The Future ofRegional Communities
Together with Shinkin Banks

Annual Report

2022
Shinkin Central Bank

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Shinkin Central Bank,
the Central Bank for Shinkin Banks
As the central financial institution for the cooperative regional financial
institutions in Japan, known as shinkin banks, the Shinkin Central Bank
(hereinafter the SCB) occupies a well-established position in Japan’s
financial industry. Shinkin banks currently hold funds totaling some¥158 trillion (around US$1,298 billion).

Management Philosophy and Operational Policies
Management Philosophy
As the central bank for all shinkin banks, the SCB supports the growth of the shinkin bankindustry, thereby contributing to economic development throughout Japan.

Operational Policies

1. Strengthen the corporate base, broaden operational functions, and enhance the credit standing of shinkin banks.
2. Attract stable funds from shinkin banks and diversify funding sources.
3. Upgrade market operations and develop financial services.
4. Pursue new business to reflect changing financial circumstances.
5. Contribute to regional development and revitalization hand in hand with shinkin banks.
6. Achieve sound management through efficiency, capital adequacy, and strengthened risk management.
7. Nurture professionals and create an attractive workplace.
8. Enhance public trust in the SCB.
Corporate Data (as of March 31, 2022)
Name:
Established:
Number of employees:
Domestic network:
Overseas network:
Total assets:
Total funds:
Paid-in capital:
Preferred shares:
Capital adequacy ratio(consolidated):
Number of member
shinkin banks:Long-term credit ratings:(as of July 31, 2022)

Shinkin Central Bank (SCB)
June 1, 1950
1,277
14
6
¥43,757 billion ($357 billion)¥41,840 billion ($341 billion)¥690 billion ($5,646 million)¥90 billion ($743 million)
24.35%254
A1 (Moody’s)
A (S&P)
A+ (R&I)
AA (JCR)* The number of employees includes full-time Directors and Corporate
Auditors. Our overseas network includes Shinkin International Ltd., asubsidiary in London and Shinkin Singapore Pte. Ltd., a subsidiary in
Singapore.

Shinkin Central Bank

Shinkin Banks

Total assets: ¥43,757 billion ($357 billion)
Domestic network: 14
Overseas network: 6
Number of employees: 1,277
Number of member shinkin banks: 254

Number of member shinkin banks:
254
Total assets: ¥180,041 billion($1,471 billion)
Number of branches: 7,129
Number of employees: 101,552
Number of members: 8,996,514(As of March 31, 2022)

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

2022

2021

Millions of US Dollars*
2020

2022

2021

2020

$1,765$2,053$2,451

For the Fiscal Year
Total income¥216,095 ¥227,247 ¥266,519

Total expenses

171,233

187,466

214,229

1,399

1,693

1,970

Net income (loss)

34,046

29,57937,924

278

267

348

Net business profit (loss)

34,54833,81458,025

282

305

533

¥43,757,754 ¥43,654,176 ¥40,633,271$357,585$394,382$373,776

At the Year-end
Total assets
Loans and bills discounted

7,758,748

8,451,005

8,474,068

63,404

76,34877,951

Securities

16,163,857

17,744,905

16,477,301

132,090

160,311

151,571

Total liabilities

42,199,230

41,963,346

39,112,432

344,849

379,106

359,786

Deposits

33,165,342

33,787,924

31,208,596

271,025305,248

287,081

Debentures

1,547,370

1,774,270

2,141,480

12,64516,02919,6991,558,523

1,690,829

1,520,838

12,736

15,275

13,989Net assets* US dollar amounts are given for convenience only, converted at the rate of ¥108.71, ¥110.69, and ¥122.37 per US$1.00, the prevailing rate as of March 31, 2020, 2021, and 2022
respectively.

Contents
Financial Highlights (Non-consolidated Financial
Summary) ................................................................................. 1
Message from the President and CEO ............................. 2
About Shinkin Central Bank ............................................... 8
The SCB Group ...................................................................... 9
About Shinkin Banks .......................................................... 10
Realizing a Sustainable Society .......................................... 12
Measures for climate change ............................................. 13
Medium-Term Management Plan “SCB Strategy
2022” ...................................................................................... 16
Three Reforms (HaND) .................................................... 20
Overseas Networks ........................................................... 26

Corporate Management and Auditors .......................... 28
Business Overview ............................................................. 29
Capital Adequacy ................................................................ 30
Asset Quality ........................................................................ 31
Corporate Governance ..................................................... 32
Compliance System ............................................................ 33
Risk Management ..................................................................35
Preferred Shares ................................................................. 38
Financial Section .................................................................. 39
Organization ....................................................................... 105
International Directory ................................................... 106

This material contains certain forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties, while actual results may materiallydiffer from those contained in the forward-looking statements as a result of various factors.
US dollar amounts are converted for convenience only, at ¥122.37 per US$1.00, the prevailing rate on March 31, 2022.

1

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Message from the President and CEO
The year 2030 is an important milestone toward the SDGs, and many companies, groups, andorganizations are actively addressing climate change and other issues in order to achieve thosegoals by 2030. In addition, as the effects of the COVID-19 pandemic continue to be felt for a
prolonged period of time, moves toward digitalization are also accelerating, and by 2030, theenvironment surrounding regional communities and small and medium scale enterprises (SMEs)
is expected to change significantly.
We in the shinkin bank industry are updating our business model to keep pace with thesechanges and are doing our utmost to address the challenges faced by regional communities and
SMEs.
In April 2022, the SCB launched its new Medium-Term Management Plan, "SCB Strategy 2022."
Under "SCB Strategy 2022," the SCB will work toward achieving the future where "Shinkin Bankis the most reliable bank in every local area" set forth in the previous Medium-Term Management
Plan, clearly setting the date for achievement by 2030. In order to achieve this vision, the shinkinbank industry will continue to work toward improving the sustainability of regional communities
by steadily implementing various measures and increasing the effectiveness of the "4 Strategies"
put forward, which follow the initiatives of the previous Medium-Term Management Plan.
We also aim to improve the competitiveness of the shinkin bank industry by transforming ourbusiness model around the three pillars including human assets, networks, and digitalization, andby continuing to provide new value to regional communities.
Further, amidst growing awareness of environmental issues, the SCB, together with shinkinbanks, will launch the "Shinkin Green Project," a unique initiative in the shinkin bank drive
initiatives aimed at resolving environmental issues, including decarbonization of our customers
among others .
In this message, I would like to explain the measures taken by the SCB to date, as well as themeasures and other initiatives that we will take going forward to achieve the vision have laid out.

President and CEO

2

Road to 2030
The Future of Regional Communities
Together with Shinkin Banks

3

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Review of the previous Medium-Term Management Plan"SCB Strategy 2019"
During the period of the previous Medium-Term Management Plan, the SCB Group's officers and employees, together with shinkin banks, worked together to steadily implement various measures, despite the unforeseen spreadof the COVID-19 pandemic.

[Establishment of Problem-Solving Schemes Utilizing the Shinkin Bank Industry Network]
In July 2021, in order to strengthen our efforts to support the core businesses of shinkin bank customers, we established two new group companies, Shinkin Regional Innovation Co., Ltd. and Shinkin Singapore Pte. Ltd. Shinkin
Regional Innovation Co., Ltd. is engaged in regional trading company business and regional revitalization consulting
services, while Shinkin Singapore Pte. Ltd., a local subsidiary in Singapore, supports shinkin bank customers in expanding their overseas sales channels and addresses the financing needs of their overseas subsidiaries.
In July 2021, we also launched the "Shinkin Door for Business Startups," a website to support startups, in order
to connect people who are thinking of starting a business or have just started a business with shinkin banks invarious regions, and in September 2021, we launched "Shinkin Connect," a business matching website, to increase
opportunities and speed up business negotiations for SMEs. Each of these sites utilizes the networks of the shinkinbank industry to enable searches for shinkin banks where business startup consultations are available, and event
information and startup support facilities, as well as enabling communication among registered parties nationwide
who wish to engage in business matching.

[Initiatives for Regional Revitalization]
In a joint effort with shinkin banks to support regional revitalization projects implemented by local governments, inJuly 2020, we established the “SCB Furusato Ouen Dan (lit., “hometown cheering team”),” a regional revitalization
scheme to make donations to selected projects by utilizing a corporate version of Japan’s Furusato Nozei donation
program (preferential treatment in the Japanese income taxation system). The "SCB Furusato Ouen Dan" donated a
total of ¥1.94 billion to 196 regional revitalization projects recommended by shinkin banks nationwide over the
two-year period from fiscal 2020 to fiscal 2021.
In February 2022, the SCB was awarded as the only financial institution to receive the "Fiscal 2021 Minister'sCommendation for Regional Development Support Taxation System," in recognition of the joint efforts between
the shinkin bank industry and local governments to revitalize regional communities.
The "SCB Furusato Ouen Dan" will continue its initiatives in fiscal 2022, and we will continue to actively supports
initiatives to realize regional revitalization together with shinkin banks.

[Strengthening Support System for Business Succession of SMEs]
To address the growing shortage of successors for SMEs, Shinkin Capital Co., Ltd., an SCB Group company, expanded its business succession and M&A support solutions, and in addition, during fiscal 2021, we opened five newbranches (in Kinki, Tokai, Chugoku, Fukuoka, and Hokkaido) and established a structure that can respond to theneeds of shinkin bank customers more effectively and flexibly than ever before.

4Expectations for the Shinkin Bank Industry Toward 2030
In addition to structural issues such as the declining birthrate and aging population, the COVID-19 pandemic is having a major impact on the management of SMEs, and regional economies, which are the foundation of shinkin banks,
are at a major crossroads.
In order to revitalize regional economies, it has become essential to take a solution-oriented approach tailoredto the characteristics of each region, and expectations are rising for shinkin banks, the financial institutions that areclosest to the regional communities they serve.
At the same time, the shinkin bank industry must respond appropriately to the accelerating trend toward digitalization due to the impact of the pandemic, and building a robust business model that combines "face to face" withthe power of digital technology is an urgent issue.
Also, as the year 2030 milestone for achieving the SDGs approaches, momentum for initiatives to realize a sustainable society, including climate change countermeasures, is increasing year by year.
The shinkin bank industry is also expected to enhance its competitiveness through transformation of its businessmodel, while fully demonstrating its capability to solve local issues and work toward the realization of sustainableregional communities.

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Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

"SCB Strategy 2022," a new Medium-Term Management
Plan to Generate Transformation
Under this plan, the SCB will steadily implement and enhance the effectiveness of the measures listed in the "4Strategies" in order to realize the vision laid out by 2030, and will also focus on "HaND" (Human assets, Networks
and Digitalization), a theme that can be a strength and opportunity for the shinkin bank industry, to generate transformation, thereby continuing to improve the competitiveness of the shinkin bank industry. [The first letter of thewords "Human," "assets," "Networks," and "Digitalization" are marked with black dots for emphasis][4 Strategies]
This plan sets forth the "4 Strategies" to ensure that the shinkin bank industry will continue to meet the expectations of regional communities and do its utmost to improve the sustainability of regional communities over the next
three years.
In Strategy 1, we will focus on initiatives that make a significant contribution to resolving local issues to increase
the effectiveness of our measures, and aim to build a framework for providing quality services to regional communities on a sustainable basis.
In Strategy 2, we will deepen consulting functionality for shinkin banks, including fund management and risk
management support, as well as provide products and services that contribute to the diversification of shinkinbanks' revenue sources.
In Strategy 3, we will work to improve operational efficiency and maintain and enhance the robustness and sustainability of our operations toward the effective utilization of management resources, and develop an environmentthat will serve as a foundation for transforming the business model of the shinkin bank industry.
In Strategy 4, we will strengthen our earnings power, and as one of Japan's leading institutional investors, implement initiatives that contribute to improving the sustainability of society.

[Transformation based on HaND (Human assets, Networks and Digitalization)]
Based on the concept of "human assets" that the officers and employees of the shinkin bank industry, or people, arethe most important asset for the industry, we will actively make the investments necessary for their advancement
and growth. By providing opportunities for a diverse range of "human assets" to play active roles and for each toacquire highly specialized skills, we will promote the advancement and growth of "human assets," which will lead to
growth of the shinkin bank industry.
We also believe that the shinkin bank industry's strengths lie in the nationwide network among shinkin banks
and the network that the SCB has with external professional organizations, etc., in Japan and overseas. We aim to
sublimate this network, which is one of our strengths, into a "Shinkin Ecosystem," a problem-solving system thattranscends the boundaries of the shinkin bank industry, and to create a system in which network participants canmutually grow, coexist and prosper through solving regional community issues.
In addition, we aim to create a new customer experience by integrating "face-to-face" customer contact, which
is one of the strengths of shinkin banks, with digital technology, and to improve business efficiency and productivity in the shinkin bank industry through the use of digital technology. Specifically, we hope to spread digital transformation (DX) to SMEs nationwide by building a digital platform that links "digital" with the "real world," one of
the strengths of shinkin banks. Furthermore, we will develop data businesses in the shinkin bank industry, aiming tostrengthen the marketing capabilities of shinkin banks and diversify revenue sources through the use of data, as well
as develop organizational structures and secure human resources.
6

Toward the Realization of Sustainable Regional Communities[The SCB's targeted policy direction toward achieving the SDGs]
The SCB aims to "realize sustainable management" that will both enhance the value of the shinkin bank industry andsolve social issues through activities related to regional communities, people, and the environment. To achieve thisgoal, we will strengthen our ties with and reach out to regional communities so that shinkin banks can sustainably
fulfill their role as "comprehensive service providers" that offer one-stop, appropriate solutions, both financial andnon-financial, to various local issues.
In addition, we have set a target of ¥3 trillion for ESG investments and loans by fiscal 2030, and also aim to reduce SCB greenhouse gas emissions to virtually zero by fiscal 2030.

[SCB launches the "Shinkin Green Project" to become a key player in realizing decarbonization]
The SCB has launched the "Shinkin Green Project" to respond to the needs of shinkin banks’ customers for decarbonization among others, and to strengthen the shinkin bank industry's own initiatives.
This project will promote efforts to solve environmental problems together with shinkin banks based on threepillars: "finance," in which funds from the shinkin bank industry will be provided to local green initiatives; "consulting," in which solutions will be provided toward helping local governments and SMEs decarbonize; and "eco-local,"in which local efforts to reduce environmental impacts will be promoted.
Through these efforts, shinkin banks will become key players in decarbonizing regional communities, and in addition, will establish a brand image of "green" when it comes to shinkin banks.

In Conclusion
Although there are some positive signs that the COVID-19 pandemic will come under control in fiscal 2022,
the outlook for the regional economies remains uncertain due to inflation caused by soaring resource prices,
Russia's invasion of Ukraine, and other factors.
In order to achieve the vision laid out by the SCB
where "Shinkin Bank is the most reliable bank in every
local area" by 2030, the SCB is committed to realizing
sustainable regional communities by providing new valuethat only the shinkin bank industry can deliver, throughthe concerted efforts of all officers and employees of the
SCB Group.

7

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

About Shinkin Central BankThe SCB was established as a cooperative financial institution funded by the shinkin banks, and serves as the central bank for shinkin banks
throughout Japan, which are also its members. Here we will explain the three major functions performed by the SCB in the shinkin bankindustry.

1. Functions to realize a sustainable society
Shinkin banks play a key role in supporting regional economies by lending to local organizations and SMEs in Japan. However, individual
shinkin banks are sometimes restricted in performing their banking functions because of their scale and limitations on their business area.
IssuesSolutions

Value provided◦Expansion of sales channels◦Overseas expansion◦Business startups◦Business succession and M&A▪Provide business matching opportunities▪Provide services corresponding to the needs of overseas
expansion▪Support business expansion and networking at overseas locations▪Providing a platform to support business startups▪Provide a platform for M&A▪Provide funds and capital through our support fund
▪Provide services according to life stageSound
development of
SMEs

Individual
customers◦Asset buildup◦Succession plannings◦Strengthening of financial literacy▪Provide products corresponding to life events▪Supplement services for assets under management at shinkin
banks▪Provide trust products for individual customers▪Provide digital skills training▪Providing a communication application

Realization ofpeople's
well-being

Regional
communities◦Regional revitalization◦Promotion of regional industry◦Increased use of cashless payments▪Provide Regional Revitalization Support Package▪Regional innovation in collaboration withorganizations▪Alliance with the Mercari Group▪Establishment of the SCB Furusato Ouen Dan

SMEs

external

Prosperity ofregional society

2. Central bank functions for shinkin banks
The SCB makes every effort to maintain an orderly financial system within the shinkin bank industry through the further strengthening of
consulting functions, and cyber security measures in the shinkin bank industry, as well as timely and appropriate operations of the Shinkin
Bank Management Reinforcement System, etc.

Support for
ensuring thesoundness ofshinkin banks

Maintaining andincreasing ofcredibility of theshinkin bankindustry

Solutions◦Strengthening of investment management◦Strengthening of operational efficiency▪Provide deposit products▪Provide investment products using trust banking business
functions▪Provide loan products▪Handle administrative tasks for deposit assessment
operations▪Promote sharing of cash-related operations◦Strengthening of ability to manage risk
◦Nurturing and obtaining of human resources▪Assist sophistication in risk management▪Assist profit simulation and operation planning▪Implement consulting▪Assist improvement of systems for cyber security▪Assist improvement of systems against money laundering orother illicit activities◦Early detection of management issues◦Management reinforcement▪Operate the Shinkin Bank Management Reinforcement
System▪Operate the Shinkin Bank Mutual Funding Support System

Value provided

Development of regional economies
through strengthening managementof shinkin banks

Support forboosting earnings
capacity ofshinkin banks

Issues3. Functions as an institutional investor
The SCB is constructing a stable funding base through deposit operations and bond operations. With the funds procured with this base, the
SCB makes investments and loans for various products, etc. in money markets in Japan and overseas as one of the leading institutional
investors in Japan.
Furthermore, with regard to investment and loan strategy, the SCB pursues efficient risk-return as well as promotes investments andloans that take ESG into consideration, such as forming project finance for private finance initiatives.

8

The SCB Group(As of July 31, 2022)

Regional trading
company operation

Securities

Support foroverseas businessexpansion

Consigned
clerical work
Shinkin Central Bank

Data processing
consignment

Personal loan
guarantees
Investment and
M&A advisory

Assetmanagement

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

Securities

Shinkin International£30mn in capital (100% ownership)(London local securities entity)

Regional trading
company operation
Support foroverseas businessexpansion

Shinkin Regional Innovation¥100mn in capital (100%ownership)¥100mn capital reserve

Shinkin Singapore$9mn in caital (100%ownership)(Singapore local securities entity)

Personal loan
guarantees

Shinkin Guarantee

Assetmanagement

Shinkin Asset Management

Investment and
M&A advisory

Shinkin Capital

Data processing
consignment
Consigned
clerical work

¥1.0bn in capital (100% ownership)¥0.8bn capital reserve¥200mn in capital (100% ownership)¥490mn in capital (100% ownership)▪Dealing‌‌Brokerage▪
‌Underwriting▪
‌Underwriting new bonds and agency business▪
in the euro market▪
‌Dealing and brokering for existing euro bonds‌Foreign securities investment and consulting▪
▪Regional trading company business‌‌Regional innovation consulting business▪
‌Supporting the overseas expansion of shinkin▪
banks’ customers‌Supporting investments and loans of SCB▪
‌Conducting surveys and research for financial▪
innovation‌Nurturing human resources of the shinkin▪
bank industry‌Debt guarantee business (guarantees for▪
unsecured personal loans provided by shinkinbanks)‌Management services for discretionary▪
investment contract assets▪‌Management services for investment trust assets▪Investment banking‌‌M&A brokering▪
▪
‌Corporate business consulting

The Shinkin Banks
Information System Center▪Data processing consignment‌‌Software development▪
¥4.5bn in capital (50.7% stake;49.2% owned by shinkin banks); ▪
‌Computer consulting and training¥1.5bn capital reserve

Shinkin Chukin Business¥70mn in capital (100% ownership)(handles SCB administrative work)‌Computing▪
‌Promissory note exchange▪
‌Branch, dormitory, and other property▪
management

9Shinkin Central Bank Annual Report 2022

Shinkin Central Bank

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

Outline of Shinkin Banks

254 shinkin banks form an extensive network,with approximately 7,100 offices across thecountry, from Hokkaido in the north to Kyushu
and Okinawa in the south.
Shinkin banks dedicate themselves to providing high-quality services to local residents,
as financial institutions deeply rooted in theirrespective regions, and contribute to regional
development.
Total deposits outstanding at 254 shinkinbanks as of March 31, 2022, reached approximately ¥158 trillion ($1,298 billion), which ranks
it in third place after Japan’s city and regionalbanks, and gives shinkin banks an important position in Japanese financial markets.
Shinkin banks continue to further deepen
their presence and roles as important infrastructure for regional economies and communities.

