CHIBA BANK NEWS

July 16, 2024
The Chiba Bank, Ltd.
Chibagin Securities Co., Ltd.

Progress of Initiatives for Improvement and the Prevention of recurrence
Regarding Administrative Actions Issued by the Kanto Local Finance Bureau
On June 23, 2023, Chiba Bank, Ltd. (President: Tsutomu Yonemoto) (“Chiba Bank” or “the Bank”)
was issued with the administrative actions (Business Improvement Order) for situations where a
problem related to the investors’ protection was raised by the Kanto Local Finance Bureau, pursuant to
Article 51-2 of the Financial Instruments and Exchange Act, regarding the financial instrumentsintermediary business related to the solicitation and sales of structured bonds. In accordance with
Article 51 of the Financial Instruments and Exchange Act, Chibagin Securities Co., Ltd. (President:
Yukihito Inamura) ("Chibagin Securities") was issued with the administrative actions (Business
Improvement Order) from the Kanto Local Finance Bureau regarding business operations that violate
the suitability principle for solicitation and sales of structured bonds.
Chiba Bank and Chibagin Securities reported to the Kanto Local Finance Bureau the progress of
initiatives for improvement and the prevention (As of June 30, 2024) of their respective business
improvement reports to the Kanto Local Finance Bureau, based on each business improvement ordermentioned above, on July 24. Chiba Bank and Chibagin Securities
Progress in initiatives to improve and prevent recurrence is as shown in the attachment.
Chiba Bank and Chibagin Securities will continue to make the whole company efforts to improve
operations and prevent recurrence of these issues while striving to regain the trust of all our
stakeholders, including our customers.
End

（Attachment）

Progress of Initiatives for Improvement and the Prevention of recurrence
Regarding the Administrative Actions Issued by the Kanto Local Finance Bureau(Overview)

July 16, 2024

Chiba Bank/Chibagin Securities

Introduction

On June 23, 2023, Chiba Bank, Ltd. was issued with the administrative actions (Business Improvement Order) for situations where a
problem related to the investors’ protection was raised, pursuant to Article 51-2 of the Financial Instruments and Exchange Act, regarding
the financial instruments intermediary business related to the solicitation and sales of structured bonds. In accordance with Article 51 of the
Financial Instruments and Exchange Act, Chibagin Securities Co., Ltd. was issued with the administrative actions (Business Improvement
Order) regarding business operations that violate the suitability principle for solicitation and sales of structured bonds. Taking this situation
very seriously, and each company has formulated a business improvement plan, including efforts to prevent recurrence, based on afundamental cause analysis as an initiative for improvement.
Since the establishment of the relevant business improvement plan, we have made the whole company initiatives to improve operations
and prevent recurrence of these issues. We will continue to steadily implement initiatives for improvement and prevention of recurrence,
while striving to regain the trust of all our stakeholders, including our customers.

Progress of the entire effort⚫ Of the total 57 measures, implementation of major measures has been completed except for some measures that require
system development.
⚫ Assessing the effectiveness of the program through various internal and external surveys and questionnaires, and striving to
improve the effectiveness of the program through PDCA.
At present

Establishment offrameworks based on thebusiness improvement
plan

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Execution andeffectiveness verificationof each measure

Penetration / Establishment

2222Initiatives to Improve Operations and Prevent Recurrence (Overview)
Penetration and thoroughness of the Purpose, Vision, Fiduciary Duty, Human Resource Development Policy

P4

Chiba Bank
Establishment of thebusiness operation system

P7

Strengthening comprehensive proposal
capabilities in the personal businessElimination of incentives in the
personal business

Strengthening the internalmanagement system

P8

Strengthening 1st line functions

Strengthening 2nd line functions

Strengthening thebusiness management
systemP10

Strengthening group governance

Reform of organizational culture

Strengthening 3rd line functions

Building a new business model linking with the banking and securities

Chibagin Securities
Strengthening the business
management system

Establishment of thebusiness management
systemStrengthening theinternal management
systemＰ11

