1, 2012 was changed from the existing 31.26% to29.65% and will be 27.87% beginning from April 1, 2015 onward. As
a result of the change, deferred tax assets increased by ¥777 million($9 million), deferred tax liabilities edged down by ¥3 million ($0million), net unrealized gains on other securities increased by ¥7,334
million ($89 million), deferred gains (losses) on hedging instruments
decreased by ¥4,022 million ($48 million), and income taxes-deferredincreased by ¥2,532 million ($30 million). The deferred tax liabilities
related to land revaluations increased by ¥789 million ($9 million) andland revaluations increasing by the same amount.
21. Reserve for Employee Retirement Benefits:(1) Retirement Benefit Scheme
The Bank and some of its consolidated domestic subsidiaries
have a defined benefit plan that offers lump-sum payments uponretirement and contributes to the Employees’ Pension Fund for all
Shinkin Banks nationwide.
(2) Reserve for Employee Retirement Benefits as of March 31, 2012
and 2011 is analyzed as follows:
Millions ofMillions of Yen
U.S. Dollars
2012

2011

2012

2012

2011

Projected Benefit
Obligations (A)(41,086)(40,059)(499)

31.26 %

31.26 %

Plan Assets (B)16,82816,323

204

Unfunded Retirement
BenefitObligations (C) = (A) + (B)(24,257)(23,735)(295)

Unrecognized Actuarial
Differences (D)

3,415

4,735

41

Unrecognized Prior Service
Cost (E)(767)(1,363)(9)

Net Amounts Reported in theConsolidated Balance Sheet(F) = (C) + (D) + (E)(21,609)(20,363)

(262)

－

－

－

(21,609)(20,363)(262)(Adjustments)
Change in valuation allowances(15.36%)(0.88%)

Dividends received, not taxable(4.17%)(3.15%)

Reduction and Adjustment of Deferred
Tax Assets Due to Changes in Tax Rate

6.73 %－

Others1.07 %

1.22 %

Actual effective income tax rate after
the application of tax effect accounting

19.53 %

28.45 %

(3) Adjustment to Deferred Tax Assets and Deferred Tax Liabilities
Due to Changes in Corporate Income Tax Rate
Following the promulgation of the Law for Partial Amendment

Prepaid Pension Cost (G)Reserve for Employee
Retirement
Benefits (F) – (G)11 Shinkin Central Bank

39

Notes:1. The above projected benefit obligations included the governmental
welfare program.
2. The above projected benefit obligations on the lump-sum paymentof retirement benefit included amounts measured by consolidated
subsidiaries under the non-actuarial method.
(3) The breakdown of Pension Expenses for the fiscal years ended
March 31, 2012 and 2011 is as follows:
Millions ofMillions of Yen
U.S. Dollars
2012
2011
2012
Service Cost

1,332

1,243

16

Interest Cost

786

744

9

(163)

(79)

(1)

Expected Return on Plan
AssetsAmortization of Prior
Service Costs
Amortization of Actuarial
Differences
Others (e.g., Extraordinary
Retirement Benefits Paid
Out of the Scope of the
Retirement Benefit Scheme)

(595)

(702)

(7)

1,403

1,569

17

－

－

－

Net Pension Expenses

2,763

2,775

33

Notes:
1. The amounts paid by employees to the Employees’ Pension Fundare excluded from Service Cost.
2. The retirement benefit costs on the lump-sum payment of retirement
benefit for consolidated subsidiaries are included in Service Cost.
(4) Assumptions used in the calculation of the above information
were as follows:
2012

2011

Discount Rate

2.0 %

2.0 %

Expected Rate of Return on Plan
Assets

1.0 %

0.5 %

Method of Attributing the Projected Benefits to Periods of Services:
Straight-line basis
Amortization of Unrecognized Prior Service Costs:
10 years (Unrecognized prior service costs are amortized, using
the straight-line method within the average remaining service
years of the current employees)
Amortization of Unrecognized Actuarial Differences
10 years (Unrecognized actuarial differences will be amortizedfrom the following fiscal year, using the straight-line method
within the average remaining service years of the current
employees)

12 Shinkin Central Bank

40

Note:
The rate of retirement, the mortality rate and the rate of increase in
future compensation levels used in calculating the retirement benefit
obligations on the Employees’ Pension Fund are identical to thefigures used in the formula for the calculation of the Employees’
Pension Fund itself.

22. 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 in accordance with the ordinary lease transaction method(i) Leased property acquisition cost equivalents, accumulated depreciation equivalents, accumulated impairment loss equivalents, and net bookvalue equivalents
As of March 31, 2012
Millions of Yen
Acquisition Cost
Equivalents

Accumulated
Depreciation Equivalents

Accumulated Impairment
Loss Equivalents

Net Book Value
Equivalents

Tangible Fixed Assets

1,206

1,089

－

117

Intangible Fixed Assets

2,459

2,215

－

243

Total

3,665

3,304

－

361

Millions of U.S. Dollars
Acquisition Cost
Equivalents

Accumulated
Depreciation Equivalents

Accumulated Impairment
Loss Equivalents

Net Book Value
Equivalents

Tangible Fixed Assets

14

13

－

1

Intangible Fixed Assets

29

26

－

2

Total

44

40

－

4

As of March 31, 2011
Millions of Yen
Acquisition Cost
Equivalents

Accumulated
Depreciation Equivalents

Accumulated Impairment
Loss Equivalents

Net Book Value
Equivalents

Tangible Fixed Assets

1,228

909

－

319

Intangible Fixed Assets

2,936

2,238

－

698

Total

4,164

3,147

－

1,017

13 Shinkin Central Bank41

(ii) Future lease payments subsequent to the balance sheet dates are as follows:

Millions of U.S.
Dollars
2012

Millions of Yen
2012

2011

One year or less

367

699

4

More than one year

17

385

0

Total

385

1,084

4

Balance of accumulated impairment loss
on leased assets

－

－

－

(iii) Lease payments, reversal of allowance for accumulated impairment loss on leased assets, depreciation equivalents, interest expenseequivalents, and impairment loss for the fiscal years ended March 31, 2012 and 2011 are as follows:
Millions of U.S.
Millions of Yen
Dollars
2012
2011
2012
Lease Payments

699

806

8

Reversal of Allowance for Accumulated
Impairment Loss on Leased Assets

－

－

－

Depreciation Equivalents

656

757

7

Interest Expense Equivalents

12

25

0

Impairment Loss

－

－

－

(iv) Method for calculating depreciation equivalents
Depreciation equivalents are calculated using the straight-line method over the leasing periods for useful life and with a zero residual value.
(v) Method for calculating interest expense equivalents
Interest expense equivalents are regarded as the difference between the lease payments and the acquisition cost of the leased property, andthe allocation method for each consolidated fiscal year calculated by the interest method.
2. Operating Leases
Future lease payments related to noncancelable operating leases: Not applicable

14 Shinkin Central Bank42

23. Financial Instruments:
1. Matters concerning financial instruments(1) Policies on financial instruments
Shinkin Central Bank Group (the “Group”) works to ensure
the stable procurement of funds through the acceptance of deposits
mainly from its Shinkin Bank members and through the issuance ofdebentures. Additionally, the Group takes steps to diversify its
funding methods by procuring funds from short-term money
markets depending on market 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 fromthese financial 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 in transactions within the scopes of these risk
limits, and in this way works to preserve a sound management andto ensure stable earnings.
(2) Types and related risks of financial instruments
Financial assets held by the Group consist mainly of shortterm funds, securities, and loans assets.
Short-term funds are invested in the call loan and bills
markets 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, corporate bonds andothers as well as foreign securities such as government,
government-guaranteed, and government related institutional bonds
issued in the major industrialized countries. In addition, forinvestment diversification the Group also invests in equity securities
and investment funds.
These investments are exposed to market risks such as theindividual issuers’ credit risk, interest rate risk, price fluctuation risk,
and foreign currency risk, as well as market liquidity risk.
Loans assets consist of direct loans to low-risk borrowers
including Shinkin Banks, central and local governments, public
service corporations, blue chip private-sector corporations, andagency loans performed through Shinkin Banks.
These loans are exposed to counterparty credit risk andinterest rate 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 denominated deposits, most ofwhich are deposits from Shinkin Bank members.
These deposits are exposed to market risks such as interest
rate risk and foreign currency risk, as well as liquidity risk.
As a debenture issuer, the Group issues 5-year interest-bearing
debentures each month.
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, currency swaps, and currency options)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 market risks by mitigating (i)interest rate risk through interest rate swaps and (ii) foreign
currency risk of foreign denominated assets throughforeign-denominated funds procurement, currency swaps, and forex
swaps.
Hedge accounting is applied to risk hedges through ALM
activities including the use of derivatives. As for the hedge
accounting, hedged items, hedging methods, policies, and methodsof hedge effectiveness assessment, etc. are described in the“Significant Accounting Policies.”(3) Risk management frameworks for financial instruments
The basic policies for risk management of the Bank arebroadly distinguished between “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 market divisions.
For the comprehensive management of these risks, Risk
Management Division has been established.
<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 bymeasuring various risks using a uniform risk measure such as Valueat Risk (VaR), aggregating the measurements, and comparing theaggregated amounts with the strength of the Bank’s capital. The
Bank measures credit risks and market risks using VaR
methodology, and monitors on a daily basis to prevent risk limits
from being breached.
These risk limit amounts are reviewed each fiscal year by the
Risk Management Committee and determined at the Executive
committee. The values of risk, on the other hand, are measured at
the middle and end of each month by the Risk Management
Division, which takes steps to prevent any of the various risk limits
from being breached and, through an ALM Committee, reports
regularly to the management and relevant divisions.
The values of risk managed at consolidated subsidiaries areaggregated and 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 mutually independent tasks to ensure effective
internal checking functions.
The Credit Committee has been established as an organ for