Deposits1 Outstanding by
Bank Segment (As of March 31, 2022)
City Banks

2,592

Shinkin Banks

1,298

Second-tier Regional BanksManagement improvement /business turnaroundCo-financing

Succession support / M&As

Product and service expansion

Overseas expansion

Personal lending businessBusiness start-ups

Local-area revitalization

Shinkinbankcustomers

Nationwide Network of Shinkin Banks (254 banks)

Hokuriku (15 banks)
Kinki (29 banks)

Hokkaido (20 banks)

Chugoku (20 banks)
Tohoku (27 banks)

Kyushu (26 banks)

Kanto (49 banks)

Tokyo (23 banks)
Tokai (34 banks)

Okinawa (1 bank)

Shikoku (10 banks)

Deposits Outstandingat Shinkin Banks(Trillions of yen / billions of US dollars)$3,635Agricultural Cooperatives

155.5(1,405)140.9(1,326)143.4(1,293)

Loan and Bills Discounted
Outstanding at Shinkin Banks(Trillions of yen / billions of US dollars)

158.8(1,298)145.2(1,336)

70.9
(667)

71.9
(648)

72.6
(668)

2018

2019

2020

78.4
(708)

78.8
(643)

2021

2022

885
2

547

Credit Cooperatives

187

Labor Credit Associations

184

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

10Shinkinbanks(Billions of US dollars)
2

Regional Banks2

Notes:

Shinkin Bank Services

2018

Note:

2019

2020

2021

2022

Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥106.28, ¥110.96, ¥108.71,¥110.69 and ¥122.37 per US$1.00, the prevailingrate on March 31, 2018, 2019, 2020, 2021 and
2022, respectively.
Source: The SCB.

Note:

Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥106.28, ¥110.96, ¥108.71,¥110.69 and ¥122.37 per US$1.00, the prevailingrate on March 31, 2018, 2019, 2020, 2021 and
2022, respectively.
Source: The SCB.

Capital Adequacy Ratio of Shinkin Banks

12.51%

201812.26%

The capital adequacy ratio of shinkin banksrose to 12.55% (preliminary figure) as of March
31 2022, from 12.48% at the end of the previous fiscal period.
The ratio maintains a level that is not inferior to that of domestic citybanks (13.94%),
and is outperforming other domestic regionalbanks (9.58%).

12.55%

12.48%
12.10%

2019

2020

2021

2022
(Preliminary figure)

Source: The SCB.

Non-consolidated Capital Adequacy
Ratio by Bank Segment (%)(as of March, 31, 2022)

12.55%

13.94%
9.58%

Shinkin banks

Nonperforming-loan Ratioof Shinkin Banks (%)

City banks(Preliminary figure)

Regional banks

4.32%

2018

4.05%

2019

2020

3.80%

2021

3.97%

2022
(Preliminary figure)(Domestic)

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

3.92%

Source: The SCB.

Difference between Shinkin Banks and Commercial Banks
Category

Shinkin Banks

Commercial Banks
Banking Act

Legal foundation

Shinkin Bank Act

Organization

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

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

11

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Realizing a Sustainable Society
Declaration of Shinkin Central Bank Group on SDGs
Shinkin Central Bank Group is a group in which the SCB plays its role as the central financial institution for shinkin banks. As such, the Group
strives to implement initiatives together with shinkin banks throughout Japan toward realization of a sustainable society based upon the
Sustainable Development Goals (SDGs) and in accordance with the principle of a cooperative institution focusing on three important themes,
including the “region”, the “people” and the “environment”.

Sustainable prosperity of a regional society
Major initiatives

Relevant SDGs

■ Improving sustainability of shinkin banks■ Improving sustainability of SMEs
■ Initiative for regional revitalization in collaboration with shinkin banks
We contribute to sustainable prosperity of regional societies by strengthening sustainability of shinkin banks
which support the regions and SMEs which constitute the business infrastructure for the regions, as well as
by activity supporting regional revitalization.

Well-being to all the people
Major initiatives

Relevant SDGs

■ Support for realization of children’s dream■ Enhancement of support for life planning of all generations■ Promotion of creating a workplace that values uniqueness of employees
Together with shinkin banks, we strive to implement initiatives to bring well-being to senior generations,children and all people in the regions, and to contribute to realizing a diversified and inclusive society withthe concept of “leave no one behind”.

Conservation of global environment
Major initiatives

Relevant SDGs

■ Promotion of ESG investments and loans■ Measures for climate change■ Reducing environmental burden associated with business activities
We strive to reduce environmental burden associated with business activities. Furthermore, as a banking
group making investments and loans on a global scale, we will contribute to conservation of the global
environment by promoting investments and loans that are mindful of the environmental problems.

Support for initiatives
Task Force on Climate-related Financial Disclosures (TCFD)
The “Task Force on Climate-related Financial Disclosures (TCFD)” was established in December 2015 by the Financial
Stability Board at the request of G20 finance ministers and central bankers. In July 2019, the SCB endorsed therecommendations of the TCFD.
Equator Principles
In April 2021, the SCB adopted the Equator Principles, a voluntary framework designed to ensure that in extendingloans to large-scale projects, financial institutions give due consideration to the impact of such projects on theenvironment and society.

12Measures for climate change
In July 2019, the SCB endorsed the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD). Information will be disclosed in line with TCFD recommendations as follows.

Governance‌We hold an Executive Committee meeting to deliberate on our policies and initiatives as to the SDGs including climate change, and then report the◇result to the Board of Directors. Also, from a standpoint of integrated management as one banking group, we hold the “Group Promotion Committee
on SDGs” meetings twice a year, a committee comprised of executive officers of the SCB and SCB Group companies to discuss such matters as the
SCB Group’s policies and initiatives regarding the SDGs including climate change.
◇‌In September 2021, "the SCB Group Environmental Policy" was approved by the Board of Directors in order to be more proactive in solving environmental
issues.
◇‌T he SDGs Promotion Division was reorganized as an independent division in April 2022 (split off from the SDGs Promotion Office of the Strategic Planning
Division), which is taking the lead on cross-organizational efforts to address the SDGs including climate change.

Strategy
The environmental problems including climate change are the most important issues common to all human beings. As such, in accordance withthe “Declaration of Shinkin Central Bank Group on SDGs” formulated in September 2019, we recognize that this climate issue would bring
opportunities, risks and influences on our business activities in the following context. Accordingly, we will actively strive to solve the issues.

<Opportunities>‌Together with shinkin banks nationwide, we are actively implementing initiatives to realize a sustainable society. We recognize that these initiatives◇
contribute to regional revitalization as well as to an increased presence of the shinkin bank industry including the SCB. In April 2022, the Shinkin Green
Project was launched with the aim of decarbonizing regional communities and SMEs. The Green Project Promotion Office, established within the
Regional Innovation Division, is taking the lead in promoting initiatives to solve environmental problems in cooperation with government agencies
and external organizations.
◇‌B ased upon our understanding the increased use of renewable energies worldwide and advancement of technological innovations as investment opportunities,
we are promoting ESG investments and loans. We are also actively addressing transition finance for the transition to a decarbonized society.Toward the SDGs
target deadline of 2030, we have set a medium- to long-term goal of a cumulative total of ¥3 trillion in ESG investments and loans (from fiscal 2021 to fiscal
2030).

FOCUS
About the Shinkin Green Project

Finance

As awareness of environmental issues grows worldwide, the shinkin bank

Providing funds from theindustry is developing its own “Shinkin Green Project” to work together as one

shinkin bank industry toto solve environmental problems.

green initiatives

regional community

Based on the three pillars of “finance,” which provides funds from theshinkin bank industry to regional community green initiatives, “consulting,”

Shinkin Green Project

which provides solutions to decarbonize municipalities and SMEs, andConsulting

ecoLocalLeveraging networks to

Promoting efforts to“ecoLocal,” which promotes initiatives to reduce environmental impact inprovide solutions to

reduce environmental

decarbonize municipalities

impact in regionaland SMEs

communities

regional communities, by 2030, shinkin banks aim to become a key player indecarbonizing regional communities.

13

Shinkin Central Bank Annual Report 2022

Shinkin Central Bank

<Risks>‌We recognize the risk associated with a transition to a low carbon society such as tightening regulations and technological innovations relating to the◇climate (transitional risk), and the risk of facing difficulties in business continuity due to an increased number of natural disasters or abnormal weather
associated with climate change (physical risk). All these are the risks that affect the businesses and financial conditions of the SCB's customers, whichthen indirectly affects the portfolio of the SCB.
◇‌In consideration of the SCB’s special role of being a central financial institution for shinkin banks, we recognize that the risk of the SCB facing difficulties in its
business continuity due to the climate change (physical risk) is a major risk.
◇‌In managing climate change risk, risks are qualitatively assessed based on two scenarios: "2°C" and "4°C".

[Overview of the 2°C scenario]
In order for society as a whole to actively work toward decarbonization, low carbon and decarbonization technologies are promoted, andvarious regulations are strengthened to curb carbon emissions.
(Possible Circumstances)
Policy and regulatory changes
Transitional risk

Changes in technology
Market changes
Reputation

Physical risk

Increased costs for companies to comply with stricter government carbon emission regulations
Increased costs associated with developing low carbon and decarbonization technologies
Decreased demand for high carbon emitting industries
Reputational damage due to delays in climate change response

Acute

Risk of more severe natural disasters decreases compared to the 4°C scenario

Chronic

Risk of increased extreme weather events becoming chronic decreases compared to the 4°C scenario(Possible Impacts)

The risks associated with the transition to a low carbon society (transitional risk), such as tighter climate-related regulations and technologicalinnovation, will increase and affect the businesses and financial conditions of the SCB's investment and loan customers, which can be
expected to indirectly affect the SCB's portfolio. At the same time, physical risks will be lower than in the 4°C scenario.
[Overview of the 4°C scenario]
Priority is given to economic development, with no additional policy or regulatory enforcement, and the rise in global temperature and its
effects will continue to worsen.
(Possible Circumstances)
Transitional risk
Physical risk

Transitional risk is lower than in the 2°C scenario due to insufficiently tightened climate change policies and regulations
Acute

Severe flood damage due to an increase in large typhoons and heavy rains, as well as increased
drought damage and forest fires caused by heat waves

Chronic

Increased extreme weather events due to the long-term rise in temperature(Possible Impacts)

The SCB's portfolio can be expected to be indirectly affected by an increase in the risk of facing difficulties in business continuity (physicalrisk) due to more severe natural disasters and more extreme weather events caused by the progression of rising temperatures, which willaffect the businesses and financial conditions of the SCB's investment and loan customers. At the same time, transitional risk will be lower
than in the 2°C scenario.
<Influences>‌As of March 31, 2022, carbon-related assets accounted for 29.1% of total loans*. Based on TCFD recommendations, loans to the energy, transportation,◇materials and construction, and agriculture, food and forest products groups are defined as carbon-related assets.
* Total direct lending to members (shinkin banks) and non-members ( ¥7,469.1 billion)

14

Risk management‌In the integrated risk management framework, we have created a risk map that classifies risk events according to two criteria: "impact on the SCB"◇
and "probability of occurrence," and manages them comprehensively. Climate change risk events are also added to the risk map for visualization andsharing.
◇‌W e have distinguished those sectors whose financial conditions are susceptible to the climate change and formulated the "Guideline for Making Responsible
Investments and Loans by Type of Business." By making investments and loans in accordance with this Guideline, which is continually being revised, we aremaking a contribution to realization of a sustainable society as well as managing financial impact on the SCB. In July 2021, we tightened our policy on
investments and loans for coal-fired power generation.
◇‌T he SCB adopted the Equator Principles in April 2021. Based on these principles, we assess the environmental and social impacts of projects in the decisionmaking process on project finance and other projects, and continuously monitor the status of environmental and social considerations even after a project is
operational. In April 2022, we established handling procedures for the Equator Principles.
◇‌In the credit screening framework, the impact of ESG factors on the creditworthiness of the customers is qualitatively evaluated, and credit decisions are
made based also on the results of the evaluation. In addition, when investing in funds, we evaluate the ESG investment stance of the entrusted asset
management company and make investment decisions based on the results of the evaluation.

Metrics and Targets◇‌W e have set a target of ¥3 trillion for the cumulative amount of ESG investments and loans from fiscal 2021 to fiscal 2030. The scope of ESG investments
and loans is defined as investments and financing that contribute to solving environmental and social issues (e.g. bonds, loans, funds, project finance, PFI) withreference to international principles and government guidelines.
(Amount of ESG investments and loans executed)
TargetCumulative total of ¥3 trillion from fiscal 2021 to fiscal 2030

ActualFiscal 2021: ¥300.5 billion (including ¥74.0 billion in the environmental field)

 e have set targets for reducing the balance of investments and loans used to finance the construction of coal-fired power plants by 50% by fiscal 2030 from◇‌W
the end of fiscal 2020, and to zero by fiscal 2040.
(Balance of investments and loans used to finance the construction of coal-fired power plants)
TargetReduce by 50% by fiscal 2030 from the end of fiscal 2020*1, and to zero by fiscal 2040

ActualBalance at the end of fiscal 2021: ¥5.5 billion*1 Balance at the end of fiscal 2020: ¥5.9 billion◇‌In order to achieve carbon neutrality by 2050 as set forth in the Paris Agreement, the SCB has set a target to reduce its greenhouse gas emissions (Scope 1
and Scope 2)*2 to virtually zero by fiscal 2030. We will contribute to the realization of a decarbonized society by switching to electricity derived fromrenewable energy sources and saving energy.
(Greenhouse gas emissions)
Measurement Item

Fiscal 2021

Scope 1

1,880 t-CO2

Scope 2

11,932 t-CO2

Total

13,812 t-CO2

TargetVirtually zero by fiscal 2030

*2 Scope 1: Direct emissions generated by the business operator itself (combustion of fuel, etc.)
Scope 2: Indirect emissions generated through use of electricity, etc. supplied by another party◇‌In order to reduce CO2 emissions, efforts are underway to achieve electricity consumption reduction goals based on the "shinkin bank industry’s environmental
voluntary action plan," and have achieved actual reduction that exceeds the reduction target for fiscal 2030.
(Electric power consumption)
Target19% reduction in fiscal 2030 compared to fiscal 2009*3

ActualFiscal 2021 213kWh/m2*4 (-42.8%)*3 Fiscal 2009 373kWh/m2*4 Electric power consumption rate = electric power consumption/total floor space

15

Shinkin Central Bank Annual Report 2022

Shinkin Central Bank

Medium-Term Management Plan "SCB Strategy 2022"
Overview of the Medium-Term Management Plan “SCB Strategy 2022”
The current environment surrounding the shinkin bank industry is characterized by a number of material issues that must be addressed,
including sustainability concerns of regional communities, accelerating digitization, climate change countermeasures, in addition and thepersistently low interest rate environment due to sustained monetary easing.
In light of these changes in the business environment, the SCB has formulated a new Medium-Term Management Plan, “SCB Strategy
2022,” which is based on the “Four Strategies” and “Three Reforms” that follow the initiatives of the previous Medium-Term Management Plan,
and the new Plan began from April 2022.
Management Philosophy

As the central bank for all Shinkin Banks, the SCB supports the growth of the Shinkin Bank industry,
thereby contributing to economic development throughout Japan.
Together with Shinkin Banks, SCB will aim for constructing combined operations as one banking group, improving
competitiveness of Shinkin group, and achieving the future where Shinkin Bank is the most reliable bank in every local
area, by allocating resources to each bank’s field of expertise.

Vision by 2030

Achieving both increased corporate value and solutions to social issues= Sustainable Management

Shinkin Green ProjectMedium-Term Management Plan “SCB Strategy 2022”- Road to 2030 - The Future of Regional Communities Together with Shinkin Banks- Plan period Fiscal 2022 to fiscal 2024
(3 years)

HX

NX

DX

4S

Human assets

Network

Digital3X

Strategy

Transformation- Four Strategies -Strategy 1

Improve the capability to solve issues ofregional communities- Reforms through HaND -Shinkin Banks’ Strengths

Strategy 2Strengthen shinkin banks’ profitability andcapability to respond to risk

The SCB’s Strengths

Strategy 3

Build a sustainable and efficient business
operating structure

Strategy 4

Strengthen SCB’s financial base

Relationshipwithregional
communities

Face to facecustomer contact

Values to be shared

The SCB“Collaboration” with shinkin banks

Collaboration with the outside● Medium-term target level of
earnings● Levels of management indicesthat should be maintained

Profit attributable to owners of parent

Consolidated capital adequacy ratio (domestic standard)

Around16

Shinkin banks¥40.0 billion

At least

15%

Global network

Cooperation
withexternalorganizations

Practice of “Try & Learn”

Maximum amount available for dividend
At least¥200 billion

Three Reforms - HaND The nature of financial institution business is about to undergo a major transformation as a result of accelerating innovation due to dramaticadvances in digital technology, the resulting shift in industrial structure, and intensifying competition across industries and business categories.
Under these circumstances, it is necessary for the shinkin bank industry to reform its business model to increase its competitiveness as a whole.
The SCB will create reforms based on the three themes including “Human assets,” “Network,” and “Digital,” which can be strengths andopportunities for the shinkin bank industry, and will enhance the competitiveness of the shinkin bank industry.

Reforms through HaND
Human assets × Network × Digital↓

Improving the competitiveness of the shinkin bank industry

Human assets transformation

Network transformation

Digital transformation

Advancement of diverse human resources

HX

Shinkin banks×

Regional communities

×

Acquisition of specialized skills

NX

Blending of real world and digital technology

External organizations

×
×

DX

Improved efficiency and productivity

Direction of HaND

Human assets
transformation

HaND will provide opportunities for diverse human resources to play an activerole in the industry and establish a system to enable each individual to acquire
highly specialized skills.
Through this, we aim to enhance the growth of the shinkin bank industry andincrease corporate value through the advancement and growth of “human assets.”

P20

Networktransformation

The SCB Group will serve as the hub of the shinkin bank industry, and by further
strengthening organic collaboration with external organizations such as businesscompanies and government agencies, we aim to sublimate the industry network
into a system that solves regional community and shinkin bank issues, and toenhance its value (maximize network value).

P22

Digitaltransformation

By combining shinkin banks’ strengths in “face to face” communication with digitaltechnology, we aim to create a new customer experience by increasing thedepth of all phases of customer contact, customer understanding, and problem
solving.

P24

17

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Medium-Term Management Plan “SCB Strategy 2022”

１

Improve the capability to solve issues of regional communities

Strategy

In order to meet the expectations of regional communities raised by the COVID-19 pandemic, we will focus on initiatives that makea significant contribution to solving issues of regional communities and increase the effectiveness of our measures.
We will aim to build a system in which the shinkin bank industry receives appropriate compensation for these initiatives andprovides quality services to regional communities on a sustainable basis.

Strategy 1

Achieve by 2030
H N D

[Focus Initiatives and Measures]Support for SMEs suitable for life stages

N

DX for SMEs

D

Initiatives to realize a decarbonized society

N

Promotion of regional community innovation

N

Support for individuals suitable for life stages

N

Developing and securing human resources that
contribute to problem solving

H

H …Human assets

N …Network● Shinkin banks will continuously demonstrate
their capability to solve regional community
issues as a regional community platformer● Shinkin banks will demonstrate their presence
Improve the capability ofshinkin banks to solve
problems faced by regional
economies (SMEs, regional
communities, and individuals)

as key players in the realization of SDGs anddecarbonization in regional communities

D …Digital

２

StrategyStrengthen shinkin banks’ profitability and capability to respond to risk

The SCB Group will work together as one to deepen its consulting functions for shinkin banks, including fund management and risk
management support.
We will promote the provision of products and services that contribute to the diversification of shinkin banks’ revenue sources.

Strategy 2[Focus Initiatives and Measures]

Achieve by 2030
H N D

Strengthening of fund management and risk
management support structureN● Achieve efficient fund management and risk
management in the shinkin bank industry as a

Developing data business in the shinkin bank industry

Providing comprehensive consulting services for fundmanagement

18

D

H

whole, while maintaining an appropriate level
Strengthening themanagement foundationnecessary for shinkin banks tosustainably solve problems ofregional communities

of profits

３

Build a sustainable and efficient business operating structure

Strategy

To make effective use of limited management resources, we will work to improve operational efficiency by promoting collaboration,
centralization, and outsourcing, while maintaining and improving the robustness and sustainability of our operations.
We will develop an environment that will serve as a foundation for business model reform in the shinkin bank industry.

Strategy 3[Focus Initiatives and Measures]

Achieve by 2030
H N D
● Introducing labor-saving measures for middle

Promoting operational efficiency in shinkin banks

N

Promoting operational efficiency at the SCB

D

and prioritizing allocation of management

Establishing an environment to accelerate industryDXD

regional communities

Establishing an environment to promoteadvancement and growth of human assets

H

Improving robustness and sustainability ofoperations

Nand back-office operations of shinkin banks
resources to front-office operations for

Building a structure to
improve operational
resilience and efficiency
in the shinkin bankindustry● Improving the status of working in the shinkinbank industry

４

StrategyStrengthen SCB’s financial base

While a commensurate cost burden is expected to be incurred in strengthening the functions of the shinkin bank industry, we will
aim to enhance profitability by upgrading our risk appetite framework management and developing specialized human resources.
As one of Japan’s leading institutional investors, we will promote initiatives to contribute to the improvement of social
sustainability through the promotion of ESG investments and financing.