Ｐ12

Strengthening governance bymanagement team

Reform of organizational structure

Strengthening confirmation of thecompliance suitability principle

Sophistication of product selection
process

Review of performance award systemand personnel evaluation system

Review of Human Resource development
system and training system

Strengthening 1st line functions

Strengthening 2nd line functions

Strengthening complaint response

Strengthening checks and balances bybanks

Reform of corporate culture

Strengthening 3rd line functions

Ｐ13

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3333Purpose / Vision, Fiduciary Duty Policy , Human Resource Development Policy

To create a local community better suited to bringing each person’s hope to life

PurposeCustomer
Chibagin Group

Fiduciary Duty
PolicyEmployees
Human Resources
Development Policies

Investor

Contribute to the resolution of regionalsocietal issues

Job satisfaction/compensation
supporters

Dividends

Fiduciary Duty Policy -Policy for acting "for the customer”Offer an empathetic set ofvaluesSupport for prosperous lifestyles

Human Resources Development Policy-Policy for "Promoting the growth and development of employees”“Become someone who keeps fighting for the customer”.
think things throughutilize your own
strengths

gain more supporters

Three Pledges - Action principles for the achievement of the Purpose and the implementation of fiduciary dutyWhenever making a proposal to a customer or making a business decision, we always stop and think, will this proposal or decision lead tothe realization of the customer's
wish

Visiona solution to the customer's
problemthe realization of prosperous
lifestyles for the customer

An Engagement Bank Group that works closely with the community

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4444

Progress of Each Measure (Chiba Bank / Chibagin Securities)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Penetration and thoroughness of the Purpose, Vision, Fiduciary Duty Policy,
Human Resource Development Policy• The Purpose and Vision on business card and release paper, etc. (the first half of FY2023).
• Started using the company logo with the Purpose for group companies (the second half of FY2023).
Penetration andthoroughness of the
Purpose and Vision• “IR Day”, an IR event focusing on business improvement and governance, was held (Apr. 2024).

• Group CSO delivered a video message about Project Team activities and penetration status of the Purpose andVision on "Fiduciary Duty Day“(23rd of each month) (May. 2024).
• “Group Company Opinion Exchange Meeting” was held by group company staffs (May. 2024).

• The fourth session of “Purpose and Vision
Penetration Project Team” will be held (Sep.
2024).
• Fixed point observation by CX survey*1 (thesecond half of FY2024).

• The third session of “Purpose and Vision Penetration Project Team” was held, discussing evaluation andissues of various penetration measures, and confirming current position in the penetration process (Jun. 2024).
• Established Fiduciary Duty Handbook and the “Three Pledges” (Principles of Conduct for Executives
and Employees) (Oct. 2023).
• Started of Fiduciary Duty monthly study meeting (Oct. 2023 onwards).
• Setting 23rd of each month as the “Fiduciary Duty Day” and started to distribute video messages fromexecutives (Dec. 2023 onwards).
Penetration andthoroughness of the
Fiduciary Duty Policy• Started "Fiduciary Duty Hearing" for the purpose of surveying the penetration of Fiduciary Duty Policy, etc.,
and collecting opinions of branch staffs on various measures, etc. (Dec. 2023 onwards).
• Signed an advisory agreement with an outside consulting firm for Fiduciary Duty penetration (Jan. 2024).
• Implemented the “Special Fiduciary Duty Award” to commend the excellent efforts of the "customeroriented business management," which is an important pillar in the realization of the Purpose (the second halfof FY2023).

• Reporting of businesses adopting the Principles
for Customer-Oriented Business Operations to
the Financial Services Agency (Jul. 2024).
• Promote culture reform based on advice fromexternal advisors (the second half of FY2024).

• Presentation by the external advisor at meeting of all branch managers (Apr. 2024).
• Published the Q&A on Fiduciary Duty (May. 2024).
• Updated business improvement efforts and revised Fiduciary Duty Policy (Jun. 2024).

* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.
※1 Research on customer loyalty indicators and CX index is based on CXMM🄬 of Nomura Research Institute, Ltd
CXMM🄬is a registered trademark of Nomura Research Institute, Ltd. (https://www.nri.com/jp/service/solution/fis/cxmm)

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5555

Progress of Each Measure (Chiba Bank / Chibagin Securities)
Main measures

Major future initiatives

Major initiatives to date (until June 2024)

Penetration and thoroughness of the Purpose, Vision, Fiduciary Duty Policy,
Human Resource Development Policy• Human Resources Division started giving advice on careers in line with the Human Resource Development
Policy during the annual personnel interview (Oct. 2023 onwards).
Penetration andthoroughness of the
Human Resource
Development Policy• Conducted training for managers on coaching skills for vision formulation and penetration (Jul. 2023 – Feb.
2024).
• Linked the employee performance evaluation system to the Human Resource Development Policy (thefirst half of FY2024 onwards).

• Career development support for staff led bysenior deputy general manager of career support(ongoing).

• Incorporated the Fiduciary Duty element into the target setting of bonus evaluation (the first half of
FY2024 onwards).
* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

Monitoring (Customer Evaluation)

Three intentions
to calculate CX index

CX index※1
Highest point in
the banking
industry*3
7.00

6.00
5.50
5.00

In 2022
April toMay

Business
Improvement
Order in June
2023

Average ofbanking
industry*2
FY2022～～～～

6.50

Continue
Highest point in
the banking
industry*3

Recommendation

In 2023
October toNovemberAverage ofbanking
industry*2
FY2023Copyright © 2024 The Chiba Bank, Ltd. All Rights Reserved.

Purchase

Analyze issues that need
to be prioritized byunderstanding thedifference between
evaluations andexpectations for thevarious values we provide
to customers.

・Reporting to management
・Briefing for headquarters
departments
・Return (customer
feedback) to branches

Reflected ineach measure*1 CX index is based on CXMM🄬 of Nomura Research Institute, Ltd.
CXMM🄬is a registered trademark of Nomura Research Institute, Ltd.
https://www.nri.com/jp/service/solution/fis/cxmm （Japanese）*2 CX Benchmark Survey FY2023 is a survey conducted by Nomura Research Institute, Ltd.
Implementation period: FY2022 figures are for December 2021, and FY2023 figures are for December 2023.
*3 The highest score among banks that introduced CXMM🄬 in the most recent year since the completion of thesurvey analysis for each year of Chiba Bank

6
666

Progress of Each Measure (Chiba Bank)
Main measures
Major initiatives to date (until June 2024)
Establishment of the operational management system(problem of incentive mechanism)

Major future initiatives• Implemented four major measures to investment trust (Apr. 2023 onwards in sequence).
① Improving financial literacy of customers by building an asset management portal site
② Provide highly convenient non-face-to-face channels, including investment trusts of app

Strengthening
comprehensive proposal
capabilities in the
personal business③ Specialization of “careful explanation/ convincing proposal” through paperless investment trust
procedures④ Introduce Advanced consulting proposals through the use of the proposal tool the “Okane noBasket” (Money Basket)• Started dispatching trainees to be trained as specialists who can provide comprehensive consulting
services for individuals (FY2023 onwards).

• Further utilization of the “Okane no Basket” (Money
Basket).
• Train specialists who can provide comprehensive
consulting services for individuals is planned to be
50 (through FY2025).