15 Shinkin Central Bank

43

reviewing and determining matters related to credit risk
management. The Credit Committee is comprised of senior
management and general managers of related divisions anddeliberates on credit transactions that exceed a designated amount.
The Executive Committee deliberates on 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. They 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 whichfunds are used and repayment resources. In addition to appropriate
assessment and post-transaction management, they continuallycheck whether the client service division is conducting appropriate
credit control, and provides 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 by individual
borrower added to the credit risk of the Bank and monitored.
(ii) Market risk management
To maintain an accurate understanding of market risk andrigorously 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 inmarket operations, providing a risk management structure in whichinternal checks are maintained through independent functions.
The Bank has established the ALM Committee as the body
responsible for deliberating and making decisions on mattersrelating to market risk management. The ALM Committee iscomprised of senior management and heads of divisions related tomarket risk. Based on risk status information—obtained via reports
from divisions responsible for market risk management and othersources—the ALM Committee reviews broadly and in a timely
manner ALM related policies and market transactions for the Bank’s
fund-raising and management as well as the usage of hedging
transactions involving derivatives such as interest rate swaps.
Divisions responsible for market risk management 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 and managed according to risk limits
allocated to each category. Market risk management at the Bank notonly uses VaR methodology but takes multi-faceted approaches, thatis, monitoring sensitivity to change in individual risk factors such as
the interest rate risk based on outlier standard and the basis pointvalue (BPV; the amount of the change in a portfolio’s market value
from a specific change in the interest rate), stress loss amounts from
unexpected market changes, and appraisal losses from financial
instruments. For stress loss amounts, in particular, a supplementary
framework has been incorporated into the integrated risk
16 Shinkin Central Bank

44

management, in addition to the above monitoring system. In thisway, market risks including those that cannot be captured throughVaR methods alone are managed.
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 parent operations but aremanaged 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,with regard 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-equivalent amount under the regulations on banks’ capital ratio.
The market risk amount (estimated loss amount) of the Bank’s
trading operations was ¥251 million ($3 million) as of March 31,
2012 and ¥416 million as of March 31, 2011 and the market risk
amount (estimated loss amount) of the trading operations of theBank’s consolidated subsidiaries was ¥1,204 million ($14 million)
as of March 31, 2012 and ¥1,129 million as of March 31, 2011.
The Bank conducts back testing to compare VaR calculatedusing the model with actual loss amounts. Based on the results ofback testing covering the fiscal year ended March 31, 2012, theactual loss amount exceeded the VaR model on one occasion, andthe Bank believes that the measurement model it uses has anadequate level of accuracy to capture market risk. However, it
should be noted that VaR measures the amount of market risk atcertain probability levels statistically calculated based on historicalmarket fluctuation. Hence, there may be cases where market risk
cannot be captured in situations where market conditions change
unprecedentedly.
(b) Financial instruments other than those held for trading
purposes
The Bank uses VaR analysis for quantifying market risk ofdue from banks, securities not held for trading purposes, loans andbills discounted, deposits, debentures, receivables under securities
borrowing transactions and, within derivative transactions,interest-rate and foreign-exchange instruments not held for trading
purposes. The VaR model is based on the delta method and uses a
99.0% confidence interval, a holding period of one year and an
observation period of five 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 inaccordance with methods used by the Bank.
The Group’s market risk amount (estimated loss amount)
other than for trading purposes was ¥314,373 million ($3,823
million) as of March 31, 2012 and ¥314,857 million as of March 31,
2011. The Bank conducts back testing to compare VaR calculated

using the model with actual loss amounts. 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 ofliquidity risk, the Bank has established liquidity risk management
policies. Divisions responsible for liquidity risk management areclearly separated from divisions involved in cash management andmarket operations, allowing internal checks to be maintained
through the independent 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 of risk limit amounts relating to the gap
between cash receipts and payments. This is carried out forindividual currencies and periods. In the event that a significant
liquidity risk arises, the Bank has preparations to respond rapidly,
including the securing of funding sources.
The liquidity risk management frameworks created by the
Bank include subsidiaries as well, by providing overdraft facilities
for consolidated subsidiaries with operations involving fundmovements in relatively large amounts.
(4) Supplementary explanation concerning the fair values of  
financial instruments
Fair values of financial instruments, in addition to values
based on market prices, also include values based on reasonableestimates if market prices are unavailable. Since value estimates are
predicated on certain assumptions, values may vary if theunderlying assumptions change.

17 Shinkin Central Bank45

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 andsimilar 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, 2012
Millions of Yen
Carrying ValueFair Value

Difference(1) Cash and Due from Banks

1,963,108

1,963,108－(2) Bills Bought and Call Loans

663,867

663,867－(3) Receivables under Resale Agreements

73,99073,990－(4) Receivables under Securities Borrowing Transactions

71,52971,529－(5) Monetary Debts Purchased (※1)

392,893392,736(157)

Trading Securities

401,745

401,745－(7) Money Held in Trust

181,193

181,193－Held-to-Maturity Debt Securities

4,089,392

4,199,927

110,535

Other Securities

16,236,328

16,236,328－(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (※1)

5,374,701(23,548) 

5,351,153

5,404,185

53,032

Total Assets

29,425,203

29,588,614

163,410(1) Deposits

21,595,878

21,613,518

17,640(2) Debentures

3,953,960

3,996,691

42,731

61,394

61,394－(4) Borrowed Money792,410

811,782

19,372(5) Bills Sold and Call Money

497,739497,739－(6) Payables under Securities Lending Transactions

1,605,617

1,605,617－Total Liabilities

28,506,999

28,586,744



(3) Trading Liabilities
Trading Bonds Sold

Derivatives (※2)
To which Hedge Accounting was not applied(1,599)(1,599)－To which Hedge Accounting was applied

79,07856,270(22,807)77,47954,671(22,807)

Total Derivatives

18 Shinkin Central Bank

46



Millions of U.S.Dollars
Carrying ValueFair Value

Difference(1) Cash and Due from Banks

23,87623,876－(2) Bills Bought and Call Loans

8,074

8,074

－

(3) Receivables under Resale Agreements

899

899

－

(4) Receivables under Securities Borrowing Transactions

869

869

－

4,778

4,776

(1)

Trading Securities

4,886

4,886

－

(7) Money Held in Trust

2,203

2,203

－

Held-to-Maturity Debt Securities

49,73751,081

1,.344

Other Securities

197,474

197,474－(5) Monetary Debts Purchased (※1)
(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (※1)

65,369(286)

65,08365,728645

Total Assets

357,883

359,871

1,987(1) Deposits

262,659

262,874214(2) Debentures

48,09048,609519(3) Trading Liabilities
746

746

－

(4) Borrowed Money

9,637

9,873

235

(5) Bills Sold and Call Money

6,053

6,053

－

Trading Bonds Sold

(6) Payables under Securities Lending Transactions

19,52819,528－Total Liabilities

346,716

347,686To which Hedge Accounting was not applied

(19)

(19)

－

To which Hedge Accounting was applied

961

684

(277)

942

664

(277)

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.