Strategy 4[Focus Initiatives and Measures]

Achieve by 2030
H N D
● M aintain the profitability and soundness

Upgrading risk appetite framework management
Developing human resources with expertise ininvestment and loans-related operations
Promoting ESG investment and financing andenhancing climate change response
Making appropriate allocation of management
resources

necessary to fulfill its functions as a central
financial institution in a permanent and stableH

mannerEstablishing a mediumto long-term financialbase for the SCB to
fulfill its role as a central
financial institution● Contribute to the sustainable development ofsociety through ESG investments and financing

19

HX：Human assets transformation
Aiming for a Chain of Innovation
Looking back on our initiatives in recent years, we feel that the spirit of challenge has taken root in the SCB as well, as evidenced by the promotion of DX in theshinkin bank industry, establishment of new subsidiaries, promotion of ESG investments and financing, and realization of operational reforms, among others. We
intend to continue to enhance the effectiveness of our initiatives based on our “Try & Learn” philosophy, which emphasizes learning a lot from new challenges andlinking that to the next challenge. In response, this fiscal year we launched a new program called <neXtry>, which allows employees to propose new business ideas
and work on their own to realize them with the support of experts. Aiming for the chain of
innovation, we will continue to advance the creation of an environment that further fosters a
corporate culture of challenge in order to nurture innovators who will pave the way to the futureof the shinkin bank industry.
Also, in order to improve the sustainability of regional communities, it is essential to take anapproach that is tailored to the characteristics of each regional community, the skills required of
officers and employees in the shinkin bank industry, who play the role of the “first-mile” inpromoting regional community-based initiatives, are becoming more sophisticated and diverse thanever before. The SCB also believes that, based on the idea that the employees and officers peopleof the shinkin bank industry are “assets,” it is necessary to systematically develop human resources
with highly specialized skills, and we have put forth establishing a human asset development cycle tofoster an awareness of self-sustained career development among employees, and to develop
human assets with specialized skills in specific fields.
In addition, we will focus more than ever on creating the necessary environment so that diverse
human resources, including women and seniors, can maximize their abilities and play active roles forlonger periods of time, leading to the realization of a dynamic organization.
Deputy President Hiroshi Sudo

Toward the Advancement and Growth of Human Assets
We will further work on fostering an organizational tone and creating a comfortable work environment so that a diverse range of human assets, including women andseniors, can play an active role, and by working to develop human assets with expertise and the flexibility to respond to changes in the environment, lead to the growthof the shinkin bank industry and enhance our corporate value.

Advancement of diverse human resources

Acquisition of specialized skills
Establish
environments

GenderAgeWork
experience

ValuesLifestyle

Provideopportunities

Market operations
FinanceSME
finance

IT / digital

Business strategy

Shinkin banks

The SCB

Nationality

Recognition of their roleand social mission as
officers and employees ofthe shinkin bank industry

Consulting

Advancement and growth of “human assets”

Growth of the Shinkin Bank Industry and Enhancement of Corporate Value
20

Three Reforms(HaND)

New business creation program “neXtry”
SCB employees propose new solutions to tackle issues faced by regional communities and shinkin banks, and with organizational support, work to realize
their ideas themselves through the “neXtry” New Business Creation Program. In addition to creating growth opportunities for employees, we aim toenhance the value that SCB can provide by fostering an organizational culture in which challenges are encouraged and repeating “Try & Learn” in an
efficient and effective manner.

Concept- Learn the process from idea conception to its materialization, and realize it yourself.Work on realization of ideas by
the proposers themselves

Provide maximum support to proposers

neXtryIncorporate new perspectives

Outline of the program
Hypothesis testing andconcrete consideration

Idea generation

PDCA (Plan-Do-Check-Act)
put into practice

ProposalCommercialization

Implementation of training, etc.

Operation of New Business
Creation Program

Support for proposals(system in which proposer staff members work on their own)

Provision of training and workshops

JudgesMentoring judges prior to proposal

Mentoring for accompanying support

Verification of measures

Consulting firms

SCB University
We operate “SCB University” so that each and every employee can voluntarily learn to achieve his or her own goals and career development. Under thissystem, employees can freely select courses they wish to study from a diverse curriculum and receive credits according to the courses they take. Many
courses can also be taken online as “SCB-Sels,” and by providing a flexible learning environment, SCB-Sels will help participants acquire the knowledge
and skills required of employees of the central financial institution in the shinkin bank industry.

By level
Technical Skills

Newly-hired staff

2nd year

Basic (51 courses)

Newly appointed investigator

Newly appointed manager

Development (17 courses)

Life Design

Practical (5 courses)

Critical thinking, consulting skills, etc. (13 courses)

Human Skills
DX

4th yearDX Basic

External dispatch

Outside public lectures

Self-development

Correspondence courses

DX Development
MBA study abroad

SME Training Institutes

TOEIC preparation courses

DX Practical
Cross-industry exchange

Online English conversation

Domestic graduate schools, etc.
Digital training, etc.

21

NX：Network transformation
Toward Maximizing Network Value

Deputy President

The SCB Group provides a wide range of highly specialized services in cooperation with shinkinbanks nationwide. The networks that the 254 shinkin banks nationwide have with regional
communities, the mutual networks among shinkin banks, and the networks that the SCB Grouphas with external organizations in Japan and abroad are major strengths of the shinkin bankindustry. By connecting regional community societies with various corporations, government
agencies, and research institutes, we hope to open up new possibilities for regional community
societies.
To date, we have promoted initiatives that utilize our network, such as the establishmentof the “SCB Furusato Ouen Dan (lit., “hometown cheering team”),” a regional innovation
promotion scheme that utilizes the corporate version of the Furusato Nozei donation program,and the “Shinkin Business Succession Consortium,” which provides a one-stop consultation
service on business succession and coordinates appropriate external organizations.
The SCB Group will serve as the hub of these networks to further strengthen external
cooperation with regional community societies and enhance their value. By maximizing these
network values, we aim to create a system in which all participants can enjoy greater benefits
from each other. We call this system of co-existence, co-prosperity, and mutual support the“Shinkin Ecosystem.”

Hiroshi Nakahara

Formation of the Shinkin Ecosystem
The SCB Group will serve as the hub, organically combining the networks of regional community societies held by shinkin banks nationwide with SCB’s
extensive networks of external organizations in Japan and overseas to create a problem-solving system that transcends the framework of the shinkin bankindustry. By doing so, we aim to solve issues in regional community societies and form a system (the Shinkin Ecosystem) in which participants in the network
mutually grow, co-exist, co-prosper and mutually support each other.

Research andeducational
Institutions

SMEs

Business
corporations

Regional
community societies
Network-based
problem solving↓

Organic
combinationof networks

Shinkin banks

The SCB

Growth in ESG/SDGsof regional community societies

Externalorganizations
Providing Problem-Solving
Solutions↓

Growth in Business throughsolutions to regional
community social issues

Co-existence andco-prosperity with
regional community
societies

Regional
community
residents
Municipal
governments

Specialists

Ecosystem※

Government
agencies

Overseasbusinesses※Ecosystem is a term that originally meant “ecosystem,” and refers to a state in which organisms living in the same area depend on each other to survive. Here, it refers
to the co-existence, co-prosperity, and mutual support of the many stakeholders in the network in which shinkin banks and the SCB are involved.

22

Three Reforms(HaND)

Regional Innovation Promotion Scheme “SCB Furusato Ouen Dan”
This scheme utilizes the corporate version of the Furusato Nozei donation program, etc., to make donations to regional innovation projects of local publicbodies recommended by shinkin banks. Through this scheme, we aim to realize regional innovation projects that will lead to achievement of the SDGs.
In addition, in order to share examples of initiatives under this scheme, the “SCB Furusato Ouen Taikai (hometown support convention)” is held tointroduce case studies and promote mutual exchanges.

Sponsor

The SCB(Financial support)

SCB Furusato Ouen Taikai
Sharing of distinctive case studies of
SCB Furusato Ouen Dan divided
into 10 themes

SCB
Furusato Ouen Dan

Local public entity(Execution)<Thematic case studies>

Shinkin banks(Effectiveness support)

Case study sharing

Tourism

Migration andsettling down

Business start-up andentrepreneurship

DigitalUtilizing the Shinkin Bank Network to Address Business Succession Issues
The SCB, together with Shinkin Capital, which is responsible for M&A brokerage services, provides a one-stop service for consultations on businesssuccession for shinkin bank customers. The Shinkin Business Succession Consortium is a system that introduces customers to appropriate externalorganizations based on the nature of the customer’s consultation.
In addition, Shinkin Capital is expanding its offices in order to collect and promptly respond to the business succession needs of shinkin bank customers
in a timely and appropriate manner.

Shinkin Business Succession Consortium

Establishment of a dedicated M&A platform for the shinkin bank industry

M&A
support
Ｍ&Ａ支援

Coordination withappropriate externalorganizations toaddress businesssuccession issues

Excess debt elimination

Business succession support
for medicaland nursing care

Subsidy applications

Tax consultation

HR recruitment

Stock purchases

Cooperation with externalorganizations to establish a
dedicated M&A platform
for the industry
Matching among shinkinbanks’ customers

Organic Collaboration with Shinkin Banks and External Organizations
to Solve the Urgent Problem of Business Succession
Shinkin bank industry network to solve business succession issues
Number of shinkin bank business loan customers: 1.24 million
Shinkin CapitalStrengthening cooperation
with shinkin banks throughexpansion of offices
Meticulous response to the needsof shinkin banks’ customers

5 offices established in fiscal 2021,
to be expanded in succession

Tokyo head office
Regional offices
Considering establishingin succession

Shinkin banks

Utilize nationwide network ofshinkin banks to collect businesssuccession needs of customers

254 shinkin banks nationwide

23

DX：Digital transformation
With a view toward the blending of real world and digital technology
The shinkin bank industry is characterized by a “Face to Face” business model centered on in person sales, but customer preferences and behavioral patterns
are changing dramatically due to the progress in digitalization and the spread of COVID-19. Therefore, it is important how to strengthen customer contact
points, and we believe that the shinkin bank industry also needs to strategically incorporate digital technology.
The SCB will establish a competitive advantage over other business formats by making fulluse of “Face to Face” communication to penetrate small, medium, and micro businesses, which
are the main customer base of the shinkin bank industry, with digital technology that has a senseof touch. Also, with the keyword “blending real world and digital technology,” we will provide
one-stop digital services to enhance customer convenience as well as aiming to create newcustomer experiences by combining it with “Face to Face” communication. In addition, in orderto prioritize the allocation of management resources to operations that contribute to theresolution of regional community issues, we intend to “reform” our operations, organization, andprocesses by improving operational efficiency and productivity through the use of digitaltechnology.
In the past, we have responded to accelerating digitalization through various measures, but
in order to raise these efforts to the level of “DX” and continue them, we will secure DX humanresources by hiring external personnel and training internal personnel, as well as building anorganizational structure that is capable of handling DX across the organization.
Senior Managing Director

Yuzuru Nishino

Toward DX Promotion in the Shinkin Bank Industry
By blending real world and digital, we will aim to create new customer experiences by increasing the depth of all phases of customer contact, customer
understanding, and problem solving.
In addition, through the use of digital technology, we will further improve the efficiency and productivity of operations in the shinkin bank industry to agreater extent than ever before, thereby allocating management resources to operations that contribute to solving regional community issues.

Blending of real worldand digital technology

Industry DX•Increasing customer contact points

Creation of
new customer
experiences•Deep understanding of customers•Making customer-oriented proposals•Qualitative
understanding•Meticulous
proposals

Customerunderstanding

Problemsolving•Time and place •Quantitative
independent
understanding•Broad rangeof solutions

Customer
contact

Reform of operations,organization, and processes

Improvement of operational
efficiency and productivity

Face to Face
•Reliable
relevance

Allocation of
resources tosolve regional
community issues

Digitalization

RPA(Digitization of individual operations)Web conferencing

Telework

Digital technology
E-documentation

Digitization(Digitization of analog and physical data)

24

Without affixing seals

(HaND)

Three Reforms

DX for SMEs
For SMEs, which are the main customers of shinkin banks, the realization of DX is a material agenda for improving productivity and competitiveness. The
SCB is promoting DX for SMEs under the three pillars of “digital tools,” “ICT consulting,” and “HR development solutions.”
In particular, with regard to “digital tools,” the SCB is developing a web-based service to provide one-stop services for cash management, back-officeservices, communication, and other functions scheduled to be launched on October 2022.
Through these services, we aim to realize “warm fintech” unique to shinkin banks by blending real world and digital technologies, such as streamlining
the operations of SMEs and helping shinkin banks to more effectively support their core businesses.

[Shinkin Digital Platform Concept]
Phase 1
“Shinkin direct” (already provided)☞ New communication with shinkin banks(Digital Face to Face)

Provision of digital tools
One-stop
digital services

Phase 2
“Portal Service for Businesses”☞ Use of services through the web portal(Cash management, back-office operations, etc.)

Phase 3“Shinkin digital Platform”☞ Improve convenience through data linkage of contents(Wide range of digital services for both financial andnon-financial services)

DX for SMEs
Resolving management
issues through ICT

Improvement of IT literacy ofmanagement and employees

Implementation of
ICT consulting

Providing HR
development solutions

Establishing an environment to accelerate DX talents development
The SCB has been responding to the accelerating
digitalization through various measures, but in order
to raise these measures to the level of DX in the
future, it is necessary for each individual to have asense of ownership and work on a crossorganizational basis.
In order to drive DX company-wide basis, wewill establish a structure to engage in planning,development, and driving of DX across theorganization, as well as also securing human resources
who will be responsible for DX in the shinkin bankindustry by actively hiring external personnel andtraining internal human resources.
Through these initiatives, we will accumulate DX
know-how in the SCB, which will lead to driving DX
among shinkin banks and SMEs.

Recruitment of
external personnel

Develop internal
human resources• Secure human resources throughmid-career hires and part-timeadvisor contracts

Level 3

Level 2• Establish training programs in collaboration
with external organizations• Exchange of human resources with outside
parties including shinkin banks
Business creation andoperational reform
Utilization for
operations

Level 1

Acquisition ofliteracy

Level 0Business-related DX human resources• Business designers• UX designers

Engineering-related DX human resources• Data scientists• Architects• Engineers• Programmers

25

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Overseas Networks
The SCB has offices in New York, London, Hong Kong, Shanghai, Bangkok and Singapore. These offices collect and disseminate information relating to economic and financial conditions, the investment and financing environment, and thelaws, taxation regimes, and employment situation of each region.
These offices also work with allied banks to support the overseas expansion of shinkin banks’ customers.
Moreover, as part of our support for the overseas business of SMEs, we dispatch employees to allied banks. The overseas
offices also provide shinkin bank employees with opportunities to improve their skills related to supporting the overseas businesses of their customers and contribute to human resources development in the shinkin bank industry.
Network of SCB Group’s overseas offices and allied banks

Shinkin International Ltd.
SCB New York Representative Oﬃce

Bank of China

LondonSCB Hong Kong Representative Oﬃce
Shanghai

The Bank of East Asia

New York

Shinkin Central Bank

BeijingTokyo

SCB Shanghai Representative Oﬃce

Hong Kong
ManilaBangkokBank of Shanghai

Ho Chi Minh City

Mexico City

Bank of Communications

Banco Mercantil del Norte, S.A.

BDO Unibank, Inc.

Singapore

Joint Stock Commercial Bank for
Investment and Development of Vietnam

Jakarta

Shinkin Singapore Pte. Ltd.
Maybank Indonesia
SCB Bangkok
Representative Oﬃce
Bangkok Bank… SCB Oﬃce…

Business Alliances(SCB employees seconded)… Business Alliances

Expanding our global network
Given the increase in the number of Japan’s SMEs expanding overseas, particularly in Southeast Asia, in July 2021, we opened a Singapore-based subsidiary,
Shinkin Singapore Pte. Ltd., as a new Asian base for the shinkin bank industry.
Together with shinkin banks, we are committed to bringing the growth potential of Asia into the future of the regional economy by providing
financing and supporting sales channel development for SMEs.

Mission of Shinkin Singapore Pte. Ltd.

26

Supporting the overseas expansion ofshinkin banks’ customers

Establishing a competitive advantage in the shinkin bank industry’s overseas support system by enhancing financefunctions and sales channel development functions.

Supporting investments andfinancing of SCB

Realize and maintain optimal asset allocation by utilizing the global network of the SCB head office and overseas
offices.

Conducting surveys and research forfinancial innovation

Utilizing examples of financial innovation in Singapore and other Asian countries to revitalize local communities
and offer solutions to social issues.

Nurturing human resources of theshinkin bank industry

Systematically develop and improve engagement of shinkin banks and SCB employees through practicalexperience in Asian markets.

Support for overseas business expansion and funding
The SCB has formed business alliances with nine local banks overseas to increase its capability to support shinkin banks’ customers who are expanding their businesses overseas.
Working with shinkin banks, the SCB and local banks, we provide a wide range of support to shinkin banks’ customers who conduct businessoverseas by helping them open local bank accounts, and providing local currency denominated financing using standby L/C, for example.

Provision of services corresponding to the needs of overseas expansion
We are collaborating with shinkin banks in the business areas such as overseas expansion, cultivation of overseas sales channels, overseas financing,effective use of overseas human resources, inbound tourism, and foreign exchange, thus providing various services to those shinkin banks’ customers who are considering overseas expansion.

“Shinkinkai” (local networking)In a typical year we hold regular meetings of the “Shinkinkai” local information exchange events in order to build networks among shinkin banks’customers who are active in the region, involving not only the three Asian offices of Hong Kong, Shanghai and Bangkok, but also Ho Chi Minh,
Jakarta and Manila, where staff have been seconded to local banks with which business alliances have been concluded.

Global Expansion by Shinkin Bank Customers
America: 221

China: 1,105
South Korea: 111
Mexico: 32
Hong Kong: 118
Myanmer: 34
India: 44

Thailand: 514

Laos: 7
Vietnam: 412

Taiwan: 94

Philippines: 115
Combodia: 30
Malaysia: 77
Singapore: 51
Indonesia: 201

Source: Fourteenth Survey on the Overseas Business of Shinkin Bank Customers (2022)

Support of business matching
To support the development of overseas sales channels for SMEs, the SCB holds business meetings withdomestic buyers who have overseas sales channels and supports listing of products on overseas local
e-commerce websites.
In fiscal 2021, the SCB held online business meetings “Food Product Business Meetings with Shinkin
Banks to Connect the World to Japan” for its customers, and more than 450 business meetings were
held, the largest scale ever.
In addition, we held business meetings to develop overseas sales channels for alcoholic beverages
against the backdrop of the growing appreciation of Japanese alcoholic beverages globally.

Hosting the “Shinkin Global Summit 2022”
The “Shinkin Global Summit 2022: Overseas Development × SDGs with Shinkin” was held with the aimof promoting the SDGs through the overseas development of shinkin bank customers.
At the Summit, in cooperation with Shinkin Singapore and others, introductions of advanced casestudies and panel discussions about the SDGs among shinkin bank’s customers were held on the themesof overseas sales channel development and utilization of foreign national human resources.

27

Shinkin Central Bank Annual Report 2022

Shinkin Central Bank

Corporate Management and Auditors

Kenichiro Mimuro

Chairman of the Boardof Directors (Part-time)

Hiroshi Nakahara
Deputy President

Career summary

Career summary

Career summary

April 1968
Joined Hamamatsu Shinkin
Bank (current Hamamatsu
Iwata Shinkin Bank)
June 2005
President and Chief
Executive Officer ofHamamatsu Shinkin Bank
June 2008
Director of the SCB
June 2020
Chairman of the Board of
Directors (current position)
June 2020
Chairman of the Board of
Directors of The National
Association of Shinkin
Banks (current position)
August 2021
Chairman of the Board of
Directors of Hamamatsu
Iwata Shinkin Bank
(current position)

April 1980
Joined the SCB
April 2005
General Manager ofStrategic Planning Division
June 2007
Director and General
Manager of Strategic
Planning Division
June 2009Managing Director
June 2013
Senior Managing Director
June 2016
Deputy President
June 2018
President and Chief Executive
Officer (current position)

April 1987
Joined the SCB
April 2005
Representative Director
and President of Shinkin
International Ltd
June 2009
General Manager of Strategic
Planning Division of the Bank
June 2013
Director and General
Manager of Osaka Branch
June 2016
Managing Director
June 2018
Senior Managing Director
June 2022
Deputy President(current position)

Hiroyuki Shibata

President and Chief
Executive Officer

Career summary

Career summary

April 1981
Joined the Ministry of Finance
June 2013
President of the Accounting
Center and President of the
Policy Research Institute,
Ministry of FinanceJuly 2014
Director-General of the
Financial Bureau
July 2015
Commissioner of the
National Tax Agency
October 2016
Executive Consultant of the SCB
June 2017
Director and Executive
Consultant
October 2017
Senior Managing Director
June 2022
Deputy President(current position)

April 1987
Joined the SCB
April 2013
General Manager of Business
Promotion Division
April 2014
Seconded to shinkinbank with Personnel
Division benefits as
Senior Advisory Officer
June 2016
Director and General
Manager of Personnel
Division
June 2018
Managing Director
June 2022
Senior Managing Director(current position)

Chairman of the Board of
Directors (Part-time)
Kenichiro Mimuro

President and Chief Executive Officer

Yuzuru Nishino

Senior Managing Director

Directors

Hiroshi Sudo

Deputy President

Yuji Takahashi
Atsushi Toyoshima
Yoshinori Jinno
Ikuo Sekiguchi

Seiji Sakuda
Tatsuo Takeda
Kazuo Ohashi
Hiromi Nomura
Mamoru Itagaki

Directors (Part-time)

Corporate Auditor

Shuichi Endo
Ikuo Higuchi
Tetsu Komori
Hiroshi Hiramatsu
Setsuo Gomi
Norikazu Shibuya
Toshiro Yagi
Kiyoshi Yamachi
Minoru Kondo
Koya Nakazawa
Takayuki Sakakida
Kazuyoshi Takai

Masafumi Shinagawa

Hiroyuki Shibata

Deputy Presidents
Hiroshi Sudo
Hiroshi Nakahara

Senior Managing Director
Yuzuru Nishino

Managing Directors
Takehiko Murotani
Hideki Sasaki
Zon Suzuki
Kenji Tanaka

28

Corporate Auditors (Part-time)
Akira Asanuma
Hirotsuna Sumida
Akio Okuyama
Naoyuki Yoshino(As of July 1, 2022)

Business Overview
Earnings Performance

Asset Management

Looking at the financial results for fiscal 2021
(ended March 31, 2022) overall, operating income decreased by ¥11 billion ($91 million) or
4.9% year on year to ¥216 billion ($1,765 million), mainly due to a decrease in gains onsales of government bonds. Meanwhile, operating expenses came to ¥171 billion ($1,399
million), down ¥16 billion ($131 million) or
8.6%, year on year due to a decrease in interest on payables under securities lending transactions as a result of lower foreign currency
procurement interest.
As a result, ordinary income came to ¥44
billion ($366 million), an increase of ¥4 billion($40 million), or 12.3%, year on year. Profit
came to ¥34 billion ($278 million), an increaseof ¥4 billion ($36 million), or 15.1%, year on
year.