• Launched customer satisfaction questionnaire on “Okane no Basket"(Money Basket) (Feb. 2024).
• Started distributing case study videos of “Okane no Basket"(Money Basket) utilization (Mar. 2024).
• Briefing sessions were held on “Okane no Basket"(Money Basket) for insurance companies and investment
management companies (Apr. 2024).
• Established the Banking and Securities Strategic Review Committee, and froze the profit targets of
Chibagin Securities (Jul. 2022).
• In principle, the introduction of customers to Chibagin Securities by Chiba Bank was suspended (Jul.
2022).
• New sales of structured bonds were completely suspended (Aug. 2022).
Elimination of incentives
in personal businesses• Abolished the profit target for the individual division of bank branches and reviewed the assessment
system by Fiduciary Duty and activity volume, etc. (Oct. 2023 onwards).
• Implement training, video distribution on Fiduciary Duty and penetration of new evaluation system tofocus on activity volume (Sep. 2023 onwards).

• Management reform training for general managers
and senior deputy general managers of branch tostrengthen sales skill leadership and acquire
management skills (Jul. 2024).

• Completely eliminated the revenue return incentive from Chibagin Securities that had been generated
when a customer referred by the Bank, closing a deal (Oct. 2023).
• An outside professional gave a lecture about sales measures to individuals to general managers and staffs(Apr. 2024).
* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

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Progress of Each Measure (Chiba Bank)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Strengthening the internal management system
Efforts to Understand the actual status of the workplace• Opening of “Chocotto line” to group companies (Sep. 2023)• Conducted engagement surveys for staffs (first survey: Sep. 2023, second survey: Apr. 2024).
• Talent management system "Talent Palette" introduced to group companies (Apr. 2024).
Strengthening 1stline functions• Established "Engagement Improvement Committee" to study and discuss various measures to improveengagement (Jun. 2024).
Strengthening internal management functions on 1st line

• Establishment of new criteria for referral to Chibagin securities (Apr. 2023).
• Newly-established practical training for newly assigned in charge of the internal administration supervisors (Oct.
2023).
• Introduction of suitability verification tools at all branches (Mar. 2024).
• Improvement of suitability verification tools and dissemination of information on how to utilize them (Jun. 2024).

• Identification of issues and consideration of
improvement measures based on analysis ofengagement survey results (ongoing).
• Conduct 360-degree evaluation to groupcompanies (Aug. 2024).
• The first session of “Engagement Improvement
Committee” will be held (Sep.2024)• Follow-up of participants in training for newly
assigned in charge of the internal administration
supervisors (ongoing).
• The effectiveness of suitability verification tools will
be verified, and improvements and additions offunctions will be made as necessary (ongoing).

• Appointment of the General Manager in charge of Corporate Management, consolidation of the Complianceand Risk Management Division and the Service Quality Management Division, and Newly-established the“Customer Support Monitoring Office” in the Compliance and Risk Management Division (Oct. 2023).
Strengthening
2nd line functions• Started conducting direct customer interviews regarding financial product sales by headquarters staff (Dec.
2023 onwards).

• Recording interviews with business-use
smartphones will be starting(Aug. 2024).

• Report on the implementation status of the NPS®※1 questionnaire for customers who have conducted financial
product transactions at the internal meeting (Feb. 2024 and May. 2024).

• Using the text mining tool for advanced analysis ofcomplaints, requests, etc. (Sep. 2024).

• In the “watch alert“ function of “Okane no Basket"(Money Basket), corrective action is triggered when suspicious
activity is detected in Fiduciary Duty (Apr. 2024).

* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.
※1 NPS® is a survey method to measure customer loyalty and is registered trademark of Bain & Company, Fred Reichheld, NICE Systems, Inc

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8888

Progress of Each Measure (Chiba Bank)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Strengthening the internal management system• Strengthen group collaboration in the audit department through participation in conference bodies of the Audit andInspection Division of Chibagin Securities by the Audit and Inspection Division of the Bank (Sep. 2023 onwards).
• The President is officer in charge of the Audit and Inspection Division and is deeply involved in PDCA
(Oct. 2023 onwards).

Strengthening 3rdline functions• The Audit and Inspection Division reviews the implementation status of the business improvement plan and makes
recommendations for each measure to the relevant division (Jan. 2024 onwards).
• Conducted thematic audits “Progress of the business improvement plan" (Feb. 2024)• Sophistication of culture audits (ongoing).
• Improve effectiveness of business improvement
measures (ongoing).