19 Shinkin Central Bank47

As of March 31, 2011
Millions of Yen
Carrying ValueFair Value

Difference(1) Cash and Due from Banks

2,026,383

2,026,383－(2) Bills Bought and Call Loans

750,984

750,984－(3) Receivables under Resale Agreements

86,98386,983－(4) Receivables under Securities Borrowing Transactions

93,138

93,138－(5) Monetary Debts Purchased (※1)

495,572495,277(294)

Trading Securities

402,984

402,984－(7) Money Held in Trust

211,106

211,106－

Held-to-Maturity Debt Securities

4,271,910

4,359,087

87,176

Other Securities

16,985,180

16,985,180－(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (※1)

5,254,813(17,892)

 

5,236,920

5,286,425

49,504

Total Assets

30,561,166

30,697,553

136,387(1) Deposits

21,569,331

21,597,846

28,515(2) Debentures

4,323,600

4,377,850

54,250(3) Trading Liabilities
78,87378,873－(4) Borrowed Money630,950

657,681

26,731(5) Bills Sold and Call Money435,272

435,272－

Trading Bonds Sold

(6) Payables under Securities Lending Transactions

2,843,378

2,843,378－Total Liabilities

29,881,405

29,990,901

109,496

2,921

2,921

－

284,174

301,466

17,291

287,096

304,388

17,291

Derivatives (※2)
To which Hedge Accounting was not applied
To which Hedge Accounting was 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.
Note1: Calculation method of fair value for financial instruments
Assets(1) Cash and Due from Banks
For deposits without maturities, since fair value approximates carrying value, carrying value is used as fair value. For deposits withmaturities, present value is calculated by discounting based on the interest rate that would conceivably be applied to newly made deposits.
(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 or at reasonably calculated amounts as fair value.
Reasonably calculated amounts are determined by the discounted cash flow method using the discount rates of comparable assets as themain variable input for price determination.
(6) Trading Assets

20 Shinkin Central Bank

48

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
the exchanges in the case of listed equity shares and at market prices in the case of bonds.
(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
the quoted market prices and other applicable information at the balance sheet date.
Floating-Rate Japanese Government Bonds
The Bank believes that current market prices may not accurately reflect fair value due to very limited volume of actual transactions
continuously. The Bank used a valuation technique at the end of the fiscal year which management believes provided a reasonable estimate of
the bond's fair value. As a result of this change, the fair value and the net unrealized gains of Securities increased by ¥9,922 million ($120
million) as of March 31, 2012 and ¥24,205 million as of March 31, 2011 with regard to the Held-to-Maturity Debt Securities, compared toamounts determined by using market prices as basis for the fair value. Moreover, the fair value increased by ¥20,907 million ($254 million) as
of March 31, 2012 and ¥39,562 million as of March 31, 2011, Net Unrealized Gains on Other Securities increased by ¥15,080 million ($183
million) as of March 31, 2012 and ¥27,194 million as of March 31, 2011 and Deferred Tax Assets decreased by ¥5,826 million ($70 million) as
of March 31, 2012 and ¥12,367 million as of March 31, 2011 with regard to the Other Securities, compared to amounts determined by using
market prices as basis for fair value.
Fair value based on management's reasonable estimates for Floating-Rate Japanese Government Bonds was calculated using thediscounted cash flow approach and others, with the primary price variables including government bond yields and swaption volatility andothers.
Securitized Products
Fair values for overseas Collateralized Loan Obligations (CLOs) and some other securitized products were previously determined basedon price information received from brokers. However, the bank believes that broker quotes do not accurately reflect fair values continuously
because of the very low frequency with which these products are traded and the significant gap in prices desired by sellers and buyers. Fairvalues for these securities, therefore, have been determined using a valuation technique which management believes provided a reasonableestimate of securities' fair value at the end of the fiscal year.
As a result of this change, the fair value and the net unrealized gains of Securities increased by ¥26,543 million ($322 million) as ofMarch 31, 2012 and ¥22,385 million as of March 31, 2011 with regard to the Held-to-Maturity Debt Securities, compared to amounts
determined by using price information received from brokers as basis for the fair value. Moreover, the fair value increased by ¥10,751 million($130 million) as of March 31, 2012 and ¥11,719 million as of March 31, 2011, Net Unrealized Gains on Other Securities increased by ¥7,755
million ($94 million) as of March 31, 2012 and ¥8,056 million as of March 31, 2011 and Deferred Tax Assets decreased by ¥2,996 million ($36
million) as of March 31, 2012 and ¥3,663 million as of March 31, 2011 with regard to the Other Securities.
The securitized products for which fair values are stated based on management's estimates include CLOs with secured loans to overseas
companies as underlying assets and other similar investments with a stated value of ¥491,696 million ($5,980 million) as of March 31, 2012 and¥546,402 million as of March 31, 2011 on the consolidated balance sheets at the end of the fiscal year.
Fair values based on management’s reasonable estimates for these products were calculated using the discounted cash flow approach withthe primary price variables including default rates for similar assets, recovery rates, early redemption rates, and discount rates.
Notes concerning securities categorized by holding purpose are stated in “Securities (Information related to securities).”(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, categorizedby type 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, sincefair value approximates carrying value, carrying value is used as fair value.
With regard to loans to borrowers in bankruptcy, in quasi-bankruptcy, or at risk of bankruptcy, the Bank estimates loan loss based on thepresent value of estimated future cash flows or the estimated recoverable value from collateral and guarantees. Since fair value therefore
approximates the balance sheet carrying value as of the balance sheet date less the current estimated loan loss, carrying value reduced by theestimated loan loss is used as fair value of loans.
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,
fair value is calculated by discounting future cash flows to present value. The discount rate is the interest rate that would be applicable to newly
made deposits. For term deposits with short contractual maturities, since fair value approximates carrying value, carrying value is used as fairvalue.
(2) Debentures
For debentures issued by the Bank, market prices are used as fair value.
21 Shinkin Central Bank49

(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 theinterest 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, and (6) 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
Derivative transactions consist of interest-rate-related transactions (interest rate futures, interest rate options, interest rate swaps, etc.),
currency-related transactions (currency futures, currency options, currency swaps, etc.), and bond-related transactions (bond futures, bond future
options, etc.), and are stated at exchange-traded transaction prices, discounted present value, and amounts calculated using option pricing
models, etc.
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

Millions of Yen

Millions of Yen

Millions of U.S.Dollars

2012

2011

2012

Unlisted stocks, etc.(※1)
Investment in investment partnerships(※2)
Total

258,400

255,600

3,142

8,178

3,975

99

266,578259,575

3,242※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.
Note 3: Amounts of monetary claims and securities with maturities scheduled for redemption after the consolidated balance sheet date
As of March 31, 2012
Millions of Yen
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

1,905,631
663,867
73,99034,660
－
－

1,000
－
－

1,000
－
－

1,000
－
－

－
－
－

71,529

－

－

－

－

－

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
Corporate Bonds
Other Securities with maturities
Japanese Government Bonds
Municipal Government Bonds
Corporate Bonds
Loans and Bills Discounted (※2)

7,402

19,942

52,072

14,547

11,275288,514810,410630,61052,062103,998
3,791,456
2,672,500
66,365331,508
2,715,014

1,374,982
1,117,900
29,355
171,383
3,341,646
1,590,000
85,406400,234
1,316,565

386,306
360,300－
15,4001,834,253
1,046,400
41,497
244,577
562,073

738,018
701,400
200－
905,308
672,100
7,649
127,027
274,879

270,61292,500200－
3,311,413
2,745,000
10,08811,360291,764

517,210442,000－－
1,808,159
1,415,000－
3,500
205,785

Total

10,039,303

6,087,797

2,835,706

1,933,753

3,886,065

2,819,670

22 Shinkin Central Bank

50

Within 1 year

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

Over 7 years,
within 10 years

Over 10 years

23,177
8,074
899

421
－
－

12
－
－

12
－
－

12
－
－

－
－
－

869

－

－

－

－

－

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
Corporate Bonds
Other Securities with maturities
Japanese Government Bonds
Municipal Government Bonds
Corporate Bonds
Loans and Bills Discounted (※2)