The amount of assets under management in fiscal 2021 was virtually unchanged from the endof the previous fiscal year at ¥42,677 billion($348,755 million).
Mainly due to lower government bondholdings, outstanding invested securities decreased by ¥1,581 billion ($12,920 million) during the fiscal year to ¥16,163 billion ($132,089
million) at fiscal year end.
Loans and bills discounted decreased by¥692 billion ($5,657 million) during the fiscal
year to ¥7,758 billion ($63,403 million) at fiscal
year end.
The outstanding amount of short-termmoney market assets increased by ¥2,223 billion ($18,172 million) during the fiscal year to¥18,321 billion ($149,720 million) at fiscal year
end, mainly reflecting Bank of Japan current deposits.

Breakdown of Funding*
17.0%(¥7,127 billion)
3.7%(¥1,547 billion)
79.3%(¥33,165 billion)

Deposits
Debentures
Borrowed money

Breakdown of Asset Management*
1.0% (¥433 billion)

42.9%(¥18,321 billion)

18.2%(¥7,758 billion)

Short-term market
operation
Securities
Loans and bills
discounted
Others37.9%(¥16,163 billion)

Funding
In fiscal 2021, the total amount of funding increased by ¥236 billion ($1,934 million) year on
year, for a total of ¥41,840 billion ($341,918
million). Of this figure, deposits received cameto ¥33,165 billion ($271,024 million), a decreaseof ¥622 billion ($5,087 million), which mainlycomprised fixed-term deposits from shinkinbanks.
After deducting redemptions, debenturesat the end of fiscal 2021 came to ¥1,547 billion($12,644 million), down ¥226 billion ($1,854
million) during the fiscal year, including ¥249
billion ($2,040 million) in debentures issued by
the SCB.
Borrowed money increased by ¥1,086 billion ($8,876 million) during the fiscal year to¥7,127 billion ($58,248 million), mainly comprising borrowings under a funding provision to
support increased lending by the Bank of Japan.

Securities
To advance its diversified investment portfolio, the SCB also invests in such risk assets as
stocks and investment trust funds not subject to interest risk, while optimizing its
portfolio in response to shifts in the financing and investment environment.
The SCB also carries out interest rate
swaps and other derivative trading, to hedge
risks linked to assets under management.
Loans and Bills Discounted
As of March 31, 2022, the outstanding amountof loans and bills discounted was ¥7,758 billion($63,403 million).

Breakdown of Securities*
1.1%(¥184 billion)
31.9%(¥5,160 billion)

30.1%(¥4,856 billion)

3.5%(¥567 billion)
21.4%(¥3,460 billion)

12.0%(¥1,934 billion)

Government bonds
Municipal bonds
Corporate bonds& short-term
corporate bonds
Stocks & investment
trust funds
Foreign securities
OthersBreakdown of Loans and Bills
Discounted*
9.3%(¥724 billion)

National andgovernment
agencies andorganizations

3.7%(¥289 billion)
32.3%(¥2,505 billion)

49.0%(¥3,798 billion)

Regional public
corporations
and charitableorganizations
and others
Business
corporations

5.7%(¥440 billion)

Agency loans
Others* As of March 31, 2022.
* The amount shown in the pie chart is rounded down
to the nearest whole number.

Ordinary Income and Net Income (Non-consolidated)

(Millions of yen)

FY2017FY2018FY2019FY2020

FY2021

Ordinary income (loss)

60,67858,562

52,63639,88444,827

Net income (loss)

46,49842,28637,92429,57934,04629

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Capital Adequacy
OutlineConsolidated Capital Adequacy Ratio

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

The SCB’s consolidated capital adequacy ratio
at March 31, 2022, was 24.35%.
Equity capital, the numerator for calculating the capital adequacy ratio, amounted to¥1,508 billion ($12,330 million).
Risk-weighted assets, the denominator for
calculating the capital adequacy ratio, amounted to ¥6,194 billion ($50,617 million).

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

Capital Adequacy Ratio (Domestic Standard)

Consolidated
Non-consolidated

30

Capital adequacy ratio
Amount of capital
Amount of risk-weighted assets
Capital adequacy ratio(%, billions of yen)
FY2017
30.57
1,645
5,381
31.62

FY2018
23.65
1,425
6,026
24.48

FY2019
24.31
1,476
6,071
25.18

FY2020
25.60
1,502
5,867
26.29

FY2021
24.35
1,508
6,194
24.84

Asset Quality
Disclosed Claims under the Shinkin Bank Act and Disclosed Claims under the Financial Reconstruction Act
As of the end of March 2022, bankrupt andquasi-bankrupt receivables amounted to¥0.1 billion ($1 million), doubtful receivables¥3 billion ($27 million), substandard receiva-

bles ¥18 billion ($154 million), and restructured loans ¥18 billion ($154 million).
The coverage ratio of bad debts (the total of claims deemed collectible with collat-eral and guarantees and the allowance forpossible loan losses divided by total bad
debts) was 64.53%.

Claims disclosed pursuant to the Shinkin Bank Act and Claims disclosed(millions of yen)pursuant to the Financial Reconstruction Act [Non-consolidated]
Bankrupt and quasi-bankrupt receivables
Doubtful receivables
Substandard receivables
Loans past due three months or more
Restructured loans
Total claims under the Financial Reconstruction Act (FRA) (A)End of March
2021
83
3,384
19,9301,008
18,921
23,398End of March
2022
163
3,344
18,92542
18,882
22,433

Increase or
Decrease
80(40)(1,005)
(966)
(39)
(965)

320

192

(128)

Normal claims

8,466,339

7,772,335(694,004)

Total loans (B)Ratio of total claims under the FRA to total loans (%) (A/B)

8,489,738
0.27

7,794,768
0.28(694,970)
0.01

1,124

706

(418)

10,107

10,051

(56)

4,268

3,719

(549)

15,50014,477(1,023)

66.24
58.71

64.53
57.48

(1.71)(1.23)

Partial write-offs

Specific allowance for doubtful accounts (C)recorded on the total claims under the FRA (A)General allowance for doubtful accounts (D)recorded on the total claims under the FRA (A)Amounts deemed collectible with collateral andguarantees (E)Total coverage amounts on disclosed claims under the FRA (F)Coverage ratio (F)/(A)Allowance ratio (%) ((C)+(D))/((A)-(E))

Claims disclosed pursuant to the Shinkin Bank Act [Consolidated]
Bankrupt and quasi-bankrupt receivables
Doubtful receivables
Loans past due three months or more
Restructured loans
Total claims under the FRA (A)End of March
2021
83
3,384
1,008
18,921
23,398End of March
2022
163
3,344
42
18,882
22,433(millions of yen)
Increase or
Decrease
80
(40)
(966)
(39)
(965)

320

192

(128)

Normal claims

8,615,012

7,911,089(703,923)

Total loans (B)Ratio of total claims under the FRA to total loans (%) (A/B)

8,638,410
0.27

7,933,522
0.28(704,888)
0.01

Partial write-offs

31

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

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

Institutional Structure

General Assembly of Representatives
The SCB is a cooperative financial institution
comprising 254 shinkin banks nationwide (asof March 31, 2022) that are its members andinvestors. The General Assembly of Representatives, equivalent to the general meetingof shareholders in a joint-stock company, isheld annually to elect directors and resolve
important issues.
Board of Directors
The SCB’s Board of Directors, comparable to
the Board of Directors in a joint-stock company, holds regular meetings nine times per
year, and makes decisions regarding importantbusiness matters.
There are no board members corresponding to the outside directors as defined by theCompanies Act, however, the Board of Directors includes 18 part-time directors selectedfrom among the executive officers of shinkinbanks from each region in Japan. This is in accordance with Article 32, paragraph 4 of the
Shinkin Bank Act, the SCB’s Articles of Incorporation stipulate that more than half the total number of board members must be executive officers of shinkin banks. The SCB is
confident that the appropriate check on management provided by the parttime directors
ensures that supervision and safeguard functions are in place and have a high degree ofobjectivity and transparency in business operations.
Corporate Auditors
The SCB’s corporate auditors, comparable
to the corporate auditors of a joint-stockcompany, audit the execution of duties by the
directors. The Board of Auditors, which consists of all the corporate auditors, regularly
holds discussions on matters concerning audit
policies and plans.
The SCB appoints one full-time corporate
auditor and two part-time corporate auditorsfrom among the executive officers of shinkinbanks, and two part-time corporate auditors
who are not executives of the SCB or shinkinbanks (non-member corporate auditors),
equivalent to outside corporate auditors as defined by the Companies Act. Non-member
corporate auditors are appointed from among
persons who meet the requirements stipulated in Article 32, paragraph 5 of the Shinkin
Bank Act. There are no stipulations of standards or guidelines regarding independence forthe appointment of non-member corporate

32

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

Checks on Business Operations

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

Improving Internal Control Systems

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

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

Strengthen Compliance System

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

accidents, the SCB has established the Risk
Management Committee.
7. In addition to conducting regular lectures
and training seminars for directors andemployees, each division and branch also
carries out its own training programs as
part of the SCB’s efforts to strengthen
compliance education.
8. The audit items used by the Internal Audit
Division include compliance-related items,
and internal audits include investigation ofwhether the compliance system is functioning adequately.
9. In cases of compliance violation, re ports from the heads of the divisions or
branches concerned are promptly called
for, and appropriate actions are taken toprevent a recurrence.
10. The SCB operates a hotline to facilitate
repor ting of compliance breaches bydirectors and employees. The SCB also
has in place strict measures to protect
whistle-blowers.
11. In accordance with the Act on Provisionof Financial Services, the SCB has formulated and made public its Financial
Products Solicitation Policy. To ensurethat solicitation is carried out fairly, important points regarding a product must
be explained to the customer at the timeof sale.
12. Pursuant to the Law on Protection of Personal Information, the SCB has published
its Personal Information Protection Policy
on its internet website. The SCB takes
necessary and appropriate safety measures
to protect personal information.
13. In addition to publishing its Outline forManaging Conflicts of Interest on its internet website, pursuant to the Shinkin BankAct and the Financial Instruments and Exchange Law, the SCB is taking appropriate
management steps to ensure that customers’ interests are not wrongfully violated.
14. Based on the financial Alternative Dispute
Resolution (ADR) system, to respond
expeditiously, fairly, and appropriately tocustomers’ inquiries, complaints, disputes,
and other issues, the SCB has overhauled
its internal management system and is
striving to enhance its reliability.
The SCB intends to review and update thecontent of its Compliance Manual and otherpolicies on an ongoing basis. All SCB directors
and employees are working to maintain strict
compliance through coordination among related divisions, and by strengthening internal
education programs.

Compliance System Overview
Customers
Divisions or branches

Corporate
lawyerCorporate
Auditors

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

Deputy head ofcomplianceadministration

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

Supervisor of compliance

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

Compliance hotline

Employees

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

Risk Management Committee

Directors (full time)

Executive Committee
Board of Directors

33

Shinkin Central Bank

Shinkin Central Bank Annual Report 2022

Countermeasures against Money Laundering and the Financing of Terrorism

Based on societal demands related to theneed for countermeasures against money
laundering and financing of terrorism (the“money laundering and financing of terrorism
countermeasures”), the SCB has designatedthe prevention of money laundering and of
terrorist financing as one of the most important managerial issues, and established AML/
CFT Division is working to sophisticate its
countermeasures by means of a risk-based approach.

The director in charge of AML/CFT Division is appointed supervisor of money laundering and financing of terrorism countermeasures, and under the active involvement of
the management team will put in place risk
management arrangements in which AML/
CFT Division is the second line of defense (administrative divisions), while also organizing a
regulatory system. AML/CFT Division is also
providing with support, checks and controls
in relation to the first line of defense (businessdivisions), and training for employees.
Supervisors of and personnel responsible

for money laundering and financing of terrorism countermeasures are assigned to the firstline of defense (business divisions), and checks
are carried out at the time of the transactionin accordance with the Act on Prevention ofTransfer of Criminal Proceeds and so on, with
notifications being made for suspicious transactions.
The Audit Division, which is the third lineof defense (internal audit division), performs
verification of the effectiveness of money
laundering and financing of terrorism countermeasures.

Risk Management System against Money Laundering and the Financing of Terrorism
Board of Directors
ReportExecutive Committee
Resolve/Report

Risk Management Committee
Deliberate/ReportSupervisor of money laundering and financing of terrorism countermeasures(Director in charge of AML/CFT Division)
Report/Consult

AML/CFT DivisionFirst line: Business Divisions

Second line: Administrative and Related Divisions【Divisions responsible for money launderingand financing of terrorism countermeasures】【Divisions responsible for managing money launderingand financing of terrorism countermeasures】

Branch offices/Head office divisions(Operations Division, International Operations Center,
Operations Center, Consulting Promotion Division, TrustBusiness Division, Treasury Operations Division, Transfer &Clearing Division, General Affairs Division (General Affairs
Group), others)

AML/CFT Division

AssistCheck

Supervisor of money laundering and financing of terrorism
countermeasures (head of division or branch)
Personnel responsible for money laundering and financing ofterrorism countermeasures (personnel responsible forcompliance)

Management supervisor of money laundering and financing of terrorism
countermeasures (General Manager of AML/CFT Division)
Management deputy supervisor of money laundering and financing ofterrorism countermeasures (Deputy General Manager of AML/CFT Division)【Divisions involved in money laundering andfinancing of terrorism countermeasures】

Strategic Planning Division, Personnel Division, Systems Division

Verification of effectiveness

Third line: Internal Audit DivisionInternal Audit Division34

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

In order for the SCB to fulfill its role as thecentral financial institution of the shinkinbanks, it is necessary for it to take appropriate
risks, which are matched to its level of capitaland congruent with its own business modeland risk culture, to enable it to continue tosecure profits.
A “risk appetite framework” (*1, *2) has
been constructed and is being operated withthe aim of clarifying this basic concept of risktaking and strengthening risk governance.
*1. ‌Risk appetite: the type and size of risks that a financial
institution actively attempts to take in order to fulfill its
role*2. ‌Risk appetite framework: a framework for discussing andexecuting risk-taking policies and risk tolerances asprescribed by the required level of profits and capital

Setting the SCB’s risk culture and risk
appetite

We believe that what is required of SCB isthat it fulfill its function as the central financial
institution of the shinkin banks with a focus on
stability and continuity.
We recognize that, in order to achievethis, the SCB must secure a sound financial
position and stable profits, and that it has arisk culture that does not permit excessiverisk-taking.
In addition to setting risk appetite withreference to this risk culture, the SCB has
designated the consolidated capital adequacy
ratio (domestic standard) and maximum
amount available for dividend as management
indicators (risk appetite indicators).

Management of Risk Appetite Framework

Based on the objectives for which the risk appetite framework was introduced, and ourrisk culture and appetite, we have taken acomprehensive view of the balance between
earnings, risk and capital in order to set a
medium-term target level of earnings (profit
attributable to owners of parent).

Also, based on these medium-term targets, we are executing operations in accordance with a PDCA cycle, under which we formulate earning plans for a single fiscal year,
take on risk, provide status reports, verify
progress, and amend as required.
In addition, we have formulated a risk appetite statement to clarify the content of therisk appetite framework.

Basic Policy on Risk Management

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

dent from its risk management systems—tomonitor the SCB’s risk management activities.

Integrated Risk Management

To manage risk in a comprehensive manner,
the SCB employs the integrated risk management method to cope with quantifiable risk.
Integrated risk management is a way tomanage its diverse risks by calculating themwith uniform criteria, such as the Value-atRisk (VaR) method, and comparing theiraggregated value to the institution’s overall
financial strength (i.e., capital adequacy).
For market risk and credit risk, the SCB
calculates the VaR. For the calculation of operational risk capital requirements, the SCB
employs the basic indicator approach, proposed under regulations concerning capital
adequacy ratios.
The SCB defines capital under its integrated risk management system and allocates quantitative risk limits, operational risk and other types of risk.* Separately,
the SCB estimates losses under various
stress scenarios as part of its efforts tomonitor potential impacts on capital.
The quantit ative risk limits and re ser ve amounts for each f iscal year are
determined by the Executive Committee
following deliberation by the Risk Management Committee. The Risk Management
Division, which oversees integrated risk
management, measures the amount of risk
exposure both during and at the end of eachmonth, to ensure that quantitative limits
for each type of risk are not exceeded. The
Risk Management Division provides reports
on risk status to senior management andrelated divisions through the Risk Management Committee.
* With regard to subsidiaries within the SCB’s scope of
consolidation, the SCB monitors risk exposure at eachsubsidiary and allocates capital commensurate with theamount of risk. These allocations enable subsidiaries totake risks.

35

Shinkin Central Bank Annual Report 2022

Shinkin Central Bank

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

Executive Committee

Risk Management
Committee
Risk Management Division

Risk Management Division

Credit Planning & Supervision Division
Responsible for credit assessment

Responsible for overall management ofoperational risk

Responsible for integrated risk
management

Operations Division
Risk Management Division(Assessment)
Strategic Planning Division (Policy)
Financial Management Division(Calculation)

Responsible for market risk
management
Risk Management Division

Systems Division

Financial Management Division

Responsible for information technology
risk management

General Affairs Division

Risk Management Division, Credit
Planning & Supervision Division

Divisions stipulated by Risk
Management Division

Responsible for liquidity risk
management

Responsible for compliance risk
management

Responsible for the management of otheroperational risk

Responsible for credit control

Market Risk Management Framework

stress losses at times of unexpected market
fluctuations, the basis-point-value (BPV)(changes in the valuation of the market value ofthe portfolio in response to changes in interest rates), and IRRBB (interest rate risk in scenarios specified by the FSA).
The status of these risk management
activities is reported to senior management at
biweekly meetings of the ALM Committee.

Board of Directors
Executive Committee
Decisions

Matters for discussion

Risk Management Committee
ALM Committee
Decisions

Reports

Divisions responsible formarket risk management

Matters for discussion

Market divisions
Mutual checks

Mutual checks

Mutual checks

Administrative control divisions

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

36

Risk Management Division

Responsible for administrative risk
management

Responsible for capital adequacy

Decisions

ALM
Committee

CreditCommittee

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

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

Credit Risk* Management
To maintain an accurate understanding ofcredit risk and rigorously manage this risk, the
SCB has formulated a credit risk management
policy. Furthermore, the SCB has formulated
a Credit Policy, which sets out the SCB’s
fundamental philosophy. The SCB requires
strict adherence to the Credit Policy on thepart of all directors and employees involvedin credit operations. The SCB conducts ongoing internal communications emphasizing
the importance of sound ethics in all behavior
and decision making.
At the SCB, divisions responsible for
credit control, credit assessment and asset
assessment are clearly separated from divisions
involved in client services. In this way, we arebuilding a structure in which internal checks
are maintained through the independentfunctions given to each part of the system.
The SCB has established the Credit Committee and the Risk Management Committee
as the bodies responsible for deliberating andmaking decisions on matters relating to credit
risk management. The Credit Committee andthe Risk Management Committee comprisesenior management and the general managers
of related divisions. The Credit Committee deliberates on credit transactions thatexceed a designated amount, and the Risk
Management Committee deliberates broadly
and thoroughly matters relating to credit
risk management. The Executive Committee
deliberates, and makes decisions regarding,
the results of self-assessment of assets andmatters relating to self-assessment of asset
write-offs and asset reserve provisions.
Divisions responsible for credit control
manage the credit risk for each borrower
relating to loans and market trading activities.
An overall credit limit is set for each borrower according to their credit rating.
Credit ratings are based on quantitative
criteria, set by evaluating the borrower’s
financial statements, and qualitative criteria,
set by evaluating the borrower’s competitive
strength in the particular industry within
which it operates. Based on these assessmentsof credit strength, each borrower is given acredit rating on the SCB’s 10-step scale. The
credit ratings given to borrowers are reviewed
regularly, and flexibly revised as necessary.
Divisions responsible for credit control
analyze the SCB’s overall credit portfolio
according to credit rating, industry, country,
and other criteria. These analyses are used
to monitor the diversification of credit risk
as well as changes in portfolio credit risk.
Furthermore, credit risk is quantified andmanaged within the risk limit set by the Executive Committee.
The credit risk amount is measured
using VaR as well as the Monte Carlo simula-tion method.
The Credit Planning & Supervision Division—responsible for credit assessment—
accurately monitors each borrower’s financial
condition, the purposes for which funds areused, and repayment resources. In addition toappropriate assessment and post-transaction
management, the Credit Planning & Supervision Division continually inspects whether theclient service division is conducting appropriate credit controls, and provides guidanceas necessary. In the event that there should
be any problem on the borrower’s side, theCredit Planning & Supervision Division expeditously assesses the borrower’s management
situation and provides supervision. Where
necessary, action is taken to recover the loan.
The Credit Planning & Supervision Division is also responsible for asset assessment.
The division undertakes and manages operations relating to asset self-assessments, andthe calculation of asset write-offs and asset
reserve provisions.
* Credit risk includes such risk as counterparty risk forderivative transactions and securitization transaction
risk.