• Introduction of cultural audits (Mar.2024).
• The Audit and Inspection Division participates in accompanying support with a consulting firm to improve internalmanagement system of Chibagin Securities (Apr.2024).
* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

Monitoring (internal evaluation)

Overall Score(Mean of main scores）

FY2023 Engagement Survey Results for Staff (Percentage of Positive Responses)

I feel that my current job isworthwhile

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I share the Bank's The Purpose
and Vision.

I feel that I am contributing to society,customers, and the community throughmy work.

9999

Progress of Each Measure (Chiba Bank)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Strengthening the business management system• Newly-established of Group Strategy Division (Apr. 2023).

• The Bank has dispatched Audit & Supervisory Board, Director, and general manager-level personnel to
Chibagin Securities and appointed by Standing Audit & Supervisory Board Member, and person responsible
for corporate management, administrative, and planning departments (Apr. 2023 onwards).
• Unification of group recruitment at the Bank and personnel exchanges between the Bank and group companies
commenced (Apr. 2023).
• Newly-established of the “Group Improvement Office” headed by the President (Oct. 2023).
Strengthening group
governance• Regular reporting of business execution by the group CxO at the Board of Directors (Oct. 2023 onwards).
• Conducting a compliance named questionnaire for all group employees (Jan. 2024).

• Conducted third-party evaluation on the selection of financial products (Feb. 2024).
• The Group Improvement Office, based on the results of a questionnaire survey of the head office evaluation by branchstaff, conducts hearings for improvement in each division of the head office, and feed back the results to each division(Feb. 2024).

• Continue to conduct surveys ofmanagement issues through hearings
with sales branch and make
improvement proposals towards thoseissues by the Group Improvement Office(ongoing).
• Expand introduction of customer
satisfaction surveys to group companies(ongoing).

• Outside Director assumed Chairman of the Board of Directors (Apr. 2024).
• Shortened term of directors to one year from two years (Jun. 2024).
• Third-party evaluation by an external organization was conducted in the evaluation of the effectiveness of the Board of
Directors in FY2023 (the first half of FY2024).
• Started 1on1 meeting with the Presidents of group companies by the Bank’s President (Sep. 2023 onwards).
• Regularized meetings to exchange opinions between the Bank executives and employees of group companies (Sep.
2023 onwards).
Organizational culture
reform• Resolved that appointment of presidents of group companies is an advisory matter to the Appointment, Remuneration
and Corporate Advisory Committee (Mar. 2024).

• Started operation of “transfer system”
and “specialist course” (Jul. 2024).

• Established the “transfer system” that allows group company employees to transfer to the Bank, and the “specialist
course" for highly specialized group companies and mid-career recruits (Apr. 2024).
• Introduced skill matrix for directors of group companies (utilized for appointment from Apr. 2024).
* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

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10
10
10

Progress of Each Measures (Chibagin Securities)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Strengthening the business management system• The Bank has dispatched Audit & Supervisory Board, Director, and general manager-level personnel to
Chibagin Securities as Standing Audit & Supervisory Board Member, and person responsible for corporate
management, administrative, and planning departments (Apr. 2023 onwards).
Strengthening
governance bymanagement team

• Conducted video trainings and lectures by Chiba Bank Outside Directors to executives(Nov. 2023 onwards).

• Introduced the effectiveness evaluation of the Board of Directors using an external organization (Jan. 2024).

• Addressing issues to improve the effectiveness of theBoard of Directors based on the results of the external
evaluation.