90

242

633

176

137

3,509

9,856
7,669
633
1,264
46,11332,504807
4,031
33,021

16,723
13,596357
2,084
40,642
19,338
1,038
4,867
16,012

4,698
4,382
－
187
22,30912,726
504
2,974
6,836

8,976
8,530
2
－
11,010
8,174
93
1,544
3,343

3,291
1,125
2
－
40,27533,386
122
138
3,548

6,290
5,375
－
－
21,991
17,209
－
42
2,502

Total

122,102

74,042

34,48923,51947,26434,294※1. Current deposits, ordinary deposit, deposits at notice, and transfer deposits, included in “Due from banks,” are stated under amounts
redeemable “Within 1 year.”※2. Of Loans and Bills Discounted, claims of ¥8,972 million ($109 million) to borrowers in bankruptcy, borrowers in quasi-bankruptcy, andborrowers at risk of bankruptcy, etc, are excluded since their redemption cannot be expected.
As of March 31, 2011
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

1,954,786
750,984
86,98354,890
－
－

6,000
－
－

1,000
－
－

1,000
－
－

－
－
－

93,138

－

－

－

－

－

Due from Banks (※1)
Bills Bought and Call Loans
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
Corporate Bonds
Loans and Bills Discounted (※2)

13,02825,346

48,391

5,417

24,041

380,747

157,421
100,700
11,26720,00020,405
1,970,048
900,000
57,553
184,692
2,414,196

1,936,582
1,542,810
81,417－
246,938
5,807,692
3,482,500
112,576
533,337
1,401,208

345,793282,300－－
43,843
1,852,123
910,000
62,498234,920
683,332

648,695
619,400－－－
601,898
385,000
10,741
3,075
228,671591,098
457,000400－－
3,305,682
2,842,000
29,19323,568289,125595,114442,000－－－
2,361,271
1,800,000－
3,500
228,379

Total

7,440,589

9,225,719

2,935,641

1,485,683

4,210,947

3,565,513※1. Current deposits, ordinary deposit, deposits at notice, and transfer deposits, included in “Due from banks,” are stated under amounts
redeemable “Within 1 year.”※2. Of Loans and Bills Discounted, claims of ¥9,096 million to borrowers in bankruptcy, borrowers in quasi-bankruptcy, and borrowers at risk ofbankruptcy, etc, are excluded since their redemption cannot be expected.

23 Shinkin Central Bank

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, 2012
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)

11,998,156

8,288,612

1,286,920

4,690

17,498－Debentures

997,050

1,806,140

1,150,770－－－

Borrowed Money (※2)

155,310－－

201,960

108,150－

Bills Sold and Call Money

497,739

－

－

－

－

－

Payables under Securities Lending
Transactions

1,605,617

－

－

－

－

－

Total

15,253,872

10,094,752

2,437,690

206,650

125,648－

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

Over 7 years,
within 10 years

Over 10 years

Deposits (※1)

145,927

100,810

15,65257

212－

Debentures

12,126

21,967

13,996－－－

Borrowed Money (※2)

1,888

－

－

2,456

1,315

－

Bills Sold and Call Money

6,053

－

－

－

－

－

Payables under Securities Lending
Transactions

19,528

－

－

－

－

－

Total

185,525

122,777

29,648

2,513

1,528

－

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years※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, 2011
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Deposits (※1)

12,143,484

8,925,981

488,063－

11,802－

Debentures

954,000

1,992,520

1,377,080－－－

Borrowed Money (※2)

2,000

－

－

301,960－－

Bills Sold and Call Money435,272

－

－

－

－

－

Payables under Securities Lending
Transactions

2,843,378

－

－

－

－

－

Total

16,378,134

10,918,501

1,865,143

301,960

11,802－※1. Demand deposits, included in “Deposits,” are stated under amounts payable “Within 1 year.”※2. Borrowed Money without maturity is not included.

24 Shinkin Central Bank52

24. 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), Cash and Due from Banks (negotiable certificates of deposit) and Monetary Debts Purchased (loaned claims in trust) in the
consolidated balance sheets.
(1) Trading Securities

Net Unrealized Gains (Losses)
Recognized as Income

Millions of Yen
2012
71

Millions of Yen
2011

Millions of U.S. Dollars
2012

24

0

(2) Held-to-Maturity Debt Securities
As of March 31, 2012
Millions of Yen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



Items with Fair
Value notExceeding Carrying
Value

3,284,427
81,825－274,841
344,262
3,985,357
85,263100
－17,432
4,054
106,850

3,362,337
82,365－
275,840
375,687
4,096,231
85,208100－
17,2034,000
106,511

4,092,207

4,202,743



Unrealized
Gains (Losses)
77,910540－
998
31,424
110,873
(55)
(0)
－
(229)
(53)
(338)
110,535

Millions of U.S. Dollars
Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Fair 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

Unrealized
Gains (Losses)

39,946
995
－
3,342
4,187
48,471
1,037
1
－
212
49
1,299

40,894
1,001
－
3,354
4,569
49,820
1,036
1
－
209
48
1,295

947
6
－
12
382
1,348
(0)
(0)
－
(2)
(0)
(4)

49,771

51,115

1,344

25 Shinkin Central Bank53

As of March 31, 2011
Millions of Yen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

3,007,115
92,10019,990145,369
353,5543,618,129
475,296
1,286
－
168,470
12,080657,134

3,063,732
92,94519,992
146,229
383,8113,706,710
474,484
1,284
－
168,070
11,890655,730

4,275,263

4,362,440(3) Other Securities
As of March 31, 2012

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

26 Shinkin Central Bank

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

Unrealized
Gains (Losses)
56,617844
2859
30,256
88,580
(812)
(1)
－
(400)
(190)
(1,403)87,176

Millions of Yen 

Fair Value

Carrying Value
9,062
10,953,799
9,673,064
210,852－
1,069,882
3,292,151
14,255,014
38,603823,097
750,674
4,024－
68,3991,652,180
2,513,881
16,768,895

Acquisition Cost
6,353
10,770,566
9,500,012
207,920－
1,062,632
3,213,353
13,990,273
43,870823,445
750,756
4,035－
68,653
1,672,356
2,539,673
16,529,946

Unrealized
Gains (Losses)
2,709
183,233
173,051
2,932
－
7,250
78,797
264,740(5,267)
(347)
(82)
(10)
－
(254)
(20,176)(25,792)
238,948

Millions of U.S. Dollars


Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others110
133,225
117,648
2,564－
13,01240,04077
130,996
115,5432,528－
12,92439,082

Unrealized
Gains (Losses)
32
2,228
2,104
35
－
88
958

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

173,376469
10,010
9,130
48
－
831
20,09430,575203,951

170,156533
10,015
9,131
49
－
834
20,34030,888201,045

3,219
(64)
(4)
(1)
(0)
－
(3)
(245)
(313)
2,906

 

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

Carrying Value

As of March 31, 2011

Millions of Yen 

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

Carrying Value
21,995
7,198,947
6,343,337
241,918－
613,692
3,172,839
10,393,783
57,006
4,585,016
4,170,262
35,141－
379,6122,649,307
7,291,330
17,685,114

Acquisition Cost
17,352
7,095,812
6,249,867
238,395－
607,550
3,122,706
10,235,872
65,436
4,609,943
4,193,543
35,358－381,0422,696,624
7,372,004
17,607,876

Unrealized
Gains (Losses)
4,643
103,135
93,469
3,522
－
6,142
50,132
157,911(8,429)(24,926)(23,281)(216)－(1,429)(47,316)(80,673)
77,238(4) Held-to-Maturity Debt Securities Sold during the Fiscal Year
Not applicable.

27 Shinkin Central Bank55

(5) Other Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2012
Millions of Yen  Amounts ofSecurities Sold 

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks

41,713

2,815

8,629

Bonds

1,717,263

54,619

1,382

Japanese Government Bonds

1,688,405

53,373

1,382

Municipal Government Bonds

28,8581,245

0Short-Term Corporate Bonds

－

－

－

Corporate Bonds

－

－

－

Others918,147

23,01623,265

Total

2,677,124

80,451

33,278Millions of U.S. Dollars   Amounts ofSecurities Sold 

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks

507

34

104

Bonds

20,886664

16Japanese Government Bonds

20,535649

16

Municipal Government Bonds

350

15

0

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

－

－

－

Others

11,166

279

282

Total

32,560978404

For the Fiscal Year Ended March 31, 2011
Millions of Yen

  

 

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks64,162

6,782

10,056

Bonds

2,682,226

17,4707,726Japanese Government Bonds

2,682,226

17,4707,726

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

－

－

－

Others1,380,896

9,893

8,653

Total

4,127,284

34,14626,43628 Shinkin Central Bank

56

Amounts ofSecurities Sold

(6) Impaired Securities
Securities (other than Trading Securities) with a quoted market price, if the market price of certain security falls by 30% or more of
the book value, and with the percentage of decline over a certain past period taken into account, its market price is not expected torecover to the acquisition price, the value of the security presented in the consolidated balance sheets is revised to the amount of themarket price. In addition, valuation differences are recorded as impairment loss in the fiscal year.
In this fiscal year ended March 31, 2012, impairment loss of ¥2,325 million ($28 million) was recorded for stocks of ¥1,273 million($15 million) and others of ¥1,052 million ($12 million).
In the previous fiscal year ended March 31, 2011, impairment loss of ¥4,575 million was recorded for stocks.