Operational Risk Management
To comprehensively manage operationalrisks, the SCB has formulated management
guidelines for operational risks, and to address administrative risks, system risks andcompliance risks, which we consider the
major operational risks, we have additionally formulated individual management
guidelines for each of those risks. Furthermore, the SCB has constructed a systemfor comprehensively managing operationalrisks. In addition to having in place a department to comprehensively manage operational risks as well as a department tomanage administrative risks, a department
to manage system risks and a department
to manage compliance risks, we also set up
risk management departments to manageother operational risks as necessary.
The SCB has established the Risk Management Committee as the body responsible fordeliberating and making decisions on mattersrelating to operational risk management. The
Risk Management Committee, comprising senior management and heads of related divisions,deliberates and makes decisions on comprehensive methods for managing operationalrisks, including administrative risks, systemrisks and compliance risks.
Regarding the SCB’s subsidiaries, the
SCB’s Internal Audit Division conducts auditsof the respective systems.
To calculate its operational risk capital requirements, the SCB uses the basic indicator
approach proposed under regulations con-cerning capital adequacy ratios.

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

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

• Compliance risk management
The General Affairs Division, which functions
as a department designated for compliancerisk management, manages compliance risks
by a series of processes involving identifying
compliance risks; analyzing and evaluating thecauses, background and range of impact, etc.
of each risk; taking necessary measures tominimize compliance risks; and verifying theresults of the aforementioned.

37

Shinkin Central Bank Annual Report 2022

Shinkin Central Bank

Preferred Shares
The SCB’s Preferred Shares

Trading of Preferred Shares

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

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

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

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

Composition of Preferred Shares (March 31, 2022)
・Number of Investors (17,869)
Foreign institutions
and others
27(0.1%)
Other corporations
194(1.1%)
Financial institutions
202(1.1%)

Other corporations
31,963(4.5%)(Closing price,yen)First day of listing (December 22, 2000) 200,500
Foreign institutions
and others
1,380(0.2%)

Highest price (March 15, 2006)

311,500

Lowest price (April 14, 2009)

102,400

Closing price (July 29, 2022)

243,900* The price of preferred shares is split-adjusted, reflecting
the stock split of preferred shares as at July 31, 2009.

Individuals
100,593(14.2%)

Individuals
17,436(97.6%)

38

Price of Preferred Shares*

・Number of Subscription (708,222)
Securities companies
7,992(1.1%)

Securities companies
10(0.1%)The SCB’s preferred shares are treatedas stocks in the taxation system, and are given
the same preferential treatment concerning
tax as stocks.
For fiscal 2022, the dividend for preferred shares was ¥6,500 ($53) per share,
which included a preferred dividend of ¥3,000($24) and a participating dividend of ¥3,500($28).

Financial institutions
566,294(80.0%)

Financial Section
Contents
39 Five-Year Summary (Consolidated)

47 Notes to Consolidated Financial Statements

40 Consolidated Balance Sheet

96 Independent Auditor’s Report

41 Consolidated Statement of Income

102 Non-Consolidated Balance Sheet

42 Consolidated Statement of Comprehensive Income

103 Non-Consolidated Statement of Income

43 Consolidated Statement of Changes in Net Assets

104 Statement of Trust Account (Consolidated)

46 Consolidated Statement of Cash Flows

Five-Year Summary (Consolidated)
FY2017FY2018FY2019(Millions of Yen)FY2020
FY2021

Total Income

306,892

293,808

301,954

261,011249,652

Trust Fees

351

399

759

1,258

1,921

Total Expenses

244,018

231,873245,596

217,585

201,470

Profit Attributable to Owners of Parent

44,46644,78140,22731,64935,942Comprehensive Income

20,43353,530(90,508)

196,771(110,723)

Net Assets

1,626,605

1,660,465

1,550,287

1,727,321

1,596,329

Total Assets

38,790,449

39,693,375

40,868,096

43,843,528

43,931,795

Net Assets per Share (Yen)

299,587.63

306,594.84

283,111.71

320,620.85

292,802.41

Net Income per Share (Yen)

6,311.86

6,358.89

5,679.98

4,401.33

5,041.19

19,603

19,603

19,603

19,603

19,603General Common Shares

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

3,000

3,000

3,000

3,000

3,000

Preferred Shares

4,603

4,603

4,603

4,603

4,603

525,445807,201

1,320,957

2,015,700

2,708,486

Dividends

Trust Assets

Notes:
1. National and local consumption tax incurred by the Shinkin Central Bank and its domestic consolidated subsidiaries are
excluded from transaction amounts.
2. The amount stated for the amount of trust assets is the amount of trust assets related to the trust business pursuant to the “Acton Engagement in Trust Business Activities by Financial Institutions”. Consolidated companies conducting such trust businesscomprised only the Shinkin Central Bank.

39

Consolidated Balance Sheet
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks (Note 2 (2), 27)
Bills Bought and Call Loans (Note 27)
Receivables under Resale Agreements (Note 27)
Monetary Claims Bought (Note 27)
Trading Assets (Note 3, 10, 27, 28)
Money Held in Trust (Note 27, 28)
Securities (Note 4, 8, 10, 27, 28)Loans and Bills Discounted (Note 5, 6, 7, 10, 27)
Foreign Exchanges Assets
Other Assets (Note 10)
Tangible Fixed Assets (Note 9, 15, 26)
Intangible Fixed Assets (Note 26)
Deferred Tax Assets (Note 24)
Customers' Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets

Millions of Yen

2021

16,764,225
1,329,496
34,216
204,459
333,867
118,623
16,139,087
7,754,789
19,622
1,006,582
72,884
17,675
4,407
157,170(25,312)43,931,795

15,063,421
494,181367,229
180,309
280,431108,030
17,724,041
8,446,047
20,676921,687
73,10020,714
4,008
169,612(29,963)
43,843,528

136,996
10,864
279
1,670
2,728
969
131,887
63,371
160
8,225
595
144
36
1,284
(206)
359,007

Liabilities and Net Assets
Liabilities
Deposits (Note 27)
Debentures (Note 13, 27)
Trading Liabilities (Note 11, 27)
Borrowed Money (Note 10, 12, 27)
Bills Sold and Call Money (Note 27)
Payables under Repurchase Agreements (Note 10, 27)
Payables under Securities Lending Transactions (Note 10, 27)
Foreign Exchanges Liabilities
Borrowed Money from Trust Account
Other Liabilities (Note 12, 14)Reserve for Employee Bonuses
Reserve for Directors' Bonuses
Net Defined Benefit Liability (Note 25)
Reserve for Directors' Retirement Allowances
Reserve under Specific Law
Deferred Tax Liabilities (Note 24)
Deferred Tax Liabilities for Land Revaluation (Note 15)
Acceptances and Guarantees
Total Liabilities

33,123,802
1,545,370
27,911
4,167,880
5,637
1,195,089
1,728,562
1,159
42,821
248,597
1,788
93
43,091569
139,885
6,033
157,170
42,335,466

33,752,872
1,770,870
31,6254,020,480
10,166
287,020
1,702,956
2,055
30,300190,891
1,806
91
41,943532
196,8996,081
169,612
42,116,207

270,685
12,628228
34,05946
9,766
14,125
9
349
2,031
14
0
352
4
0
325
49
1,284
345,962

Net Assets
Common Shares and Preferred Shares (Note 23)
Capital Surplus
Retained Earnings
Total Shareholders' Equity
Net Unrealized Gains (Losses) on Other Securities (Note 24, 28)
Deferred Gains or Losses on Hedges (Note 24, 29)
Land Revaluation Excess (Note 15)
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans (Note 25)
Total Accumulated Other Comprehensive Income
Non-Controlling Interests
Total Net Assets
Total Liabilities and Net Assets

690,998
100,678
644,122
1,435,799
104,436
34,977
14,772(2,631)(3,650)147,904
12,626
1,596,329
43,931,795

690,998
100,678
627,964
1,419,641
307,894(20,577)
14,894(3,408)(3,764)
295,037
12,642
1,727,321
43,843,528

5,646
822
5,263
11,733
853
285
120
(21)
(29)
1,208
103
13,045359,007

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

40

2022

Millions of
U.S. Dollars(Note 1)2022

Consolidated Statement of Income
Shinkin Central Bank For the year ended March 31,
IncomeInterest Income:Interest on Loans and Discounts
Interest on Due from Banks
Interest on Bills Bought and Call Loans
Interest on Receivables under Resale Agreements
Interest on Receivables under Securities Borrowing Transactions
Interest and Dividends on Securities
OthersTrust Fees
Fees and Commissions (Note 17)
Trading Income (Note 18)
Other Operating Income
Other Income (Note 20)
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 17)
Trading Losses (Note 19)
Other Operating Expenses
General and Administrative Expenses
Other Expenses (Note 21)
Total Expenses

Profit before Income Taxes
Income Taxes (Note 24):
Current
Deferred
Total Income Taxes
ProfitProfit Attributable to Non-Controlling Interests
Profit Attributable to Owners of Parent

2022

Millions of Yen

2021

175,199
15,7597,114(169)(1,174)
9
153,103554
1,921
42,124
1,548
16,52012,337
249,652

175,162
17,565
7,756
80(1,226)(0)150,507478
1,258
41,175
1,507
31,09810,809261,011

1,431
128
58
(1)
(9)
0
1,251
4
15
344
12
135
100
2,040

70,18329,222
1,160
1,782
7
50
1,481
36,47914,881
8
61,30654,603486
201,470

83,93033,296
1,691
1,966
60
149
3,289
43,476
14,90015560,75854,7153,125
217,585

573
238
9
14
0
0
12
298
121
0
500
446
3
1,646

48,181

43,426393

11,617279
11,89736,283341
35,942

11,32857
11,38532,040390
31,649

94
2
97
296
2
293

2021
4,401.33
3,000.00
1,500.00
6,500.00

U.S. Dollars(Note 1)
2022
41.19
24.51
12.25
53.11

Yen

Net Income per Share (Note 33)
Dividend Declared per Share (General Common Shares)
Dividend Declared per Share (Specific Common Shares)
Dividend Declared per Share (Preferred Shares)

Millions of
U.S. Dollars(Note 1)
2022

2022
5,041.19
3,000.00
1,500.00
6,500.00

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

41

Consolidated Statement of Comprehensive Income
Shinkin Central Bank For the year ended March 31,
ProfitOther Comprehensive Income (Note 22)
Net Unrealized Gains (Losses) on Other Securities
Deferred Gains or Losses on Hedges
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans
Comprehensive Income
Comprehensive Income Attributable to Owners of Parent
Comprehensive Income Attributable to Non-Controlling Interests
The accompanying notes are an integral part of these financial statements.

42

2022

Millions of Yen

36,283(147,007)(203,457)
55,555
777
117(110,723)(111,068)
345

2021

32,040164,730
28,350133,125(170)
3,425
196,771
196,204
566

Millions of
U.S. Dollars(Note 1)2022
296
(1,201)(1,662)
453
6
0
(904)
(907)
2

Consolidated Statement of Changes in Net Assets
Shinkin Central Bank For the year ended March 31, 2022

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

Capital Surplus

690,998

Retained Earnings
100,678

Total Shareholders' Equity
627,964

1,419,641

(303)

(303)

627,661

1,419,338

Surplus Dividends(19,603)(19,603)

Profit Attributable to Owners of Parent

35,94235,942

Reversal of Land Revaluation Excess

122

122

Cumulative Effects of Changes in Accounting Policies
690,998

Restated balance

100,678

Changes during the Fiscal YearNet Changes in Items Other Than Shareholders'Equity during the Fiscal Year
Total Changes during the Fiscal Year
Balance at End of Year--

16,46016,460690,998

100,678

644,122

1,435,799

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

307,894

Deferred Gains
Land Revaluationor Losses on
ExcessHedges(20,577)

14,894Foreign
Currency
Translation
Adjustments(3,408)

Total
Remeasurements Accumulated
Otherof Defined Benefit
Comprehensive
Plans
Income(3,764)

295,037

Cumulative Effects of Changes in Accounting Policies
Restated balance

307,894(20,577)

14,894(3,408)(3,764)

295,037

NonControlling
Interests

Total Net
Assets12,642

1,727,321

(294)

(597)

12,348

1,726,723

Changes during the Fiscal Year
Surplus Dividends(19,603)

Profit Attributable to Owners of Parent

35,942

Reversal of Land Revaluation Excess

122

Net Changes in Items Other Than Shareholders'Equity during the Fiscal Year(203,457)

55,555

(122)

777

114

(147,132)

278(146,854)

Total Changes during the Fiscal Year(203,457)

55,555

(122)

777

114

(147,132)278(130,393)

Balance at End of Year104,436

34,977

14,772(2,631)(3,650)147,904

12,626

1,596,329

43

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

Capital Surplus

5,646

Retained Earnings
822

Total Shareholders' Equity
5,131

11,601

(2)

(2)

5,129

11,598

Surplus Dividends

(160)

(160)

Profit Attributable to Owners of Parent

293

293

Reversal of Land Revaluation Excess

00

Cumulative Effects of Changes in Accounting Policies
5,646

Restated balance

822

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

-

-

134

134

5,646

822

5,263

11,733

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

2,516

Deferred Gains
Land Revaluationor Losses on
ExcessHedges
(168)

121

Total
Remeasurements Accumulated
Otherof Defined Benefit
Comprehensive
Plans
IncomeForeign
Currency
Translation
Adjustments
(27)

(30)

2,411

Cumulative Effects of Changes in Accounting Policies
Restated balance

2,516

(168)

121

(27)

(30)

2,411

NonControlling
Interests

Total Net
Assets103

14,115

(2)

(4)

100

14,110Changes during the Fiscal Year
Surplus Dividends(160)

Profit Attributable to Owners of Parent

293

Reversal of Land Revaluation Excess

0

Net Changes in Items Other Than Shareholders'Equity during the Fiscal Year
Total Changes during the Fiscal Year
Balance at End of Year44

(1,662)

453

(0)

6

0

(1,202)2(1,200)(1,662)

453

(0)

6

0

(1,202)2(1,065)

853

285

120

(21)

(29)

1,208

103

13,045

Shinkin Central Bank For the year ended March 31, 2021

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

Capital Surplus

690,998

Retained Earnings
100,678

Total Shareholders' Equity
615,918

1,407,595

Surplus Dividends(19,603)(19,603)

Profit Attributable to Owners of Parent

31,64931,649Changes during the Fiscal YearNet Changes in Items Other Than Shareholders'Equity during the Fiscal Year
Total Changes during the Fiscal Year
Balance at End of Year--

12,046

12,046690,998

100,678

627,964

1,419,641

Accumulated Other Comprehensive Income
Net Unrealized
Gains (Losses)
on Other
Securities
Balance at Beginning of Year279,543

Deferred Gains
Land Revaluationor Losses on
ExcessHedges(153,703)

14,894Foreign
Currency
Translation
Adjustments(3,237)

Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
Income(7,014)130,482

NonControlling
Interests

12,209Total Net
Assets1,550,287

Changes during the Fiscal Year
Surplus Dividends(19,603)

Profit Attributable to Owners of Parent

31,649Net Changes in Items Other Than Shareholders'Equity during the Fiscal Year

28,350133,125

-

(170)

3,249

164,555432

164,987

Total Changes during the Fiscal Year

28,350133,125

-

(170)

3,249

164,555432

177,034

Balance at End of Year

307,894(20,577)

14,894(3,408)(3,764)

295,037

12,642

1,727,321

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

45

Consolidated Statement of Cash Flows
Millions of
U.S. Dollars
Shinkin Central Bank For the year ended March 31,
Cash Flows from Operating Activities:
Profit before Income Taxes
Depreciation
Increase (Decrease) in Reserve for Possible Loan Losses
Increase (Decrease) in Reserve for Employee Bonuses
Increase (Decrease) in Reserve for Directors' Bonuses
Increase (Decrease) in Net Defined Benefit Liability
Increase (Decrease) in Reserve for Directors' Retirement AllowancesInterest Income
Interest Expenses
Net Losses (Gains) on Securities
Net Losses (Gains) on Money Held in Trust
Net Losses (Gains) on Foreign Exchange
Net Losses (Gains) on Disposal of Fixed Assets
Net Decrease (Increase) in Trading Assets
Net Increase (Decrease) in Trading Liabilities
Net 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 Claims Bought
Net Decrease (Increase) in Foreign Exchanges (Assets)
Net Increase (Decrease) in Foreign Exchanges (Liabilities)
Net Increase (Decrease) in Due to Trust Accounts
Interest Received
Interest Paid
Other, Net
Sub-total
Income Taxes Paid
Net Cash Provided by (Used in) Operating Activities

Millions of Yen

2021(Note 1)
2022

48,181
9,776(4,651)
(18)
2
1,148
36
(175,199)
70,18337,374(95)(199,997)(6)(53,436)(3,714)(3,905)691,257(629,069)(225,500)
147,400
17,661(502,301)
903,539
25,606(24,149)
1,054
(895)
12,520198,753(75,813)50,614
316,356(9,555)306,800

43,426
10,259(1,106)(5)
1(2,596)(117)(175,162)
83,9303,251(440)(112,246)
127
130,844(5,932)(9,088)22,0752,579,025(363,650)
769,500(166,116)(733,519)
1,430
18,929(85,439)
41,86658,437641
8,278
216,361(97,318)
197,501
2,433,146(16,472)
2,416,674

393
79
(38)
(0)
0
9
0
(1,431)573
305(0)(1,634)
(0)
(436)
(30)
(31)
5,648
(5,140)(1,842)
1,204
144(4,104)
7,383
209
(197)
8
(7)
102
1,624
(619)
413
2,585
(78)
2,507

Cash Flows from Investing Activities:
Acquisitions of Securities
Proceeds from Sale of Securities
Proceeds from Redemption of Securities
Increase in Money Held in Trust
Decrease in Money Held in Trust
Acquisitions of Tangible Fixed Assets
Acquisitions of Intangible Fixed Assets
Proceeds from Sales of Tangible Fixed Assets
Net Cash Provided by (Used in) Investing Activities(9,619,387)
2,293,222
8,773,788(10,000)
1(3,776)(2,957)260
1,431,150(11,019,193)
1,092,846
8,902,375(10,004)
10,000(2,729)(5,032)90(1,031,648)(78,609)18,74071,698
(81)
0
(30)
(24)
2
11,695

Cash Flows from Financing Activities:
Dividends Paid
Dividends Paid to Non-Controlling Interests
Net Cash Provided by (Used in) Financing Activities(19,603)(66)(19,670)(19,603)(133)(19,737)

(160)
(0)
(160)

0
1,718,281
14,492,817
16,211,098

0
1,365,289
13,127,527
14,492,817

0
14,041
118,434
132,476

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) )

46

2022

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

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 ¥122.37 to U.S.$1, the exchange
rate prevailing as of March 31, 2022. 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. dollar amounts are included solely for theconvenience of readers outside Japan and this translation should not
be construed as representation that Japanese yen amounts have beenor could be readily converted, realized or settled in U.S. dollars at thator at any other rates.
2. Significant Accounting Policies:(1) Principles of Consolidation
The consolidated financial statements include the accounts of the
Bank and its nine consolidated subsidiaries as of March 31, 2022
listed below:
Ownership
Name
Location
Percentage
The Shinkin Banks Information
System Center Co., Ltd.
Tokyo
50.7%
Shinkin International Ltd.
London100%
Shinkin Chukin Business Co., Ltd.
Tokyo
100%
Shinkin Asset Management Co., Ltd.
Tokyo
100%
Shinkin Securities Co., Ltd.
Tokyo
100%
Shinkin Capital Co., Ltd.
Tokyo
100%
Shinkin Guarantee Co., Ltd.
Tokyo
100%
Shinkin Singapore Pte. Ltd.
Singapore100%
Shinkin Regional Innovation Co.,
Ltd.(*)
Tokyo
100%(*) Shinkin Regional Innovation Co., Ltd. was established on July 1, 2021,
and, therefore, has been included in the scope of consolidation from thecurrent fiscal year.

Unconsolidated subsidiaries
Shinkin no Kizuna Investment Limited Partnership
Shinkin no Tsubasa Investment Limited Partnership
Shinkin no Ishizue Investment Limited Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because their total assets, total income, net income(amount based on the equity method), retained earnings (amountbased on the equity method) and accumulated other comprehensive
income (amount based on the equity method) are immaterial and do
not hinder a rational judgment of the Bank’s financial condition andresults of operation when excluded from the scope of consolidation.