• Appointment of human resources based on the skill matrix of board member (Apr. 2024).
• Personnel with experience as General Manager of the major domestic securities company appointed as Vice
President (Jun. 2024).
• Transition to a three-headquarters structure for the Corporate Management Division, Business Support
Division, and Advisor Support Division (Apr. 2023).
• Review of project team, which oversees internal reforms and complaint countermeasures (Aug. 2023).
Reform oforganizational
structure• Introduced the “Head Office Evaluation System” to strengthen the system for management to grasp the status ofbusiness execution and problem solving in the headquarters and issue appropriate instructions (Oct. 2023).
• Expansion of career recruitment by unifying group employment by expanding the scope of mid-career recruitmentin the headquarters planning and administration departments (Jan. 2024 onwards).
• Transitioned to a headquarters organizational management structure centered on general managers and senior
deputy general managers (Apr. 2024).
• The President repeatedly lectured on the need for the corporate organizational reform (Jul. 2022 onwards).
• Adopted a mission card describing "Mission of Chibagin Securities" and "Mission as an Advisor" (Jan. 2023).

Reform of corporate
culture• Conducted engagement surveys for staffs (first survey: Sep. 2023, second survey: Apr. 2024).
• NPS®※1 (P8) questionnaires are administered to customers who have conducted financial product transactions (Dec.
2023 onwards).
• Conducted employee personnel interviews by the Human Resources Division of Chiba Bank (Feb. 2024 onwards).
• Conducted "Administrative Action Review Training” (Jun.2024).

• Respond to the missions and issues of each department
as clarified by the introduction and implementation ofthe "Headquarters Evaluation System" and invigoratecompany-wide discussions on important issues throughproject teams and other meeting bodies (ongoing).
• Mid-career recruitment to secure diverse humanresources (ongoing).

• Continued to hold meetings for exchange of opinionswith all branches by Chibagin Securities officers andChiba Bank officers (ongoing).
• Conduct surveys for all employees to gather opinions ona regular basis (ongoing).

• Strengthen organizational management centered on
general manager of the division and branch by utilizing
engagement surveys, etc.

* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

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11
11
11

Progress of Each Measures (Chibagin Securities)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Establishment of business management system• Introduced interview sheets ("Consultation Sheet" and "Suitability Confirmation Sheet") (Apr. 2023).
Strengthening confirmation of
the compliance suitability
principle• Newly-established referral standards from Chiba Bank to Chibagin Securities (Apr. 2023).
• Started feedback from internal administration supervisors to advisors based on monitoring results and examples(Apr. 2023 onwards).
• Revision of Internal Control Manual for Branches (Mar. 2024).

Sophistication of productselection process• Approval by “the Banking and Securities Strategic Review Committee”(the Bank ) and the “Investmenttype Financial Instruments Selection Committee” to be mandatory at the time of product selection at
Chibagin Securities (Jun. 2023 onwards).
• Concluded a contract with a consulting company to introduce external evaluation in the product introduction
process (Feb.2024).
• Commenced a partial review of the product lineup based on an evaluation by an external organization (Jun.
2024).

• Continue to verify the operation status
after the introduction of the interview
sheet (ongoing).
• Continue to monitor compliance withthe referral standards and verify theappropriateness of the referralstandards (ongoing).
• Establishment of a product selection
process in response to various
guidelines by utilizing external
knowledge, and review of productlineup (ongoing).

• Abolished the return of profits to Chiba Bank in financial instrument intermediary (Oct. 2023).
Review of performance award
system and personnel
evaluation system• Review of performance award system consistent with asset management-type business, such as
evaluating the status of contact with customers to restore trust (the second half of FY2023).

• On-site hearing by general manager incharge of advisor support (ongoing).

• Review the results-based bonus assessment method (the second half of FY2023).

• Strictly apply the revised systems andverify the status of their establishment(ongoing).

• Revised the personnel salary system to operate in a way that more appropriately reflects abilities andachievements (Mar. 2024).
• Reviewed human resource operations for commissioned staff to improve employee engagement (May. 2024).
• Introduced “Teach me Biz” as a training tool (Dec. 2022).

Review of Human Resource
development system andtraining system• Started compliance training by General Manager in charge of Corporate Management (Jun. 2023 onwards).