2. Money Held in Trust(1) Money Held in Trust for Trading Purposes
As of March 31, 2012
Millions of Yen

Money Held in Trust for
Trading Purposes

Carrying Value

Unrealized Gains (Losses)
Recognized as Income

181,193(102)

Carrying Value
Money Held in Trust for
Trading Purposes

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

2,203

(1)

As of March 31, 2011
Millions of Yen

Money Held in Trust for
Trading Purposes

Carrying Value

Unrealized Gains (Losses)
Recognized as Income

211,106(350)(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.

29 Shinkin Central Bank

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, 2012
Millions of U.S.
Millions of Yen
Dollars
Other Securities

215,591

2,622

－

－

Net Unrealized Gains

215,591

2,622

Deferred Tax Liabilities

58,741714

Net Unrealized Gains(Prior to Equity Method Adjustment)

156,850

1,907

Minority Interests’ Portion－－

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

156,850

1,907

Other Money Held in Trust

Net Unrealized Gains

Note:
Unrealized Gains on foreign currency translations of foreign currency-denominated other securities without fairmarket value are included in “Other Securities” under “Net Unrealized Gains”.
As of March 31, 2011
Millions of Yen
Other Securities
Other Money Held in Trust

48,539－Net Unrealized Gains

48,539Deferred Tax Liabilities

12,756

Net Unrealized Gains(Prior to Equity Method Adjustment)

35,783

Minority Interests’ Portion－

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

Net Unrealized Gains

35,783

Note:
Unrealized Gains on foreign currency translations of foreign currency-denominated other securities without fairmarket value are included in “Other Securities” under “Net Unrealized Gains”.

30 Shinkin Central Bank58

25. Derivatives:
1. Derivative transactions to which hedge accounting was not applied
The following summarizes the contract values or the contracted principal equivalents, fair values, net unrealized gains (losses) and thevaluation methods of the fair values of the Bank’s derivative transactions that do not qualify for hedge accounting as of the consolidatedbalance sheet date, which were classified by types of financial instruments. 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, 2012
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:


Sold

－

－

－

－



Bought－－－－Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Over the Counter Transactions
Interest Rate Forwards:


Sold

－

－

－

－



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

12,815,183

10,381,479

213,712

213,712

Variable Rate Receivable/Fixed Rate Payable

12,858,842

9,751,496(185,397)(185,397)

Variable Rate Receivable/Variable Rate Payable

40,00025,00023

23

Fixed Rate Receivable / Fixed Rate Payable

110,000

110,000

1,636

1,636

Interest Rate Swaps:

Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Others:Sold3,542,400

1,955,400(33,249)(1,602)

Bought

3,083,703

2,093,270

1,223(8,466)－－(2,052)

19,905Total

31 Shinkin Central Bank

59

Millions of U.S. Dollars
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:


Sold

－

－

－

－



Bought－－－－Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Over the Counter Transactions
Interest Rate Forwards:


Sold

－

－

－

－



Bought－－－－Interest Rate Swaps:
Fixed Rate Receivable/Variable Rate Payable

155,864

126,264

2,599

2,599



Variable Rate Receivable/Fixed Rate Payable

156,395

118,602(2,254)(2,254)

486

304

0

0

1,337

1,337

19

19

Variable Rate Receivable/Variable Rate Payable
Fixed Rate Receivable/ Fixed Rate PayableInterest Rate Options:


Sold

－

－

－

－



Bought－－－－Others:Sold

43,08423,782

(404)

(19)



Bought37,50525,459

14

(102)

－

－

(24)

242

Total

Notes:
1. Transactions mentioned above were valued at fair value, and Net Unrealized Gains (Losses) were accounted for in the consolidated
statements of income.
2. Fair value calculation: Over the counter transactions were valued using discounted present value or calculation models for option prices,etc.

32 Shinkin Central Bank60

As of March 31, 2011
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:


Sold

－

－

－

－



Bought－－－－Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Over the Counter Transactions
Interest Rate Forwards:


Sold

－

－

－

－



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

14,086,667

10,187,357

169,893

169,893

Variable Rate Receivable/Fixed Rate Payable

14,883,739

9,547,704(157,031)(157,031)

Variable Rate Receivable/Variable Rate Payable

62,00040,00063

63

Fixed Rate Receivable / Fixed Rate Payable

110,000

110,000

2,721

2,721

Interest Rate Swaps:

Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Others:Sold

3,187,400

1,640,400(25,157)(3,057)

Bought2,316,938

1,702,620

12,346

3,760

－

－

2,836

16,350Total

Notes:
1. Transactions mentioned above were valued at fair value, and Net Unrealized Gains (Losses) were accounted for in the consolidated
statements of income.
2. Fair value calculation: Over the counter transactions were valued using discounted present value or calculation models for option prices,etc.

33 Shinkin Central Bank61

(2) Currency-Related Transactions
As of March 31, 2012
Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value
Exchange-Traded Transactions
Currency Futures:

Net Unrealized
Gains (Losses)

Fair Value










   Sold

－

－

－

－

   Bought

－

－

－

－

  Currency Options:









   Sold

－

－

－

－

   Bought

－

－

－

－

Over the Counter Transactions



80,851

49,633

1,535

1,535

   Sold

32,866

－

(496)

(496)

   Bought

52,666

－

532

532

   Sold

－

－

－

－

   Bought

－

－

－

－

   Sold

－

－

－

－

   Bought

－

－

－

－

Total

－

－

1,571

1,571

  Currency Swaps:  Forward Foreign Exchange Contracts:  Currency Options:  Others:

34 Shinkin Central Bank

62

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

Total Contract
Value

Net Unrealized
Gains (Losses)

Fair Value

Exchange-Traded Transactions









Currency Futures:









   Sold

－

－

－

－

   Bought

－

－

－

－

  Currency Options:









   Sold

－

－

－

－

   Bought

－

－

－

－

Over the Counter Transactions





983

603

18

18

   Sold

399

－

(6)

(6)

   Bought

640

－

6

6

   Sold

－

－

－

－

   Bought

－

－

－

－

   Sold

－

－

－

－

   Bought

－

－

－

－

Total

－

－

19

19

  Currency Swaps:  Forward Foreign Exchange Contracts:  Currency Options:  Others:

Notes:
1. Transactions mentioned above were valued at fair value, and Net Unrealized Gains (Losses) were accounted for in the consolidated
statements of income.
2. Fair value calculation: Over the counter transactions were valued using discounted present value, etc.

35 Shinkin Central Bank63

As of March 31, 2011
Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value
Exchange-Traded Transactions
Currency Futures:

Net Unrealized
Gains (Losses)

Fair Value










   Sold

－

－

－

－

   Bought

－

－

－

－

  Currency Options:









   Sold

－

－

－

－

   Bought

－

－

－

－

Over the Counter Transactions



101,487

81,794

2,263

2,263

   Sold

54,128－(1,251)(1,251)   Bought

40,490

－

553

553

   Sold

－

－

－

－

   Bought

－

－

－

－

   Sold

－

－

－

－

   Bought

－

－

－

－

Total

－

－

1,565

1,565

  Currency Swaps:  Forward Foreign Exchange Contracts:  Currency Options:  Others:

Notes:
1. Transactions mentioned above were valued at fair value, and Net Unrealized Gains (Losses) were accounted for in the consolidated
statements of income.
2. Fair value calculation: Over the counter transactions were valued using discounted present value, etc.

(3) Stock-Related Transactions
Not applicable.