The fiscal year and the closing date thereof for the financial
statements of the consolidated subsidiaries are consistent with thoseof the Bank, except for Shinkin International Ltd. and Shinkin
Singapore Pte. Ltd., which have a fiscal year ended on December 31.
For the consolidation of the subsidiary, the Bank makes appropriate
adjustments for any material transactions 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. Non-controllinginterests in net assets of subsidiaries are valued at fair value on
acquisition in the consolidated financial statements. The excess of thecost over the fair value of the underlying net equity in subsidiaries onacquisition is expensed when incurred.
The application of equity-method to unconsolidated subsidiaries andaffiliates is as follows:
Non-consolidated equity-method subsidiaries:
N/A
Affiliated equity-method companies:
N/A
Unconsolidated subsidiaries that are not accounted for by the equity
method:Shinkin no Kizuna Investment Limited Partnership
Shinkin no Tsubasa Investment Limited Partnership
Shinkin no Ishizue Investment Limited Partnership
Unconsolidated subsidiaries that are not accounted for by theequity method are excluded from the scope of equity method because
their effect on the accompanying consolidated financial statements, interms of net income (amount based on the equity method) andretained earnings (amount based on the equity method), would not bematerial.
Affiliated companies to which the equity method is not applied due toimmateriality:
Aozora Loan Services Co., Ltd.
(2) Cash and Cash Equivalents
In the consolidated statement of cash flows, “Cash and Cash
Equivalents” consist of Cash and Due from Central Bank.
Reconciliation between Cash and Due from Banks in the
consolidated balance sheet and Cash and Cash Equivalents at March
31, 2022 and 2021 is as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Cash and Due fromBanks

16,764,225

15,063,421

136,996

Due from Banks(Excluding Duefrom Central Bank)(553,127)(570,604)(4,520)16,211,098

14,492,817

132,476

Cash and Cash
Equivalents(3) Trading Assets and Liabilities
Transactions for “Trading Purposes” (for purposes of seeking tocapture gains arising from short-term changes in interest rates,
currency exchange rates or market prices of financial instruments andother market related indices or from gaps among markets) are
included in “Trading Assets” and “Trading Liabilities” on the
consolidated balance sheet on a trade date basis. In addition, gains
and losses from “Trading Assets” and “Trading Liabilities” are47

recorded as “Trading Income” and “Trading Losses” on the
consolidated statement of income on a trade date basis.
Securities and Monetary Claims Bought 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 theamounts that would have been delivered for settlement as of the fiscal
year end date.
(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 costamortized by the straight-line method using the moving-averagemethod. Investments in affiliates that are not accounted for by theequity method are stated at cost using the moving-average method.
Other securities are stated at fair value (and the cost of securities soldis mainly determined using the moving-average method). Stocks andother equity securities with no market prices are stated at cost using
the moving-average method.
The full amount of net unrealized gains or losses on othersecurities is recorded directly within Net Assets.
Securities included as trust property in “Money Held in Trust”
are stated in the same manner as above.
(ii) Derivative Transactions
Derivative transactions are stated at fair value.
(iii) Hedge Accounting(a) Hedge of Interest Rate Risk
The Bank applies the deferred method of hedge accounting describedin the Japanese Institute of Certified Public Accountants (JICPA)
Industry Committee Practical Guidelines No. 24, March 17, 2022
“Accounting and Auditing Treatment of Accounting Standards for
Financial Instruments in Banking Industry” to transactions to hedge
against interest rate risk arising from the financial assets andliabilities.
Effectiveness of a fair value hedge is assessed for each of theidentified group of hedged items such as loans and deposits, andcorresponding group of hedging instruments such as interest rate
swaps with the same maturity bucket. Effectiveness of a cash flow
hedge is assessed based on the correlation between an interest raterisk factor of the hedged items and that of the hedging instruments.
For certain assets and liabilities, the exceptional treatment forinterest rate swaps is applied.
(b) Hedge of Foreign Exchange Fluctuation Risk
The deferred method of hedge accounting is applied to transactions tohedge against foreign exchange fluctuation risks associated with
monetary assets and liabilities denominated in foreign currencies inaccordance with the regulations set forth in JICPA Industry
Committee Practical Guidelines No. 25, October 8, 2020 “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 the48

hedged monetary assets and liabilities and that of the hedging
instruments.
The Bank has also applied fair value hedge accounting to theforeign exchange risk of other securities in foreign currency (otherthan bonds) when the hedged foreign currency securities are specified
prior to the commencement of transactions, and there exists spot andforward liabilities exceeding the acquisition costs of the foreign
currency securities designated as hedged items on a foreign currency
basis.
(c) Internal Derivative Transactions
Internal derivative transactions between trading accounts and otheraccounts, which are designated as hedges, are not eliminated andrelated gains and losses are recognized in the consolidated statementof income or deferred under hedge accounting because the internalinterest rate swaps and currency swaps transactions, etc. designated as
hedging instruments are conducted in a manner without any
subjectivity and are appropriately covered by third party transactions
conducted in accordance with the standard articulated by Industry
Committee Practical Guidelines No. 24 and No. 25.
(d) Others
Given that deferred hedge using interest rate swaps and exceptional
treatment of interest rate swaps to offset market fluctuations onhedged items of loans, other securities (bonds) and held-to-maturity
debt securities are affected by the discontinuing publication of
London Inter-Bank Offered Rate (LIBOR) and transition toalternative reference rate, the Bank has adopted “Treatment of Hedge
Accounting for Financial Instruments that Reference LIBOR”(Practical Issues Task Force Report No. 40, March 17, 2022) to avoid
impact on the continuation of hedging relationship.
(5) Tangible Fixed Assets (excluding Leased Assets)
Tangible fixed assets of the Bank are depreciated by the decliningbalance method. However, buildings acquired on or after April 1,
1998 (excluding facilities installed in buildings), and facilities
installed in buildings and structures that are acquired on or after April
1, 2016, are depreciated by the straight-line method.
The estimated useful lives of major items are as follows:
Buildings ................. 5 to 50 years
Others ...................... 3 to 20 years
Tangible fixed assets of consolidated subsidiaries are, in
principle, depreciated by the declining balance method, based on theirestimated useful lives.
(6) Intangible Fixed Assets (excluding Leased Assets)
Intangible fixed assets are amortized by the straight-line method. The
costs of software for internal use are amortized by the straight-line
method, mainly 5 years period (the estimated useful life of thesoftware).
(7) Leased Assets
Leased assets of Tangible Fixed Assets and Intangible Fixed Assets
related to finance leases that do not transfer ownership are
depreciated by 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 internal rules for self-assessments of asset quality
and write-offs and provisioning criteria predetermined by the Bank asfollows:
The amounts of write-offs and provisions are calculated based on the
result of self-assessments of the borrower classification, etc. The
Bank has the credit risk rating system as a method for assessing credit
risk to determine the borrower classification appropriately. Based on
this system, the borrower classification for self-assessments isdetermined. The credit rating evaluates the degree of a borrower’s
creditworthiness, such as its debt servicing capacity, and classifies theborrower on a scale of 10. The classification reflects qualitative
factors such as the evaluation of industry to which the borrower
belongs and competitiveness within the industry, in addition to thequantitative evaluation based on the borrower's financial information.
The credit rating is reviewed on a regular basis once a year, and isalso reviewed as needed, such as when there are changes in thecreditworthiness of the borrower.
The reserve is provided for loans to borrowers who areclassified as substantially bankrupt or who are bankrupt in the legal
sense as a result of the self-assessment of asset quality, at 100% of thecarrying amount remaining after write-offs and deducting the amount
expected from the realization of collateral and the execution ofguarantees. In addition, a reserve is provided for loans to borrowers
who are not currently bankrupt but are highly likely to go bankrupt(“Probably Bankrupt Borrowers”). In such cases, the reserve isprovided at the amount deemed necessary based on the borrower’s
debt servicing capacity after deducting the amount expected from therealization of collateral and the execution of guarantees.
The Bank calculates the amount of reserve by the cash flow
estimate method. For borrowers classified as Probably Bankrupt
Borrowers or borrowers with large exposures who have restructuredloans (“Intensive Control Borrowers”) to whom loan receivables are
renegotiated, cash flows are reliably estimated based on therepayment plan prepared by the borrowers, creditworthiness, theBank's lending policies and default rate of an external credit rating
agencies, the amount of reserve for possible loan losses is set at thedifference between the book values of the loans and the amounts
calculated by discounting by the original contractual interest rates the
cash flows that are reliably estimated based on the repayment plan
prepared by the borrowers, creditworthiness, the Bank’s lending
policies and default rates of an external credit rating agencies.
For all other loans to Intensive Control Borrowers and otherborrowers (other special attention borrowers) who warrant special
attention for future management, the Bank estimates the amount of
expected losses over the next three years. The amount of expected
losses is calculated by determining the expected loss ratio based on
the average of the historical charge-off ratios over the past three years,
and adding necessary adjustments such as future prospects.
For the borrowers (Performing) who are recognized to havegood business performance and no particular financial problems, areserve is expected for the next 1 year and provided based on the ratioof the average value of the bad debt rate calculated by the bad debt
record for 1 year with necessary adjustments such as future prospects.
All claims are assessed by the Operating Related Division basedon internal rules for self-assessments of asset quality. Subsequently,
the Asset Auditing Division, that is independent from the Operating
Related Division, audits these self-assessments. The reserve isprovided based on the results of the assessments.
For loans to Bankrupt Borrowers and Substantially Bankrupt
Borrowers, amounts deemed uncollectible, which are calculated after

deduction of expected collection from the realization of collateral andthe execution of guarantees, are written off. The amount written off
was ¥192 million ($1 million) as of March 31, 2022 and ¥320 million
as of March 31, 2021.
Reserve for possible loan losses of the consolidated subsidiaries
for general claims is provided as the amounts deemed necessary
based on the default rate calculated from actual default during acertain period in the past, and for doubtful claims as the amounts
deemed uncollectible based on the assessment of each claim.
(10) Reserve for Employee Bonuses
Reserve for Employee Bonuses is set aside at the portion of theamount of estimated bonus payments to employees that corresponds
to this fiscal year.
(11) Reserve for Directors’ Bonuses
Reserve for Directors’ Bonuses is set aside at the portion of theamount of estimated bonus payments to directors and corporate
auditors that corresponds to this fiscal year.
(12) Reserve for Directors’ Retirement Allowances
Reserve for Directors’ Retirement Allowances is calculated based on
the estimated allowances to be paid up to the end of this fiscal year.
(13) Reserve under Specific Law
This reserve amount is calculated pursuant to Article 46-5, Paragraph
1 of the “Financial Instruments and Exchange Act” and Article 175 of
the “Cabinet Office Ordinance on Financial Instruments Business” toindemnify any losses incurred from accidents in the conduct ofmarket derivative transactions on behalf of clients.
(14) Employees’ Retirement Benefits
The Bank accounted for retirement benefit obligation based on the
projected benefit obligations. The projected benefit obligations are
attributed to periods on a benefit formula basis. The methods foramortizing prior service costs and actuarial differences are as follows:
Prior service costs:
Prior service costs are amortized, using the straight-line method overa certain number of years (10 years) within the average remaining
service period of current employees at the time the cost is incurred.
Actuarial differences:
Actuarial differences are amortized from the following year, using thestraight-line method over a certain number of years (10 years) within
the average remaining service period of current employees at eachtime the cost is incurred.
Also, certain consolidated subsidiaries calculate the net defined
benefit liability and retirement benefit cost using the simplified
method which assumes the retirement benefit obligation to be equal
to the amount necessary to pay for the voluntary resignation for all
employees at the fiscal year-end.
(15) Translation of Foreign Currency-Denominated Assets andLiabilities
Foreign currency-denominated assets and liabilities are translated into
Japanese yen at exchange rates prevailing at the end of the fiscal year.
Foreign currency-denominated assets and liabilities of consolidated
subsidiaries are translated into Japanese yen at exchange rates
prevailing at the end of the fiscal year.

49

(16) Consumption Tax
National and local consumption tax incurred by the Bank and its
domestic consolidated subsidiaries are excluded from transaction
amounts. However, national and local consumption tax paid onpurchases of tangible fixed assets and intangible fixed assets, which
are not deductible as a tax credit, are expensed in this fiscal year.
(17) Amortization of Goodwill
Goodwill is fully amortized in the fiscal year incurred.
(18) Accounting Principles and Procedures Adopted when theProvisions of Relevant Accounting Standards, etc. are not Clear
Contract cancellation revenue and gains on redemptions ofinvestment trusts are included in “Interest Income (Interest andDividends on Securities)” and losses on cancellation and redemptionsof investment trusts are included in “Other Operating Expenses” inthe consolidated statement of income.
(19) Significant Accounting Estimates
Reserve for Possible Loan Losses(i) The amount recorded in the consolidated financial statements forthe current fiscal year
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Reserve for Possible
Loan Losses

25,312

29,963

206(ii) Other information for users of the consolidated financial
statements to understand the details of accounting estimates(1) Method of calculation of the amounts recorded in the consolidated
financial statements for the current fiscal year
Method of calculation is described in the “Note 2 Significant
Accounting Policies (9) Reserve for Possible Loan Losses.”(2) Key assumptions used for the calculation of the amounts recordedin the consolidated financial statements for the current fiscal year(a) The impact of COVID-19 on economic activities and outlook ofborrowers’ performance when determining borrower classification
The Bank assumes that the impact of the stagnation in economic
activities caused by the COVID-19 pandemic would persist until theend of fiscal year 2022, that the pace of recovery in economic andcorporate activities would be slow during that period, and among
other things, that the business performance of certain industries, suchas airlines and natural resources, would be significantly affected overa certain period of time.
These assumptions consider changes in the number of people infectedwith COVID-19 and current status of vaccination and uses objective
information such as outlook of worldwide air travel demand of theInternational Air Transport Association (IATA) and of world energy
demand of The International Energy Agency (IEA).
In the consolidated financial statements for the fiscal year ended
March 31, 2022, based on the above assumptions, classification of thespecific borrowers is determined considering such factors if their
future performance is expected to be significantly affected by theseassumptions.

50(b) Inputs of the cash flow estimate method
The Bank calculates the amount of reserve for possible loan losses by
the cash flow estimate method if the borrowers are classified as
Probably Bankrupt Borrowers or Intensive Control Borrowers withlarge exposures.
Key assumptions of the cash flow estimate are the repayment
schedule prepared by the borrower, creditworthiness, the Bank's
lending policies and default rates of an external credit ratingorganization according to the credit condition of borrower.
(3) Effects on the consolidated financial statements in the fiscal year
ending March 31, 2023
Though the key assumptions include how the COVID-19 will spreadout or when it will be settled, there are no precedents or
widely-agreed view that can be used as reference. Accordingly, theBank makes a best estimate based on certain assumptions, available
external information and an approval of decision-making body inaccordance with the internal rules. However, the assumptions used in
the estimates incorporate uncertainty and, if there are changes in
conditions of the COVID-19 pandemic or changes in its impact on theeconomic activities, the performance of borrowers may be affected
and a reserve for possible loan losses to be recorded in the
consolidated financial statements for the fiscal year ending March 31,
2023 may be significantly affected.
If the assumptions used in the initial estimate are changed due tochanges in the borrowers’ performance, inputs used for the cash flow
estimate method may significantly affect a reserve for possible loan
losses to be recorded in the consolidated financial statements for the
fiscal year ending March 31, 2023.
(20) Changes in Accounting Policies(i) Application of “Accounting Standard for Revenue Recognition”“Accounting Standard for Revenue Recognition” (AccountingStandards Board of Japan (“ASBJ”) Statement No. 29, March 31,
2020; hereinafter referred to as “Revenue Recognition AccountingStandard”) and related guidelines have been applied since thebeginning of the current fiscal year. The Bank recognizes the revenue
at the amount expected to be received in exchange for the goods orservices, when control of the promised goods or services istransferred to the customer.
Regarding the application of the Revenue Recognition AccountingStandard, in accordance with the transitional provisions stipulated in
the proviso of Paragraph 84 of the Revenue Recognition AccountingStandard, the Bank adjusts to the Retained Earnings at the beginningof the current fiscal year the cumulative impact of retroactively
applying the new accounting standard before the beginning of thecurrent fiscal year. The impact of this adjustment on the consolidated
financial statements is immaterial.
In accordance with the transitional provisions stipulated in Paragraph89-3 of this Standard, the note on “Revenue Recognition” for theprevious fiscal year is not provided.

(ii) Application of “Accounting Standard for Fair Value
Measurement”“Accounting Standard for Fair Value Measurement” (ASBJ Statement
No. 30, July 4, 2019; hereinafter referred to as “Fair Value
Measurement Accounting Standard”) and related guidelines havebeen applied since the beginning of the current fiscal year. The Bank
has applied the new accounting policy stipulated in the Fair Value
Measurement Accounting Standard prospectively, in accordance with
Paragraph 19 of the Fair Value Measurement Accounting Standard
and the transitional provisions stipulated in Paragraph 44-2 of“Accounting Standard for Financial Instruments” (ASBJ Statement
No. 10, July 4, 2019).
As a result, in principle, the Bank has changed the method forvaluation of stocks with market prices and investment trusts among
Other securities from measurement based on the average market pricefor one month before the end of the fiscal year to measurement at fairvalue based on the market price on the balance sheet date.
In addition, the note on “Financial Instruments” includes a noterelated to the breakdown of financial instruments by fair value level.
However, in accordance with the transitional provisions stipulated in
Paragraph 7-4 of “Implementation Guidance on Disclosures about
Fair Value of Financial Instruments” (ASBJ Guidance No. 19, July 4,2019), the relevant note for the previous fiscal year is not provided.
(21) Accounting Standards Issued but not yet Adopted- “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, June 17, 2021)(i) Overview
The implementation guidance stipulates the treatment of calculationand notes to the fair value of investment trusts, and notes to the fairvalue of investments in investment partnerships, etc. for which the net
amount equivalent to the equity interest is recorded on the balance
sheet.
(ii) Date of adoption
The Bank will adopt the implementation guidance in the consolidated
financial statements from the beginning of the fiscal year beginningon April 1, 2022.
(iii) Effects of the adoption of the accounting standards and guidance
There is no effect of the adoption of the implementation guidance on
the consolidated financial statements.
3. Trading Assets:
The details of Trading Assets as of March 31, 2022 and 2021 are as
follows:

Stocks62,877

69,193

513

Others5,818,089

5,740,754

47,545

Total

16,139,087 17,724,041

131,887

Notes:
1. Stocks include investments in affiliated companies totaling ¥189
million ($1 million) as of March 31, 2022 and 2021.
2. Others include common shares and investment in unconsolidated
subsidiaries totaling ¥9,502 million ($77 million) as of March 31,
2022 and ¥8,552 million as of March 31, 2021. Others also include
preferred shares issued by Shinkin Banks which were contributedin accordance with the Shinkin Bank Management Reinforcement
System. The amount was ¥162,499 million ($1,327 million) as ofMarch 31, 2022 and ¥169,524 million as of March 31, 2021.
Others also include foreign bonds and equities.

5. Status of Claims:
Claims under the Shinkin Bank Act and the Act on Emergency
Measures for the Revitalization of the Financial Functions are as
follows.
Claims consist of items recorded in Corporate Bonds in“Securities” (limited to those Corporate Bonds for which redemptionof the principal and payment of interest are fully or partiallyguaranteed and which are issued through private placement of
securities (Article 2, Paragraph 3 of the Financial Instruments andExchange Act)), Loans and Bills Discounted, Foreign Exchanges
Assets, Accrued Interest and Suspense Payments in “Other Assets,”and Customers’ Liabilities for Acceptances and Guarantees in the
consolidated balance sheet, as well as other securities disclosed asloaned securities in footnote (limited to those loaned under aloan-for-use or lease agreement).

Millions of
U.S. Dollars
2022

Millions of Yen
2022
2021
Trading AccountSecurities
Derivatives of Securities
related to Trading
Transactions
Trading-Related
Financial Derivatives

4. Securities:
The details of Securities as of March 31, 2022 and 2021 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Japanese Government
4,863,589 5,978,192
39,744
Bonds
Municipal Government
1,934,063 1,821,893
15,805
Bonds
3,460,466 4,114,006
28,278
Corporate Bonds

19,22823,363

157

－

0

－

Bankrupt andQuasi-Bankrupt
ClaimsDoubtful Claims

Millions of
U.S. Dollars
2022

Millions of Yen
2022
2021
163

83

1

3,344

3,384

27

42

1,008

0

28,612

28,024233

Loans Past Due Three
Months or MoreOther Trading Assets

286,026

229,043

2,337

Restructured Loans

18,882

18,921

154

Total

333,867

280,431

2,728

Total

22,43323,398

183

51

Bankrupt and Quasi-Bankrupt Claims represent claims held
against debtors with failed business status due to the grounds such ascommencement of bankruptcy proceedings, commencement ofreorganization proceedings, or commencement of rehabilitation
proceedings, and any other type of claims equivalent thereto.
Doubtful Claims represent claims whose debtor is not yet in thestatus of failure in business although such debtor’s financial status
and business performance are worsening, and for which it is highly
likely that the collection of principal or receipt of interest inaccordance with the contract is impossible, other than Bankrupt andQuasi-Bankrupt Claims.
Loans Past Due Three Months or More represent loans forwhich payment of the principal or interest is delinquent for the periodof three months or longer from the day immediately after thecontractual due date, other than Bankrupt and Quasi-Bankrupt Claims
and Doubtful Claims.
Restructured Loans represent loans for which an arrangement
favorable for the debtor has been made, such as reduction or
exemption of interests, granting of grace period for payment ofinterest, granting of grace period for payment of principal, waiver ofclaims, other than Bankrupt and Quasi-Bankrupt Claims, Doubtful
Claims, and Loans Past Due Three Months or More.
The above amounts are the amounts before exclusion ofreserves for possible loan losses.
<Changes in Presentation>
In accordance with the Partial Revision to the Regulation for
Enforcement of the Shinkin Bank Act (Cabinet Office Order No. 3,
January 24, 2020) that came into effect on March 31, 2022, theclassification of “Risk-monitored loans” under the Shinkin Bank Act
is presented in accordance with the classification of disclosed claims
under the Act on Emergency Measures for the Revitalization of the
Financial Functions.