• Formulated an overview of our human resource development system based on the three personalities
Chibagin Securities demand; “Integrity” “Professional” “Challenge” (Oct. 2023).
• Implemented “In-house recruitment system” to encourage employees to voluntarily develop their careers (Jan.
2024).

• Enhancementof e-learning training
using “Teach me Biz” (ongoing).
• Compliance and Fiduciary Duty branch
office visiting activities (ongoing).

* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

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12
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Progress of Each Measures (Chibagin Securities)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Establishment of business management system• Assigned a dedicated internal administration supervisors at 20 branches (Oct. 2022).
Strengthening 1stline functions• The Internal Control Division was newly established under the Corporate Management
Headquarters (Apr. 2023).
• Established eligibility criteria for internal control managers to standardize and improve the quality of
their skills (Jan. 2024).
• Established a training program for internal control managers and initiated training for job applicants (Apr.
2024).

• Strengthen management of compliance with theSuitability Principles by revising the internal control
manual for branch.
• Training of internal control managers throughdedicated programs (ongoing).

• The former executives in charge of compliance of the Chiba Bank is appointed as the Director andGeneral Manager in charge of the Corporate Management (Apr. 2023).
• The Compliance Division was reformed into two groups: the Coordination Department and Service Quality
Management Department (Apr. 2023).
Strengthening 2ndline functions• Changed in the responsibility of the Fiduciary Duty Committee from Sales Division to the Compliance Division(Apr. 2023).
• Both the Compliance and the Fiduciary Duty Committee are held, in principle, monthly (Jul. 2023).
• In addition to monthly monitoring, the system has been reviewed to verify transaction trends at all branches
on a yearly basis (Feb. 2024).

• Understand KPI related to the status of "customeroriented business operations" by branch and continue
to verify (ongoing).
• Continuous review of monitoring methods (ongoing).
• Consider introducing a call recording text system toimprove the quality of monitoring.

• Started a trial to collect customer feedback at the call center (May. 2024).
• Changed to regularly provide explanations of audit results to the Chiba Bank Audit and Inspection Division(Nov. 2023).

Strengthening 3rdline functions• Assigned a person to the Audit and Inspection Division to work concurrently with the Chiba Bank Audit andInspection Division (Feb. 2024).
• Hired external consultants to draft “FY2024 Internal Audit Plan” (Mar. 2024).
• Collaborating with the Bank of Chiba Bank's Audit and Inspection Division to conduct thematic audits"Progress of Business Improvement Plans" (the second half of FY2023).
• Based on the advice of external consultants and the Chiba Bank Audit and Inspection Division, the format of
the true cause analysis when deficiencies are detected in the departmental audit was revised (Jun. 2023).

• Strengthening cooperation with the Chiba Bank Audit
and Inspection Division.
• Reflecting advice from external consultants inbusiness operations.
• Creation of "Branch Analysis Chart" for departmentswith unfavorable audit results (Why-Why Analysis).

* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

Copyright © 2024 The Chiba Bank, Ltd. All Rights Reserved.

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13
13
13

Progress of Each Measures (Chibagin Securities)
Main measures

Major initiatives to date (until June 2024)

Major future initiatives

Establishment of business management system• Complaint categories were subdivided into "Insufficient confirmation of risk understanding," "Suitability of
products sold to customers," "Insufficient explanation," "Violation of rules," etc., to ensure thoroughverification of factors and problems in complaints (Jul. 2022 onwards).
Strengthening
complaint response• After complaints are filed, a system has established for reporting operational improvements, such as theanalysis of true causes and preventive measures, and management discussion of them at the Compliance
Committee and Fiduciary Duty Committee monthly by the Compliance Division, the Coordination
Department (Jul. 2023).

• Formulated effective measures to prevent recurrence
based on the analysis of true causes and reported
them to the Compliance Committee (ongoing).