36 Shinkin Central Bank64

(4) Bond-Related Transactions
As of March 31, 2012
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:


Sold

7,659

－

(8)

(8)



Bought

5,678

－

1

1

－

－

－

－

12,000－18(3)

Bond Futures Options:


Sold



BoughtOver the Counter Transactions
Bond Options:


Sold

－

－

－

－



Bought－－－－Others:


Sold

－

－

－

－



Bought

－

－

－

－

－

－

11

(10)

Total

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

Fair ValueNet Unrealized
Gains (Losses)

93
69

－
－

(0)
0

(0)
0

Total
Contract
Value
Exchange-Traded Transactions
Bond Futures:


Sold



BoughtBond Futures Options:



Sold

－

－

－

－



Bought

145

－

0

(0)

Over the Counter Transactions
Bond Options:


Sold

－

－

－

－



Bought－－－－Others:


Sold

－

－

－

－



Bought

－

－

－

－

－

－

0

(0)

Total

Notes:
1. Transactions mentioned above were valued at fair value, and Net Unrealized Gains (Losses) were accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions on exchanges were valued on the basis of closing prices, mainly on the Tokyo Stock Exchange.

37 Shinkin Central Bank65

As of March 31, 2011
Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

Total
Contract
Value

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:


Sold



Bought17,315

－

11

11

－

－

－

－

Bond Futures Options:


Sold

－

－

－

－



Bought

－

－

－

－

Sold

－

－

－

－

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

Others:


Sold

－

－

－

－



Bought

－

－

－

－

－

－

11

11

Total

Notes:
1. Transactions mentioned above were valued at fair value, and Net Unrealized Gains (Losses) were accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions on exchanges were valued on the basis of closing prices, mainly on the Tokyo Stock Exchange.

(5) Commodity-Related Derivative Transactions
Not applicable.

(6) Credit Derivative Transactions
Not applicable.

38 Shinkin Central Bank66

2. Derivative transactions to which hedge accounting was applied
The following summarizes the contract values or the contracted principal equivalents, fair values and the valuation methods of the Bank’s
derivative transactions that qualify for hedge accounting as of the consolidated balance sheet date, which were classified by types of financial
instruments. 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, 2012
Method for Hedge
Accounting
Basic Treatment



Items

Fair Value

Fixed Rate Receivable/Variable Rate Payable

2,385,000

1,300,000

9,896

Variable Rate Receivable/Fixed Rate Payable

3,986,892

3,840,253(141,553)

Variable Rate Receivable/Variable Rate Payable

92,206

92,206(4,937)

Fixed Rate Receivable/Variable Rate Payable

1,791,000

1,270,000

15,891

Variable Rate Receivable/Fixed Rate Payable

885,000

885,000(38,699)－－(159,401)

Interest Rate Swaps



Total

Method for Hedge
Accounting

Total Contract
Value

Interest Rate Swaps

Exceptional
Treatments forInterest Rate
Swaps

Basic Treatment

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

Items

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

Total Contract
Value

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

29,007

15,811

120

Variable Rate Receivable/Fixed Rate Payable

48,49046,707(1,721)

Variable Rate Receivable/Variable Rate Payable

1,121

1,121

(60)

Fixed Rate Receivable/Variable Rate Payable

21,783

15,446

193

Variable Rate Receivable/Fixed Rate Payable

10,763

10,763

(470)

－

－

(1,938)

Exceptional
Treatments forInterest Rate
Swaps

Interest Rate Swaps



Total

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 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, “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in Banking Industry”.
4. Fair value calculation for these transactions was carried out using discounted present value.

39 Shinkin Central Bank67

As of March 31, 2011
Method for Hedge
Accounting
Basic Treatment

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

2,725,000

1,770,000

13,831

Variable Rate Receivable/Fixed Rate Payable

4,761,302

4,586,568(35,366)

Variable Rate Receivable/Variable Rate Payable

97,72597,725848

Fixed Rate Receivable/Variable Rate Payable

2,021,000

1,431,000

25,845

Variable Rate Receivable/Fixed Rate Payable

885,000

885,000(8,554)－－(3,395)

Exceptional
Treatments forInterest Rate
Swaps

Interest Rate Swaps



Total

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 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, “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in Banking Industry”.
4. Fair value calculation for these transactions was carried out using discounted present value.

(2) Currency-Related Transactions
As of March 31, 2012
Method for Hedge
Accounting
Basic Treatment

Millions of Yen
Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value
1,037,908

Fair Value

623,860

4,349

Forward Foreign Exchange Contracts:
641,535－(20,311)㻌 Bought㻌㻌 Sold㻌

－

－

－



Total

－

－

(15,962)Method for Hedge
Accounting
Basic Treatment

Millions of U.S.Dollars
Items

Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value
12,623

Fair Value

7,587

52

Forward Foreign Exchange Contracts:
㻌 Sold㻌

7,802

－

(247)



㻌 Bought㻌

－

－

－



Total

－

－

(194)

40 Shinkin Central Bank

68

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, “Accounting and Auditing Treatment of Accounting Standards for Foreign Currency Transactionsin the Banking Industry”.
3. Fair value calculation for these transactions was carried out using discounted present value, etc.

As of March 31, 2011
Method for Hedge
Accounting
Basic Treatment

Millions of Yen
Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

1,304,853

752,639

9,904

819,970－(21,523)

Forward Foreign Exchange Contracts:
㻌 Sold㻌㻌 Bought㻌

－

－

－



Total

－

－

(11,618)

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, “Accounting and Auditing Treatment of Accounting Standards for Foreign Currency Transactionsin the Banking Industry”.
3. Fair value calculation for these transactions was carried out using discounted present value, etc.

(3) Stock-Related Transactions
Not applicable.

(4) Bond-Related Transactions
Not applicable.

26. Related Party Transactions:
For the Fiscal Year Ended March 31, 2012
There were no significant related-party transactions.
For the Fiscal Year Ended March 31, 2011
There were no significant related-party transactions.

41 Shinkin Central Bank69

27. Segment Information:
(1) Description of Reportable Segments
The Group classifies the businesses of the Bank and its consolidated subsidiaries as individual business segments. Among thosebusiness segments, the business of the Bank is deemed as the reportable segment.
  The Bank, as an individual financial institution, provides such financial services as deposits, debentures, lending, market fundmanagement, securities and clearing. As the central financial institution for shinkin banks, the Bank complements the functions of theshinkin banks and operates the shinkin bank industry’s own safety net, including the Shinkin Bank Management Reinforcement System.
(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 net income.
(3) Amounts by Reportable Segment
For the Fiscal Year Ended March 31, 2012
(Millions of Yen) 

Reportable segment

 

Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

Income External customers

368,461

27,008395,469(192)

395,277

1,799

2,273

4,073

(4,073)－

Total

370,260

29,282399,543(4,265)395,277

Segment profit

29,0071,840

30,848(1,042)29,805

Segment assets

30,049,035

276,698

30,325,733(77,241)

30,248,492

Segment liabilities

28,975,645

201,869

29,177,515(21,377)

29,156,138

 Depreciation

4,654

3,436

8,091

(1)

8,089

 Interest Income

263,702538

264,241(91)

264,149

 Interest Expenses

197,168

219

197,388(146)

197,241

 Income Taxes

6,296

1,081

7,377

(27)

7,349

Increase in Tangible andIntangible Fixed Assets

4,792

2,971

7,764

－

7,764

 Inter-segment

Other items

42 Shinkin Central Bank

70

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

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

Income External customers

4,481

328

4,809

(2)

4,807

21

27

49

(49)

－

4,503

356

4,859

(51)

4,807

Segment profit

352

22

375

(12)

362

Segment assets

365,4713,365

368,836(939)

367,897

Segment liabilities

352,416

2,455

354,871(259)

354,611

 Depreciation

56

41

98

(0)

98

 Interest Income

3,207

6

3,213

(1)

3,212

 Interest Expenses

2,398

2

2,400

(1)

2,398

 Income Taxes

76

13

89

(0)

89

58

36

94

－

94

 Inter-segment
Total

Other items



Increase in Tangible andIntangible Fixed Assets

Notes:
1. The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, guarantees, venture capital and M&A intermediary, and data processing outsourcing.
2. Adjustment comprises the following.
(i)Within adjustment of segment profit, reduction of ¥1,042 million ($12 million) comprises reduction of ¥459 million ($5 million) on
minority interests and ¥582 million ($7 million) on inter-segment eliminations, etc.
(ii)Within adjustment of segment assets, reduction of ¥77,241 million ($939 million) comprises reduction of ¥53,114 million ($646
millions) on eliminations relating to capital consolidation and ¥24,126 million ($293 million) on inter-segment elimination, etc.
(iii) Reduction of ¥21,377 million ($259 millions) on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv)The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from Net Income presented in the Consolidated Statements of Income.