6. Loans and Bills Discounted:
Loans include subordinated loans with a lower priority for repaymentof principal and interests than that of other debt claims. The amountwas ¥11,500 million ($93 million) as of March 31, 2022 and ¥11,500
million as of March 31, 2021. Of these amounts, none as of March 31,
2022 and 2021, were provided to Shinkin Banks in accordance with
the Shinkin Bank Management Reinforcement System.
Bills Discounted are accounted for as financial transactions inaccordance with Industry Committee Practical Guidelines No. 24.
The face value of bills of lading amounted to ¥195 million ($1million) as of March 31, 2022 and ¥76 million as of March 31, 2021.
The Bank has the right to freely dispose of, sell or re-hypothecate
such bills.
With respect to loan participation, in accordance with
“Accounting and Presentation of Loan Participation” (JICPA
Accounting Committee Report No. 3, November 28, 2014), theamount of the participation principal is accounted for as a loan to theoriginal debtor, and this amounted to ¥11,302 million ($92 million) as
of March 31, 2022 and ¥13,983 million as of March 31, 2021.

52

7. Commitments to Overdrafts and Loans:
Commitments related to overdrafts and loans represent agreements toextend overdrafts or loans up to a pre-agreed amount at thecustomer’s request as long as there is no violation of the conditions
stipulated in commitment agreements.
The amount of unused loan commitments may not necessarily
have a significant effect on the future cash flows of the Bank because
most of these loan commitments expire without being drawn down.
Most of these agreements have provisions which stipulate that the
Bank may not extend the loan or may decrease the amount ofcommitment when there are certain changes in the financial
conditions, certain issues relating to credit protection and otherreasons. The Bank limits the commitment to an amount not exceeding
the amount of the related customer’s time deposit. The Bank
periodically checks the financial condition of its customers based on
its internal rules and performs certain actions to secure loans orrevises the contracts, as necessary.
The amounts of unused loan commitments are ¥27,146,527
million ($221,839 million) as of March 31, 2022 and ¥26,282,059
million as of March 31, 2021.
The amounts which the Bank could unconditionally cancel at
any time or of which the original contractual maturity is less than one
year are ¥26,988,964 million ($220,552 million) as of March 31,
2022 and ¥26,141,095 million as of March 31, 2021.

8.

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 in “Securities.” The amount in total was ¥128,869
million ($1,053 million) as of March 31, 2022 and ¥197,643 million
as of March 31, 2021.
Those held by the Bank without being disposed of as of March
31, 2022 amounted to ¥91,671 million ($749 million) and as ofMarch 31, 2021 amounted to ¥407,355 million.

9.

Tangible Fixed Assets:
Millions of Yen
2022
2021

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

Millions of
U.S. Dollars
2022

99,89496,456

816

1,764

1,764

14

(－)

(－)

(－)

10. Assets Pledged as Collateral and Associated Liabilities:
Assets pledged as collateral for the fiscal years ended March 31, 2022
and 2021 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022

11. Trading Liabilities:
The details of Trading Liabilities as of March 31, 2022 and 2021 are
as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022

Assets Pledged as Collateral

Trading Bonds Sold

Trading Assets
Securities
Loans and Bills Discounted
Total

12,09814,85898

6,001,280

5,494,516

49,042653,212842,558

5,338

6,666,590

6,351,933

54,4784,005,400

3,858,000

32,731

287,020

4,863

1,702,956

14,125

Liabilities associated with
Assets Pledged as Collateral
Borrowed Money

Payables under Repurchase595,089
Agreements
Payables under Securities
1,728,562
Lending Transactions

3,228

2,390

26

Derivatives of Securities
Related to Trading
Transactions
Trading-Related Financial
Derivatives

2

－

0

24,68029,235

201

Total

27,911

31,625228

Securities in the amount of ¥253,101 million ($2,068 million) as ofMarch 31, 2022 and ¥271,673 million as of March 31, 2021, were
pledged as collateral for exchange settlement transactions, etc. or as
substitute for margin in futures transactions, etc.
Assets pledged through GC repo transactions of Japanese
Government Bonds (JGBs) under subsequent collateral allocation
method as of March 31, 2022 amounted to ¥602,851 million ($4,926
million) and as of March 31, 2021 amounted to none.
Other assets include Guarantee Money, Cash Collateral Pledged for
Financial Instruments, Clearing Margin Deposits for Central
Counterparty, and Cash Collateral Pledged for Repurchase
Agreement. The amounts are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Guarantee Money
Cash Collateral
Pledged for Financial
Instruments
Clearing Margin
Deposits for Central
Counterparty
Cash Collateral
Pledged for
Repurchase
Agreement

439

379

3

164,985

149,174

1,348

700,000

700,000

5,720

3,926

1,606

32

53

12. Borrowed Money and Lease Obligations:
Balance as of
Category
April 1, 2021
(Millions of Yen)
4,020,480
Borrowings

Balance as ofMarch 31, 2022
(Millions of Yen)
4,167,880

4,020,480

4,167,880

34,059

0.04

347

294

2

1.54

－

324

240

1

2.61

May 2023Jan. 2028

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

Balance as of
Average
March 31, 2022
Interest Rate (%)(Millions of U.S. Dollars)
34,0590.04

Maturity－
Aug. 2022Mar. 2029

Notes:
1. Average interest rates were computed by the weighted average method using the interest rates and the balances at the fiscal year-end.
2. The repayment schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Over 4 years,
Within 1 year
within 2 years
within 3 years
within 4 years
within 5 years
1,058,000
1,283,800
952,000
711,600－
Borrowed Money
294
150
75
9
3
Lease Obligations

Within 1 year

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

Over 4 years,
within 5 years

8,645
10,491
7,779
5,815
－
Borrowed Money
2
1
0
0
0
Lease Obligations
3. Borrowed Money includes subordinated borrowings of ¥162,480 million ($1,327 million) as of March 31, 2022 and 2021.

13. Debentures:
IssuerThe Bank

The Bank

The Bank
Total

Name of Issue

No. 317-388
5-yearInterest-bearing
debentures
No. 2
7-yearInterest-bearing
debentures
No. 2
10-yearInterest-bearing
debentures－

Issuance Date

Balance as of Balance as of Balance as ofApril 1,March 31,
March 31,
2021
2022
2022
(Millions of (Millions of (Millions of
Yen)
Yen)
U.S. Dollars)

2,875

54



Collateral

Redemption
Date

Apr. 2016Mar. 2022

1,740,870

1,515,370

12,3830.010.12－

Apr. 2021Mar. 2027

Sep. 25, 2015

10,00010,000

81

0.29

－

Sep. 27, 2022

Sep. 25, 2015

20,00020,000

163

0.52

－

Sep. 26, 2025－

1,770,870

1,545,370

12,628

－

－

－

Note:
The redemption schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Within 1 year
within 2 years
within 3 years
within 4 years
351,850
398,030
293,800
251,950

Within 1 year

CouponRate (%)

Over 1 year,
within 2 years
3,252

Millions of U.S. Dollars
Over 2 years,
within 3 years
2,400

Over 3 years,
within 4 years
2,058Over 4 years,
within 5 years
249,740
Over 4 years,
within 5 years
2,040

14. Asset Retirement Obligations:
The disclosure of Asset Retirement Obligations was omitted because
the amount was one-hundredth or less of the total balance of Liabilities
and Net Assets as of April 1, 2021 and as of March 31, 2022.

15. Land Revaluation:
Based on the “Act on the Revaluation of Land” (Act No. 34,
promulgated on March 31, 1998), land used for business was revalued.
Deferred tax on the revaluation of the land was recorded as “Deferred
Tax Liabilities for Land Revaluation” under Liabilities, and unrealized
gain on the revaluation of the land, net of deferred tax, was recorded as“Land Revaluation Excess” under Net Assets.
Date of Revaluation: March 31, 1999
Revaluation method in accordance with Article 3, Paragraph 3 of Act
No. 34: Revaluations were made based on the method, determined by
the Commissioner of the National Tax Administration, which formed
the basis for calculating land value taxes (prescribed by the “Land
Value Tax Law”), as set forth in Article 2, Item 4 of the “Order for
Enforcement of the Act on Revaluation of Land” (Government
Ordinance No. 119, dated March 31, 1998), with appropriate
adjustments.

16. Trusts with Contracts:
The details of principal amounts of trusts with contracts forcompensation of loss of principal for the fiscal years ended March 31,
2022 and 2021 are as follows:
Millions of
U.S. Dollars
Millions of Yen
2022
2021
2022
Money Trust
349
42,71130,153

17. Fees and Commissions:
The details of Fees and Commissions for the fiscal years ended March
31, 2022 and 2021 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Deposit, Fixed Income
644
479
5
Securities and Lending
370
369
3
Exchange Business
10,175
8,996
83
Securities Related Business
2,153
2,095
17
Agency Business
8,106
9,187
66
Guarantee Business
19,984
19,229163
Trustee Business
689
818
5
OthersIncome on Fees and42,124
41,175344
Commissions Businesses
207
224
1
Exchange701
945
5Agency Loans Business
13,972
13,730114
OthersExpenses on Fees and
14,881
14,900121
Commissions Businesses

18. Trading Income:The details of Trading Income for the fiscal years ended March 31,
2022 and 2021 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
Income from Trading
Account Securities
Income from
Trading-Related Financial
Derivatives
Other Trading Income
Total

2021

2022

606

651

4

942

810

7

－
1,548

45
1,507

－
12

19. Trading Losses:
The details of Trading Losses for the fiscal years ended March 31,
2022 and 2021 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022

2021

2022

Expenses from
Trading-Related Securities

5

155

0

Other Trading Losses

2

－

0

Total

8

155

0

20. Other Income:The details of Other Income for the fiscal years ended March 31, 2022
and 2021 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Gains on Sale of Stocks and
7,634
9,243
62
Other Securities
Reversal of Allowance for
4,552
1,106
37
Loan Losses
Others
150
458
1
Total
12,337
10,809100

21. Other Expenses:
The details of Other Expenses for the fiscal years ended March 31,
2022 and 2021 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2022
2021
2022
Losses on Sale of Stocks and
100
2,980
0
Other Securities
Impairment Losses on Equity
Securities

337

－

2

Others

48

145

0

Total

486

3,125

3

55

22. Consolidated Statement of Comprehensive Income:For the fiscal years ended March 31, 2022 and 2021
Reclassification adjustment amount and tax effect amount related to Other Comprehensive Income
Millions ofMillions of Yen
2022

U.S. Dollars
2021

2022

Net Unrealized Gains (Losses) on Other Securities:
The Amount Arising during the Period(318,782)

36,933(2,605)

Reclassification Adjustment Amount

36,2791,932

296

Prior to Tax Effect Adjustment(282,503)

38,865(2,308)79,045(10,514)645(203,457)

28,350(1,662)The Amount Arising during the Period

48,631

128,499

397

Reclassification Adjustment Amount

28,44256,192232

Prior to Tax Effect Adjustment

77,074

184,692

629

Tax Effect Amount(21,519)(51,567)(175)

Deferred Gains or Losses on Hedges

55,555133,125

453

The Amount Arising during the Period

777

(170)

6

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Tax Effect Amount

－

－

－

Foreign Currency Translation Adjustments

777

(170)

6

The Amount Arising during the Period(1,324)

2,899

(10)

Reclassification Adjustment Amount

1,489

1,901

12

Prior to Tax Effect Adjustment

164

4,800

1

Tax Effect Amount(46)(1,374)(0)Remeasurements of Defined Benefit Plans

117

3,425

0

(147,007)

164,730(1,201)Tax Effect AmountNet Unrealized Gains (Losses) on Other Securities
Deferred Gains or Losses on Hedges:

Foreign Currency Translation Adjustments:

Remeasurements of Defined Benefit Plans:

Other Comprehensive Income5623. 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, 2022
April 1, 2021 (Thousand
Year (Thousand Units)
Year (Thousand Units)(Thousand Units)
Units)
Shares Outstanding
General Common Shares

4,000

－

－

4,000

Specific Common Shares

2,000

－

－

2,000

Preferred Shares (Type-A)

708

－

－

708

6,708

－

－

6,708

General Common Shares

－

－

－

－

Specific Common Shares

－

－

－

－

Preferred Shares (Type-A)

－

－

－

－

－

－

－

－

Total
Treasury Shares

Total(2) Dividends
Dividends paid during the fiscal year ended March 31, 2022
Resolution

Annual General Meeting of
Shareholders, June 24, 2021

Class of ShareTotal Dividend
Amount (Million Yen)

Amount Per Share(Yen)

Record Date

Effective Date

GeneralCommon Shares

12,0003,000

March 31, 2021

June 24, 2021

Specific
Common Shares

3,000

1,500

March 31, 2021

June 24, 2021

Preferred Shares(Type-A)

4,603

6,500

March 31, 2021

June 24, 2021

Among the dividends whose record date falls within the fiscal year ended March 31, 2022, those whose effective date will fall within thefollowing fiscal year:
Resolution

Annual General Meeting of
Shareholders, June 24, 2022

Class of ShareTotal Dividend
Amount (Million Yen)

Resource ofDividends

Amount Per Share(Yen)

Record Date

Effective Date

GeneralCommon Shares

12,000Retained Earnings

3,000

March 31, 2022 June 24, 2022

Specific
Common Shares

3,000

Retained Earnings

1,500

March 31, 2022 June 24, 2022

Preferred Shares(Type-A)

4,603

Retained Earnings

6,500

March 31, 2022 June 24, 20225724. Income Taxes:(1) Breakdown of Deferred Tax Assets and Liabilities is as follows:
Millions ofMillions of Yen
U.S. Dollars
2022

2021

2022

2,788

2,732

22

Reserve for Possible Loan
Losses

121

1,122

0

Net Defined Benefit Liability

12,466

12,133

101

Write-Downs for Securities

1,376

1,431

11

－

7,970

－

5

0

0

Others

3,689

4,252

30

Valuation Allowances(2,379)(3,411)

Total Deferred Tax Assets

18,06826,232

Deferred Tax Assets:
Depreciation

Deferred Gains or Losses on
HedgesNet Unrealized Gains on Other
Securities

25. Retirement Benefit Plans:(1) Retirement Benefit Scheme
The Bank and some of its consolidated domestic subsidiaries have adefined benefit plan that offers lump-sum payments upon retirement
and contributes to the Employees’ Pension Fund for all shinkin banks
nationwide.
With regard to notes related to employees’ retirement benefits
based on a multiple-employer plan, they are included in notes related
to employees’ retirement benefits based on a defined benefit plan.
(2) Defined Benefit Plan as of March 31, 2022 and 2021 is asfollows:(i) Reconciliation of beginning- and end-of-period balance ofRetirement Benefit Obligation
Millions ofMillions of Yen
U.S. Dollars
2022

2021

(19)

Retirement Benefit
Obligation at Beginningof Period

66,526

66,963543

147

Service Cost

2,859

3,002

23

Interest Cost

253

257

2

557

(2,011)4(1,681)(1,684)(13)

Prior Service Cost

－

－

－

－

－

－

68,51566,526

559

Deferred Tax Liabilities:(39,679) (118,719)(324)

Actuarial Difference
Incurred(13,548)－(110)

Retirement Benefits Paid

(318)

(404)

(2)

Total Deferred Tax Liabilities(53,546) (119,124)

(437)

Other

Net Deferred Tax Liabilities(35,478)(289)

Retirement Benefit
Obligation at End of
PeriodNet Unrealized Gains on Other
Securities
Deferred Gains or Losses on
HedgesOthers(92,891)(2) Reconciliation between the effective statutory tax rate and theactual effective tax rate for the fiscal years ended March 31, 2022 and
2021:
2022
2021
Statutory effective tax rate

27.92 %

27.92 %

(Adjustments)
Change in Valuation Allowances(2.14 %)

(0.98 %)

Dividends received, not taxable(0.96 %)

(1.18 %)

Others(0.13 %)

0.45 %

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

24.69 %

26.21 %

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

58



2022

2022

2021

2022

24,58322,423

200

983

672

8

(767)

888

(6)

1,647

1,598

13

(1,023)

(999)

(8)

－

－

－

25,423

24,583207

(iii) Reconciliation of end-of-period balance of Retirement Benefit
Obligation and Pension Plan Assets with Net Defined Benefit
Liability and Net Defined Benefit Asset presented on the consolidatedbalance sheet
Millions ofMillions of Yen
U.S. Dollars
2022

2021

Funded Plan Retirement
Benefit Obligation

56,51354,812

Pension Plan Assets(25,423)

Unfunded Plan Retirement
Benefit Obligation
Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
Sheet

2022

(v) Remeasurements of Defined Benefit Plan
Remeasurements of Defined Benefit Plan (before tax effects)
comprise the following.
Millions ofMillions of Yen
U.S. Dollars
2022

2021

2022

Prior Service Cost

－

－

－

461

Actuarial Differences

164

4,800

1

(24,583)

(207)

Other

－

－

－

31,08930,228

254

Total

164

4,800

1

12,002

11,71498

43,091

41,943352(vi) Accumulated Remeasurements of Defined Benefit Plan
Accumulated Remeasurements of Defined Benefit Plan (before tax
effects) comprise the following.
Millions ofMillions of Yen
U.S. Dollars
2022

Millions of
U.S. Dollars

Millions of Yen

2022

－

－

－

5,721

5,886

46

2022

2021

43,091

41,943

352

Other

－

－

－

Net Defined Benefit Asset

－

－

－

Total

5,721

5,886

46

Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
Sheet43,091

41,943352(vii) Pension Plan Assets(a) The ratios by main asset categories in total pension plan assets are
as follows:
2022
2021

Net Defined Benefit
Liability2022

UnrecognizedPrior Service Cost
Unrecognized
Actuarial Differences

2021(iv) Breakdown of Retirement Benefit Expense

Millions of
U.S. Dollars

Millions of Yen
2022

2021

2022

Bonds

58 %

58 %

Stocks29 %28 %Service Cost

2,859

3,002

23

Cash and Deposits

10 %

11 %

Interest Cost

253

257

2

Other

3%

3%

Total

100 %

100 %

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

(983)

(672)

(8)

1,489

1,901

12

－

－

－

Other

(600)

(588)

(4)

Retirement Benefit
Expenses Related toDefined Benefit Plan

3,017

3,899

24

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

(b) Method for setting the Expected Long-Term Rate of Return
To set the Expected Long-Term Rate of Return on Pension Plan
Assets, the Bank takes into account past return performance and thecurrent and future expected rate of return on the diverse range ofassets that makes up the pension assets.
(viii) Underlying actuarial assumptions
Main underlying actuarial assumptions as of March 31, 2022 and2021 are as follows:

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



2022

2021

0.0～0.6 %0.0～0.6 %

4.0 %

3.0 %

0.0～8.5 %0.0～8.5 %59

26. Leases:
1. Finance Leases
Finance leases that do not transfer ownership(1) Outline of lease assets(i) Tangible fixed assets
Mainly, hardware related to computer equipment(ii) Intangible fixed assets
Software related to computer equipment(2) Lease asset depreciation method
Depreciation method is described in the “Significant Accounting
Policies.”
2. Operating Leases
Future lease payments related to non-cancelable operating leases:
Disclosure of data omitted due to immateriality.

27. Financial Instruments:
1. Matters concerning financial instruments(1) Policies on financial instruments
Shinkin Central Bank Group (the “Group”) works to ensure the stable
funding through the acceptance of deposits mainly from its Shinkin
Bank members and through the issuance of debentures. Additionally,
the Group takes steps to diversify its funding methods by procuring
funds from short-term money markets depending 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 from thesefinancial instruments, the Group engages in ALM activities including
the above-mentioned derivative transactions. For its trading activities,
the Group establishes risk limit and loss cut limits amounts andengages in transactions within the scopes of these risk limits, as a way
to maintain a financial soundness and to ensure stable earnings.
(2) Types and related risks of financial instruments
Financial assets held by the Group consist mainly of short-term funds,
securities, and loans assets.
Short-term funds are invested in the call loan.
These investments are exposed to the counterparty credit risk,
and market risks such as interest rate risk and foreign currency
exchange risk.
Securities portfolios of the Group consist of domestic securities
including JGBs, corporate bonds and other bonds as well as foreign
securities such as government bonds, government-guaranteed bonds,
and agency bonds issued in the major industrialized countries. The
Group also invests in equity securities and investment funds todiversify its portfolio.
These investments are exposed to the individual issuers’ credit
risk as well as market risks such as interest rate risk, price fluctuation
risk, and foreign currency exchange risk, and market liquidity risk.
Loans assets consist of direct loans to low-risk borrowers
including Shinkin Banks, central and local governments, public
service corporations, good standing domestic and overseas companies,
and agency loans provided through Shinkin Banks.