• Create a collection of complaint cases and make them known internally (Mar. 2024).
Strengthening
checks and balances
by banks• Established the “Banking and Securities Strategic Review Committee” (Jul. 2022).
• Regularly report to Chiba Bank‘s management on the status of follow-up services for customers referred to
Chiba Bank Securities by Chiba Bank (Jul. 2023 onwards).
• Musashino Bank began surveys and monitoring of their referral customers (Sep. 2023 onwards).

• Discussions and reports with Chiba Bank through the"Banking and Securities Strategic Review Committee"
etc. (ongoing).
• In-depth information collaboration with Musashino
Bank and implementation of transaction verificationand surveys by the bank (ongoing).

* The measures that have already been implemented in the "Major future initiatives" in the material released on April 15, 2024 have been transcribed into "Major initiatives to date“. New initiatives, additional measures, etc.is
highlighted.

Copyright © 2024 The Chiba Bank, Ltd. All Rights Reserved.

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Reprint of material released on October 16, 2023

Operational Improvement Order (Problem, True Cause Analysis)
Chiba Bank

Chibagin Securities
Problems pointed out by the Kanto Local Finance Bureau (June 23)*1

1.

Situation of the inducement to structured bonds without confirming andconsidering customer attributes

1.

Situation of long-term and continuing solicitations that violate the suitability
principle

2.

Insufficient situation of internal control system

2.

Insufficient situation of posture for compliance with the suitability principle① Insufficient internal control system for responding to complaints② Insufficient effective monitoring system regarding the status of explanations to customers③ Insufficient governance by management

Cause analysis*2
1.Problems in the operational control environment (incentive mechanism)
A system in which structured bonds with a high rate of return to earnings are evaluatedrelative to the volume of work, and there are no administrative tasks that are complicatedcompared to investment trusts and insurance
Preference for selling structured bonds, but underestimation of problems and risks associatedwith structured bonds①Management's stance of strongly pursuing earnings, ② Mechanism for achieving highly
established earnings targets, ③ Evaluation system that emphasizes performance-based evaluation
for individuals, ④ Issues such as human resource development

2.Opportunity (check-and-balance malfunction)

2.Problem in the internal control system①There were three elements of ① motivation, ② opportunity, ③ justification for 1st line
(branch and sales division).
(Motivation) Performance awards and personnel evaluation mechanisms to motivation and pressure of bank employees(Opportunity) Malfunction due to formal confirmation by the internal administration supervisor, etc.
(Justification) Rewarded by achieving the target, customers ask for explanations,
Bad sense of security that the ultimate sales responsibility lies with Chibagin Securities②Problem in risk detection for 2nd line (management division) and 3rd line (audit division)and inadequate response for the detected risks

3.Problem in business management system①Group governance issues (problems in grasping the current situation, identifying issues, andmanaging the progress of instructions)②Problems in organizational culture (problems in business operation system: situation wheremanagement is unable to respond appropriately)

Copyright © 2024 The Chiba Bank, Ltd. All Rights Reserved.

1.Motivation (pursuit of profits)①3 lines management was not fully functioning②Inadequate response to the complaint③Problems in the process of selecting products to sell
④Inadequate checks and balances by Chiba Bank

3.Justification (pressure from the bank as the referral source)
Relationships with the staff of Chiba Bank and Musashino Bank lead to justification for improper
behavior for those in charge of Chiba Securities, resulting in cases in inducement to structured
bonds with inadequate confirmation of suitability and customer attributes.

4.Business Management System, etc.
Revenue from sales of structured bonds is important for the management of Chibagin Securities,
and dilution in all tiers, including the management of the most securities, in terms of compliancewith the suitability principle.

*1 For details, please refer to the "Administrative Actions by the Kanto Local Finance Bureau" dated June 23, 2023.
*2 For details, please refer to the "Overview of the Plans for Improvement and the Prevention of Recurrence, and Disciplinary Actions to Persons
Involved in the Administrative Actions Issued by Kanto Local Finance Bureau" dated August 31, 2023.

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