43 Shinkin Central Bank

71

For the Fiscal Year Ended March 31, 2011
(Millions of Yen) 

Reportable segment

 

Shinkin Central Bank
business

Other

Total

Amount presented
in the consolidated
financial statements

Adjustment

Income External customers

336,119

25,839361,959(139)

361,820

1,937

2,202

4,139

(4,139)－Total

338,057

28,042366,099(4,278)361,820

Segment profit

27,387

1,333

28,720(833)

27,887

Segment assets

31,283,720

300,064

31,583,785(81,087)

31,502,697

Segment liabilities

30,258,547

226,558

30,485,106(25,676)

30,459,430

 Depreciation

5,129

3,150

8,280

(1)

8,278

 Interest Income

278,927545

279,473(169)

279,303

 Interest Expenses

223,479

197

223,676(102)

223,574

 Income Taxes

10,687698

11,386(158)

11,228

Increase in Tangible andIntangible Fixed Assets

1,361

868

2,230

－

2,230

 Inter-segment

Other items

Notes:
1. The “Other” classification comprises the Bank’s nine consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, guarantees, venture capital and M&A intermediary, and data processing outsourcing.
2. Adjustment comprises the following.
(i)Within adjustment of segment profit, reduction of ¥833 million comprises reduction of ¥342 million on minority interests and ¥490
million on inter-segment eliminations, etc.
(ii)Within adjustment of segment assets, reduction of ¥81,087 million comprises reduction of ¥53,144 million on eliminations relating tocapital consolidation and ¥27,942 million on inter-segment elimination, etc.
(iii) Reduction of ¥25,676 million on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv)The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from Net Income presented in the Consolidated Statements of Income.

(Related Information)
For the Fiscal Year Ended March 31, 2012
1. Information by service(Millions of Yen)
Ordinary Income fromexternal customers

Securities investment
operations
287,827

Lending operations

Other

45,247

Total
62,150395,226(Millions of U.S. Dollars)
Ordinary Income fromexternal customers

44 Shinkin Central Bank

72

Securities investment
operations
3,500

Lending operations
550

Other

Total
755

4,806

2. Information by geographic region(1) Ordinary Income                                 JapanEuropeUnited States
249,179
44,872
31,151                             JapanEuropeUnited States
3,030
545
378

Other
70,022(Millions of Yen)
Total
395,226(Millions of U.S. Dollars)
Total
851
4,806

Other

(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 Sheets. Consequently, this information is omitted.

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

Ordinary Income

Name of customer
The Government of Japan

Ordinary Income

108,936(Millions of Yen)
Related segment
Shinkin Central Bank business

1,324(Millions of U.S. Dollars)
Related segment
Shinkin Central Bank business

For the Fiscal Year Ended March 31, 2011
1. Information by service(Millions of Yen)
Securities investment
operations

Ordinary Income fromexternal customers

Lending operations

246,755

Other

52,4802. Information by geographic region(1) Ordinary Income                                 JapanEuropeUnited States
228,659
46,86831,116

Total
60,905

Other53,496360,140(Millions of Yen)
Total
360,140(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 Sheets. Consequently, this information is omitted.
3. Information by principal customer
Name of customer
The Government of Japan

Ordinary Income
108,935(Millions of Yen)
Related segment
Shinkin Central Bank business45 Shinkin Central Bank

73

(Information related to Impairment of Fixed Assets by Reportable Segment)
For the Fiscal Year Ended March 31, 2012
(Millions of Yen)

Impairment loss

Reportable segment
Shinkin Central Bank business
268

Impairment loss

Reportable segment
Shinkin Central Bank business
3



Other

Total
268

－

(Millions of U.S. Dollars)


Other

Total
3

－

Note:
The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, guarantees, venture capital and M&A intermediary, and data processing outsourcing.

For the Fiscal Year Ended March 31, 2011
(Millions of Yen)Impairment loss

Reportable segment
Shinkin Central Bank business
253

Other

Total
－

253

Note:
The “Other” classification comprises the Bank’s nine consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, guarantees, venture capital and M&A intermediary, and data processing outsourcing.

(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.

46 Shinkin Central Bank74

28. Amounts per Share:
Yen
2012

Net Assets per ShareNet Income per Share

U.S. Dollars
2012

2011

229,768.12

219,425.69

2,794.55

5,879.26

5,471.96

71.50

－

－

－

Net Income per Share after Adjustment for Common
Share equivalents

Notes:
1. In the calculation of net assets per share and net income per share, preferred dividends were deducted from current net income. However,participating dividends were not deducted from current net income.
2. The basis for calculation of net assets per share is as follows:
2012
2012
2011
Millions of Yen

1,092,354

1,043,267

Millions of U.S.
dollars

13,285

Millions of Yen

10,555

10,162Millions of U.S.
dollars128

Minority Interests

Millions of Yen

8,430

8,037

Millions of U.S.
dollars102

Preferred Dividends

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

25

Millions of Yen

1,081,799

1,033,104

Millions of U.S.
dollars

13,157Unit

4,708,222

4,708,222－－

Number of Common
Share Units

Unit

4,000,000

4,000,000－－

Number of Preferred
Share UnitsUnit

708,222708,222－－

Total Net Assets
Amount Deducted from Total Net Assets

Net Assets at Fiscal Year-end Used to
Calculate Net Assets per Share
Number of Share Units at Fiscal Year-end

3. The basis for calculation of net income per share is as follows:
2012

2012

2011

Net Income

Millions of Yen

29,80527,887

Millions of U.S.
dollars

362

Amount Deducted from Net Income

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

25

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

25

Millions of Yen

27,68025,763

Millions of U.S.
dollars336

Unit

4,708,222

4,708,222－－

Average Number of Common
Share Units

Unit

4,000,000

4,000,000－－

Average Number of Preferred
Share UnitsUnit

708,222708,222－－

Preferred Dividend
Net Income Used to Calculate
Net Income per share
Average Number of Share Units for the
fiscal year

4.Net income per Share after adjustment for Common share equivalents is not listed as there are no dilutive securities.

47 Shinkin Central Bank

75

29.

Subsequent Events:
Not applicable.

48 Shinkin Central Bank

76

77

Non-Consolidated Balance Sheets
Non-Consolidated Balance Sheets
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks
Call Loans
Receivables under Resale Agreements
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
Deferred Tax Assets
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Allowance for Investment Losses
Total Assets

78

2012

Millions of Yen

2011

Millions of
U.S. Dollars
2012

1,957,215
663,867
73,990390,101
387,453
181,193
20,624,250
5,374,685
3,126
286,528
70,867
7,181
9,071
47,496(27,915)(78)
30,049,035

2,020,526
750,984
86,983492,290
383,535
211,106
21,547,910
5,254,796
4,001
415,227
72,3795,772
27,177
34,828(23,586)(215)
31,283,720

23,804
8,074
899
4,744
4,712
2,203
250,842
65,369
38
3,484
861
87
110
577
(339)
(0)
365,471

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

21,609,051
3,965,870
74,623
792,410448,439
1,583,194
162
429,442
1,119
69
16,918348
6,499
47,49628,975,645

21,581,162
4,340,630
60,584
630,950
378,272
2,813,644
144
393,294
1,057
64
16,226321
7,366
34,82830,258,547

262,819
48,234
907
9,637
5,454
19,255
1
5,223
13
0
205
4
79
577
352,416

Total Net Assets
Total Liabilities and Net Assets

1,073,389
30,049,035

1,025,172
31,283,720

13,055
365,471Non-Consolidated Statements of Income
Non-Consolidated Statements of Income
Shinkin Central Bank For the years 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
OthersFees 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

2012

Millions of
U.S. Dollars
2012

2011

263,70245,247
6,197
2,639
79
134
206,202
3,201
7,001
14,83280,2704,453
370,260

278,927
52,480
6,912
2,322
148
232
212,586
4,244
7,208
12,56730,454
8,899
338,057

3,207
550
75
32
0
1
2,507
38
85
180
976
54
4,503

197,168
81,92347,067
12,607760
84,371
44,790
5,639
7,322
44
85,58726,32518,508334,957

223,479
116,130
55,777
12,571565
15,214
㻞㻥㻘㻥㻜㻥
3,308
7,841
774
23,242
26,08018,564299,982

2,398
996
572
153
9
0
53
544
68
89
0
1,040
320
225
4,073

35,30338,074

429

63
6,232
6,296
29,00761
10,625
10,687
27,387

0
75
76
352

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

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

Millions of Yen

2012

Yen

5,709.76
2,500.00
6,500.00

2011

5,365.65
2,500.00
6,500.00

U.S. Dollars
2012

69.44
30.40
79.05

79

Organization (As of July 31, 2012)
General Meeting of Members
Auditors
Board of Directors
Chairman of the Board of Directors (Part-Time)
President and Chief Executive Officer
Deputy President
Senior Managing Director
Managing Directors
Directors

Chief Secretary
Internal Audit Division
General Affairs Division
Legal & Compliance OfficeBusiness Continuity Management Office
Personnel Division
Strategic Planning Division
Investor & Public Relations OfficeFinancial Management Division
Risk Management Division
Credit Planning & Supervision Division
Business Promotion Division
Investment Trust & Defined Contribution
Promotion Office
Product Development Office
Disaster Recovery & Reconstruction
Support Office
Shinkin Business Solution Division
Shinkin Networks Promotion OfficeInternational Business Solution DivisionInternational Operations 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
Hokuriku Branch
Shizuoka Branch
Nagoya Branch
Osaka Branch
Kobe Branch

Support & Advisory Division for Shinkin Banks
Consulting OfficeTransfer & Clearing Division
Management Office for Domestic FundTransfer System
Treasury Business DivisionCorporate Business Promotion Division
Project Finance Office
Operations Division
Operations Center
Systems Division
Systems Center
Treasury Division
Credit & Alternative Investment Division
Treasury Operations Division
Research Institute
SDB Promotion Office

Okayama Branch
Chugoku Branch
Shikoku Branch
Fukuoka Branch
Minami-Kyushu Branch
New York Representative OfficeHong Kong Representative Office
Shanghai Representative Office

SCB Group
SCB Group
Trust businessBanking

Securities

Shinkin
Trust Bank
Trust business
Fund trust
Special money trust
Securities
investment trust
Negotiablesecurities trust
Money debentures
trust
Designated gift
trust
Public interest trust
Land trust■

Dealing■

Brokerage■

Underwriting■

Banking■■¥10bn in capital(100% ownership)■80

Shinkin
Securities¥20bn in capital(100% ownership) ;¥10bn capitalreserve

ShinkinInternational■■

Underwriting new
bonds and agency
business in theeuro market

Investment consulting
Investment trust

Personal loan
guarantee

Venture capital
M&A advisory

Data processing
consignment

Consigned
clerical works

Shinkin AssetManagement

Shinkin
Guarantee

Shinkin
CapitalShinkin Banks
Information
System Center

ShinkinCentralBusiness■

Data processing
consignment(handles SCB
administrative work)■

Softwaredevelopment■

Computing■

Promissory
note exchange■

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

Investment trust
consignments■

Investment
consulting fornegotiablesecurities andother products andinvestment
discretionary
contract
administration

Dealing andbrokering forexisting euro
bonds

■

Foreign securities
investment andconsulting■

30mn pounds incapital (100%ownership)
London local
securities entity■¥200mn in capital(100% ownership)■■

Debt guarantee
business(guarantees for
unsecuredpersonal loans
provided byshinkin banks)¥1.0bn in capital(99.1% stakewith Shinkin
Trust at 0.8%) ;¥0.8bn capitalreserve■

Venturecapitalbusiness■

M&A
brokering■■■

Corporatebusiness
consulting¥490mn in capital(100% ownership)■

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

Shinkin Central Bank,
the Central Bank for Shinkin Banks
As the central financial institution of shinkin banks, Shinkin Central
Bank (referred to as SCB hereafter) has occupied a well-establishedposition in Japan’s financial industry, with shinkin banks having a totalof ¥122 trillion (equivalent to $1,490 billion) in funds.

Management Philosophy
As the central bank for all shinkin banks, the SCB supports the growth of
the shinkin bank sector and thus contributes to economic development
throughout Japan.

1.	Strengthening the corporate base, broadening the operational functions, and enhancing the credit standing of shinkin banks

2. 	Stable fund-raising from shinkin banks as well as diversification offunding sources

5.	Contributing to regional development and revitalization hand in handwith shinkin banks

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

7. Nurturing professionals and creating an attractive workplace
8. Enhancing public trust in the SCB
Corporate Data (as of March 31, 2012)
Name:
Establishment:
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:

Shinkin Central Bank (SCB)
June 1, 1950
1,142
14
4
¥31,126 billion ($378 billion)¥29,607 billion ($360 billion)¥490 billion ($5,971 million)¥90 billion ($1,106 million)

32.43%271
A1 (Moody’s)
A+ (S&P)
A+ (R&I)
AA (JCR)		(As of July 31, 2012)
Note: The number of employees includes full-time Directors and Auditor. The number ofOverseas Network includes Shinkin International, Ltd., a subsidiary in London. The
amounts of total assets and total funds are the average balances for the year ended
March 31, 2012.

Senior Managing Director(in charge of International/
Treasury Operations)Katsuo Akiyama
Managing Director(in charge of Overseas Offices)
Kazuyuki Okura

International Business Solution Division(including International Operations Center/
Correspondent Banking)Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
General Manager: Makoto Asahi

Operational Policies

cial circumstances

Deputy President(in charge of International Planning)
Junichi Hattori

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: Hiroshi Sudo

Management Philosophy and Operational Policies

3. 	Upgrading market operation and developing financial services
4. 	Actively pursuing new business in conformity with changes in finan-International Directory (As of July 31, 2012)

Contents
F inancial Highlights (Non-Consolidated Financial
Summary) ································································ 1
Message from the President and CEO ······················ 2
Corporate Management and Auditors ······················ 3
The SCB Is a Powerful Financial Institution in Japan,
Which Is Listed on the Tokyo Stock Exchange ········· 4Management Issues and Strategies ···························· 6
Efforts Aimed at Recovery from the Great East Japan
Earthquake ··································································· 8Overseas Network ······················································ 9Business Overview ····················································· 10
Capital Adequacy ···················································· 11
Asset Quality ·························································· 12
Important Management Indices ······························· 13
Corporate Governance ··········································· 14
Strengthening the Compliance System ···················· 15
Risk Management ···················································· 16
Corporate Social Responsibility (CSR) Activities ···· 19
What Are Shinkin Banks? ······································· 20
Preferred Shares ···················································· 22
Financial Section ··························································· 23
Organization / SCB Group ········································· 80
International Directory ················································ 81
This material contains certain forward-looking statements. Such forward-looking
statements are not guarantees of future performance and involve risks and uncertainties,
and actual results may materially differ from those contained in the forward-looking
statements as a result of various factors.
U.S. dollar amounts are converted for convenience only, at ¥82.22 per dollar, theprevailing rate on March 31, 2012.

International Operations Center
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: Shigeo Enomoto
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: Hiroyuki Toda
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
General Manager: Nobuhiro Koizumi
Operations Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7655
Facsimile: +81-3-3278-7041
General Manager: Yoichi Tobitsuka

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: Tomoaki Nishimura
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: Koji Hirao

LondonOverseas Offices
New York Representative Office
Address: 114 West 47th Street,
Suite 2420, New York, NY 10036, U.S.A.
Telephone: +1-212-642-4700
Facsimile: +1-212-730-6000
Chief Representative: Atsushi Toyoshima

ShanghaiHong Kong

Hong Kong Representative Office
Address: 1413-1414 Two Pacific Place,
88 Queensway, Hong Kong, P.R. of China
Telephone: +852-2537-3777
Facsimile: +852-2537-4002
Chief Representative: Tokuo Iwasaki
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: Masataka Murakami
Hokkaido

Overseas Subsidiary
Shinkin International Ltd.
Address: 4th Floor, River Plate House,
7-11 Finsbury Circus, London EC2M 7YA, UK
Telephone: +44-20-7562-0500
Facsimile: +44-20-7256-8544
Telex: 8812847 ZILUK GManaging Director: Kengo KajiTohokuHokuriku

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: Hideki Sasaki
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: Katsushi Okado

New York

ChugokuOkayama Kobe
Osaka

Head Office

NagoyaShizuoka

Shikoku

FukuokaMinami-Kyushu

Head Office
BranchOffice/Subsidiary

Shinkin Central Bank Head Office3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
Telephone: +81-3-5202-7711 Facsimile: +81-3-3278-7011
http://www.shinkin-central-bank.jp

81

Shinkin Central Bank

Annual Report 2012

Shinkin Central Bank

3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
Telephone: +81-3-5202-7711 Facsimile: +81-3-3278-7011
http://www.shinkin-central-bank.jp

Printed in Japan

Shinkin Central Bank

Annual Report 2012