60

These loans are exposed to counterparty credit risk, and market
risks such as interest rate risk and foreign currency exchange risk.
Meanwhile, financial liabilities of the Group consist mainly of
deposits and debentures.
Deposits include current deposits, ordinary deposits, deposits at
notice, term deposits, and foreign currency-denominated deposits,
most of which are deposits from Shinkin Bank members.
These deposits are exposed to market risks such as interest raterisk and foreign currency exchange risk, and liquidity risk.
As a debenture issuer, the Group issues interest-bearing
debentures.
These debentures are exposed to interest rate risk and liquidity
risk.
Furthermore, the Group engages in derivative transactions.
Specifically, the Group trades interest rate derivatives (interest
swaps, interest futures, and interest options), currency derivatives(foreign currency forwards and currency swaps) and bond derivatives(bond futures and bond futures options).
These transactions are exposed to counterparty credit risk, andmarket risks such as interest rate risk and foreign currency exchangerisk.
The Bank hedges market risks of its financial assets andliabilities through ALM activities.
The Group partially avoids exposure to market risks by
mitigating (i) interest rate risk through interest rate swaps and(ii) foreign currency exchange risk of foreign currency-denominatedassets through foreign currency-denominated funding, currency
swaps, and forex swaps.
Hedge accounting is applied to risk hedging through ALM
activities including the use of derivatives. With regard to hedge
accounting, hedging instruments, hedged items, hedging policies, andmethods of hedge effectiveness assessment, etc. are described in the“Significant Accounting Policies.”(3) Risk management frameworks of financial instruments
In the basic risk management policy, the Bank divides risks into“risks to be minimized” and “risks to be controlled.” Credit risks,market risks and liquidity risks are classified into latter category.
Risks of both categories are managed by risk management divisions
that are independent of the client service divisions. The Risk
Management Division comprehensively manages these risks.
<Integrated risk management>
For the integrated management of risks, the Bank has introduced
integrated risk management for quantifiable risks. Integrated risk
management is a risk management method of measuring various risks
using a uniform risk measure such as Value at Risk (VaR),
aggregating the measurements, and comparing the aggregatedamounts with the Bank’s capital. The Bank measures credit risks andmarket risks using VaR methodology and monitors them on a daily
basis to prevent risk limits from being breached.
These risk limits are reviewed each fiscal year by the Risk
Management Committee and determined at the Executive Committee.
The risk exposures are measured weekly by the Risk Management
Division, which takes steps to prevent any of the various risk limits
from being breached, and through the Risk Management Committee,
reports regularly to the management and relevant divisions.

The risk exposures at consolidated subsidiaries are aggregatedand managed through the integrated risk management framework.
(i) Credit risk management
For the accurate identification and strict management of credit risk,
the Bank has established credit risk management policies. Moreover,the Bank has created a structure in which divisions responsible for
credit control, credit management and credit assessment are clearly
segregated from divisions involved in client services, with mutuallyindependent tasks to ensure effective internal checking functions.
The Bank established the Credit Committee and the Risk
Management Committee, comprised of senior management and headsof divisions related to credit risk, as bodies to deliberate and makedecisions on matters relating to credit risk management. The Credit
Committee deliberates on credit transactions that exceed the credit
limit, while the Risk Management Committee deliberates on theestablishment and the review of policies regarding credit management.
The Executive Committee deliberates and makes decisions on mattersrelated to asset self-assessments including the results of asset
self-assessments, asset write-offs and asset reserve provisions.
Divisions responsible for credit control manage the credit riskfor each borrower relating to loans and market trading activities. An
overall credit limit is set for each borrower according to the credit
rating of the borrower. These divisions analyze the Bank’s overall
credit portfolio according to credit rating, industry, country and othercriteria. These analyses are used to monitor the diversification of
credit risk as well as changes in portfolio credit risk. Additionally,
divisions responsible for credit control quantify credit risk in VaR
methodology using Monte Carlo simulation methods and manage
credit risks based on the limits set at the Executive Committee.
Divisions responsible for credit management accurately monitor
each borrower’s financial condition, the purposes for which funds areused and repayment resources. In addition to appropriate assessment
and post-transaction management, these divisions continually check
whether the client service divisions are conducting appropriate credit
control and provide guidance as necessary.
Divisions responsible for credit assessment undertake andmanage operations relating to asset self-assessments, and thecalculation of asset write-offs and asset reserve provisions.
Credit risks of consolidated subsidiaries are added to the credit
risk of the Bank by each borrower and monitored.
(ii) Market risk management
To maintain an accurate understanding of market risk and rigorously
manage this risk, the Bank has issued a market risk management
policy. Furthermore, divisions responsible for market risk
management are clearly separated from divisions involved in market
operations, providing a risk management structure in which internal
checks are maintained through independent functions.
The Bank has established the ALM Committee as the body
responsible for deliberating and making decisions on matters relating
to market risk management. The ALM Committee is comprised ofsenior management and heads of divisions related to market risk.
Based on risk status information—obtained via reports from divisions
responsible for market risk management and other sources—the ALM
Committee deliberates broadly and in a timely manner ALM related
policies and market transactions including the Bank’s fund-raisingand management as well as the usage of hedging transactions
involving derivatives such as interest rate swaps.
Divisions responsible for market risk management quantify andmanage market risk mainly by VaR within the limit set by the
Executive Committee. In addition, market risk is classified into
several categories, and the amount of risk for each category ismonitored. Market risk management at the Bank not only uses VaR
methodology but takes multi-faceted approaches, that is, monitoring
sensitivity to change in individual risk factors such as the 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 management,in addition to the above monitoring system. In this way, market risks
including those that cannot be captured through VaR 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 specific loss cut
limits.
Market risks of consolidated subsidiaries are not directly added
to the values of market risk of the Bank but are managed separately
under integrated risk management.
<Quantitative information on market risk>(a) Financial instruments held for trading purposes
The Bank uses VaR analysis for quantifying market risk of trading
securities held within securities and interest-rate andforeign-exchange instruments held for trading purposes withinderivative transactions. The VaR model is based on the delta method
and uses a 99.0% confidence interval, a holding period of fivebusiness days and an observation period of one year. In addition, withregard to market risk related to trading operations at consolidated
subsidiaries, which is managed separately within the integrated risk
management framework, the Bank uses a market risk-equivalentamount under the regulations on banks’ capital ratio.
The market risk amount (estimated loss amount) of the Bank’s
trading operations was ¥44 million ($0 million) as of March 31, 2022
and ¥43 million as of March 31, 2021, and the market risk amount(estimated loss amount) of the trading operations of the Bank’s
consolidated subsidiaries was ¥546 million ($4 million) as of March
31, 2022 and ¥745 million as of March 31, 2021.
The Bank conducts back testing to compare VaR calculatedusing the model with actual losses. Based on the results of backtesting covering the fiscal year ended March 31, 2022, the number ofactual loss amount exceeding the VaR is three times, and the Bank
believes that the measurement model it uses has an adequate level ofaccuracy to capture market risk. However, it should be noted that VaR
measures the market risks at certain probability levels statisticallycalculated based on historical market fluctuation. Hence, there may
be cases where market risk cannot be captured in situations where
market conditions change unprecedentedly.

61

(b) Financial instruments other than those held for trading purposes
The Bank uses VaR analysis for quantifying market risk of due frombanks, securities not held for trading purposes, loans and bills
discounted, deposits, debentures, payables under securities lendingtransactions and, within derivative transactions, interest-rate andforeign-exchange instruments not held for trading purposes. The VaRmodel is based on the delta method and uses a 99.0% confidence
interval, a holding period of one year and an observation period offive years. In addition, with regard to market risk at consolidated
subsidiaries related to operations other than trading operations, which
is managed separately within the integrated risk management
framework, such risk is calculated in accordance with methods usedby the Bank.
The Group’s market risk amount (estimated loss amount) otherthan for trading purposes was ¥533,948 million ($4,363 million) as ofMarch 31, 2022 and ¥502,889 million as of March 31, 2021. The
Bank conducts back testing to compare VaR calculated using themodel with actual losses and believes that the measurement model it
uses has an adequate level of accuracy to capture market risk.
However, it should be noted that VaR measures the market risks 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.

62(iii) Liquidity risk management related to fund-raising
For the accurate identification and strict management of liquidity risk,
the Bank has established liquidity risk management policies.
Divisions responsible for liquidity risk management are clearly
separated from divisions involved in cash management and market
operations, allowing internal checks to be maintained through theindependent functions. In addition, the ALM Committee deliberates
and makes decisions on matters relating to liquidity risk management.
Methods used for managing liquidity risk include the setting
and daily monitoring of risk limit amounts relating to the gap between
cash receipts and payments. This is carried out for individual
currencies and periods. In the event that a significant liquidity riskarises, the Bank has preparations to respond rapidly, including thesecuring of funding sources.
The liquidity risk management frameworks created by the Bank
include subsidiaries as well, such as 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
Since certain assumptions are adopted to determine the fair values offinancial instruments, the values may vary if the underlying
assumptions change.

2. Fair value of financial instruments (and other information)
Carrying values stated on the consolidated balance sheet, fair value and differences between them are as follows. Stocks and other equity
securities, with no market prices and investment in investment partnerships are not included in the table below. (See Note 1.)
Notes to Cash and Due from Banks, Bills Bought and Call Loans, Receivables under Resale Agreements, Bills Sold and Call Money, Payables
under Repurchase Agreements and Payables under Securities Lending Transactions are omitted as the fair values approximate their carrying
amounts and they are mainly settled in a short period of time.
Notes on immaterial items have been omitted.
As of March 31, 2022
Millions of Yen
Carrying Value(1) Monetary Claims Bought

Fair Value

Difference

204,459

204,459－

Trading Securities

305,255

305,255－(3) Money Held in Trust

118,623

118,623－450,356

497,174

46,81815,476,710

15,476,710－

7,729,833

7,744,553

14,719Total Assets

24,285,238

24,346,777

61,538(1) Deposits

33,123,802

33,136,138

12,335(2) Debentures

1,545,370

1,543,995(1,374)

3,228

3,228

－

(4) Borrowed Money

4,167,880

4,170,629

2,749

Total Liabilities

38,840,281

38,853,991

13,709(2) Trading Assets(4) Securities
Held-to-Maturity Debt Securities
Other Securities(5) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

7,754,789(24,955)(3) Trading Liabilities
Trading Bonds Sold

Derivatives (*2)
To which Hedge Accounting is not applied(2,503)(2,503)－

To which Hedge Accounting is applied(6,853)(47,487)(40,633)(9,357)(49,990)(40,633)

Total Derivatives

63Millions of U.S. Dollars
Carrying Value(1) Monetary Claims Bought

Fair Value

Difference

1,670

1,670

－

Trading Securities

2,494

2,494

－

(3) Money Held in Trust

969

969

－

3,680

4,062

382

126,474

126,474－

63,16763,288120

Total Assets

198,457

198,960502(1) Deposits

270,685

270,786100(2) Debentures

12,628

12,617

(11)

26

26

－

(4) Borrowed Money34,05934,08222

Total Liabilities

317,400

317,512112(2) Trading Assets(4) Securities
Held-to-Maturity Debt Securities
Other Securities(5) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

63,371(203)(3) Trading Liabilities
Trading Bonds Sold

Derivatives (*2)
To which Hedge Accounting is not applied

(20)

(20)

－

To which Hedge Accounting is applied

(56)

(388)

(332)

(76)

(408)

(332)

Total Derivatives*1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted.
*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.

64As of March 31, 2021
Millions of Yen
Carrying Value(1) Monetary Claims Bought (*1)

Fair Value

Difference

180,303180,3096

Trading Securities

252,407

252,407－(3) Money Held in Trust

108,030

108,030－

450,801

508,986

58,185

17,071,363

17,071,363－

8,419,993

8,466,020

46,026

Total Assets

26,482,899

26,587,117

104,217(1) Deposits

33,752,872

33,763,581

10,709(2) Debentures

1,770,870

1,772,304

1,434

2,390

2,390

－

(4) Borrowed Money

4,020,480

4,024,179

3,699

Total Liabilities

39,546,612

39,562,456

15,843(2) Trading Assets(4) Securities
Held-to-Maturity Debt Securities
Other Securities(5) Loans and Bills Discounted

8,446,047

Reserve for Possible Loan Losses (*1)

(26,053)(3) Trading Liabilities
Trading Bonds Sold

Derivatives (*2)
To which Hedge Accounting is not applied(4,041)(4,041)－

To which Hedge Accounting is applied(42,348)(99,544)(57,195)(46,389)(103,585)(57,195)

Total Derivatives*1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Claims Bought are immaterial and have therefore been deducted directly from the carrying value.
*2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.
Note 1: Stocks and other equity securities, with no market prices and investment in investment partnerships (financial instruments thatwere defined as those for which it was considered extremely difficult to determine its fair value in the financial statements of the previous
fiscal year) are as follows and are not included in “Securities” in the fair value information of financial instruments.
Millions of Yen
Category
Stocks and other equity securities, with nomarket prices (*1) (*2)
Investment in investment partnerships (*3)
Total

2022

Millions of U.S. Dollars
2022

2021
168,681

175,797

1,378

43,33926,078354

212,021201,876

1,732*1. Stocks and other equity securities, with no market prices mean unlisted common stocks and the preferred shares issued by shinkin banks
which are held by the Bank. These stocks and other equity securities are not included in fair value disclosure information based on Paragraph
5 of the “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020).
*2 Impairment loss of ¥91 million ($0 million) was recognized for unlisted common shares in the fiscal year ended March 31, 2022.
*3 Investment in investment partnerships is not included in fair value disclosure information based on Paragraph 27 of the “Implementation
Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, July 4, 2019).



65

Note 2: Amounts of monetary claims and securities with maturities scheduled for redemption after the balance sheet date
As of March 31, 2022
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

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

16,649,319
1,329,496
34,21622,237－－20,000
－
－

－
－
－

－
－
－

－
－
－

－

－

－

－

－

－

527

2,106

30,887

7,293

25,408139,283

8,544
7,000
－
－
－
2,089,460
711,150
263,911－
953,126
3,597,163

42,11140,000－－－2,994,042
635,000
556,499－
1,363,304
1,591,115

131,381130,000－－－
2,588,926
920,000
631,494－
646,921
1,129,673

130,000
130,000－－－
982,747
50,000132,169－
152,412725,948

135,000
135,000－－－
2,026,905
1,099,000
346,385－
61,128532,863－－－－－
1,816,613
1,005,000－－
268,127
175,860

Total

23,708,729

4,651,612

3,900,869

1,845,989

2,720,177

2,131,757

Millions of U.S. Dollars

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

Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

136,057
10,864
279

181
－
－

163
－
－

－
－
－

－
－
－

－
－
－

－

－

－

－

－

－

Monetary Claims Bought
Securities
Held-to-Maturity Debt Securities
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Other Securities with Maturities
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Loans and Bills Discounted (*2)

4

17

252

59

207

1,138

69
57
－
－
－
17,074
5,811
2,156
－
7,788
29,395

344
326
－
－
－
24,467
5,189
4,547
－
11,14013,002

1,073
1,062
－
－
－
21,156
7,518
5,160
－
5,286
9,231

1,062
1,062
－
－
－
8,030
408
1,080
－
1,245
5,932

1,103
1,103
－
－
－
16,563
8,980
2,830
－
499
4,354

－
－
－
－
－
14,845
8,212
－
－
2,191
1,437

Total

193,746

38,012

31,87715,08522,22917,420*1. Current deposits, ordinary deposits, deposits at notice, and transfer deposits, included in “Due from Banks,” are stated under amounts
redeemable “Within 1 year.”*2. Loans of ¥2,206 million ($18 million) to the borrowers categorized as bankrupt, potentially bankrupt or substantially bankrupt, and for which
a redemption schedule is not foreseen, are not included.

66As of March 31, 2021
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

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

14,962,535
494,181367,229

55,138－－20,000
－
－

－
－
－

－
－
－

－
－
－

－

－

－

－

－

－

18,976

4,764

16,859

7,144

18,100114,580

797
－
－
－
－
3,877,545
2,355,380
224,441－
1,000,889
4,002,566

9,595
7,000
－
－
－
3,299,164
856,500
513,050－
1,620,784
1,812,820

70,92370,000－－－2,669,487
782,000
668,303－929,642
1,188,546

210,461
210,000－－－
861,265
40,000118,757－
172,107647,937

155,000
155,000－－－
1,597,908
561,000
283,830－
116,512598,631－－－－－
1,629,051
873,000－－
243,049
193,872

Total

23,723,833

5,181,483

3,965,817

1,726,809

2,369,640

1,937,505*1. Current deposits, ordinary deposits, deposits at notice, and transfer deposits, included in “Due from Banks,” are stated under amounts
redeemable “Within 1 year.”*2. Loans of ¥1,782 million to the borrowers categorized as bankrupt, potentially bankrupt or substantially bankrupt, and for which a redemption
schedule is not foreseen, are not included.

67Note 3: Amounts of deposits, debentures and other interest bearing debt scheduled for repayment after the balance sheet date
As of March 31, 2022
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Deposits (*)

15,237,606

Debentures

351,850

Borrowed Money
Bills Sold and Call Money

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

17,695,931

63,4494,740

122,075－

691,830

501,690－－－

1,058,000

2,235,800

711,600

162,480

－

－

5,637

－

－

－

－

－

Over 10 years

Payables under Repurchase Agreements

1,195,089

－

－

－

－

－

Payables under Securities Lending
Transactions

1,728,562

－

－

－

－

－

Total

19,576,744

20,623,561

1,276,739

167,220122,075－

Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Deposits (*)

124,520

144,610

518

38

997

Debentures

2,875

5,653

4,099

－

－

－

Borrowed Money

8,645

18,270

5,815

1,327

－

－

Millions of U.S. Dollars

Bills Sold and Call Money

Over 7 years,
within 10 years Over 10 years
－

46

－

－

－

－

－

Payables under Repurchase Agreements

9,766

－

－

－

－

－

Payables under Securities Lending
Transactions

14,125

－

－

－

－

－

Total
159,979
168,534
10,433* Demand deposits, included in “Deposits,” are stated under amounts payable “Within 1 year.”

1,366

997

－

As of March 31, 2021
Millions of Yen

Deposits (*)

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

16,452,259

17,106,292

50,8393,310

140,170－

Debentures

476,340

749,180545,350－－－

Borrowed Money931,500

1,974,500

952,000－

162,480－

Bills Sold and Call Money

10,166

－

－

－

－

－

Payables under Repurchase Agreements

287,020

－

－

－

－

－

1,702,956

－

－

－

－

－

Total
19,860,242
19,829,972
1,548,189* Demand deposits, included in “Deposits,” are stated under amounts payable “Within 1 year.”

3,310

302,650－

Payables under Securities Lending
Transactions

68

Within 1 year

Over 1 year,
within 3 years3. Breakdown of financial instruments by of the fair value hierarchy level
The fair value of financial instruments is classified into the following three levels on the basis of the observability and significance of the
inputs used to calculate the fair value.
Level 1 fair value:
Fair value measured by using quoted market prices in active markets as observable inputs related to fair value measurement for assets or
liabilities subject to fair value measurement
Level 2 fair value:
Fair value measured by using observable inputs related to fair value measurement other than those for Level 1
Level 3 fair value:
Fair value measured by using unobservable inputs related to fair value measurement
If multiple inputs that have a significant effect on the fair value measurement are used, the fair value is classified into the level with the lowest
priority in the fair value measurement among the levels to which each input is assigned.
(1) Financial instruments recorded at fair value in the consolidated balance sheet
As of March 31, 2022
Millions of Yen
Fair Value
Level 1
Monetary Claims Bought
Trading Assets (Trading Securities)
Money Held in Trust (Trading Purposes, Others)
Securities (Other Securities) (*1)
StocksLevel 2

Level 3

Total

897

203,034

203,932

2,640

302,615－305,255－

118,623－

118,623

5,778,995

6,532,779

224,488

12,536,262

56,698－－56,698－Japanese Government Bonds

4,418,385－－

4,418,385

Municipal Government Bonds－

1,934,063－

1,934,063

Corporate Bonds－

3,458,909

1,556

3,460,466

Others1,303,911

1,139,805

222,9312,666,648

Total Assets

5,781,635

6,954,915

427,523

13,164,074

Trading Liabilities (Trading Securities)

3,228

－

－

3,228

Total Liabilities

3,228

－

－

3,228

Derivatives (*2)(2)

(9,354)－(9,357)

Interest-Rate-Related Transactions－

45,525－45,525Currency-Related Transactions－(54,879)－(54,879)

Bond-Related Transactions

(2)

－

－

(2)

69

Millions of U.S. Dollars
Fair Value
Level 1
Monetary Claims Bought

Level 2

Level 3－

7

Trading Assets (Trading Securities)

21

Money Held in Trust (Trading Purposes, Others)－

Securities (Other Securities) (*1)

Total
1,659

1,666

2,472

－

2,494

969

－

969

47,22553,385

1,834

102,445

463

－

－

463

StocksJapanese Government Bonds

36,106－－

36,106

Municipal Government Bonds－

15,805－15,805

Corporate Bonds－

28,26512

28,278Others

10,655

9,314

1,821

21,791

Total Assets

47,247

56,835

3,493

107,575

Trading Liabilities (Trading Securities)

26

－

－

26

Total Liabilities

26

－

－

26

Derivatives (*2)

(0)

(76)

－

(76)

Interest-Rate-Related Transactions

－

372

－

372

Currency-Related Transactions

－

(448)

－

(448)

Bond-Related Transactions

(0)

－

－

(0)

*1. Investment trusts to which the transitional measures stipulated in Paragraph 26 of “Implementation Guidance on Accounting Standard for
Fair Value Measurement” (ASBJ Guidance No. 31, July 4, 2019) have been applied are not included in the above table. The amount of theseinvestment trusts on the consolidated balance sheet is ¥2,940,447 million ($24,029 million).
*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 are shown inparenthesis.
(2) Financial instruments other than financial instruments recorded at fair value in the consolidated balance sheet
As of March 31, 2022
Millions of Yen
Fair Value
Level 1
Monetary Claims Bought
Securities (Held-to-Maturity Debt Securities)
Japanese Government Bonds
OthersLoans and Bills Discounted

Level 3

Total

－

－

527

527

492,0195,155－

497,174

492,019－－492,019

－

5,155

－

5,155

－

－

7,744,553

7,744,553

492,019

5,155

7,745,080

8,242,255

Deposits－

33,136,138－

33,136,138

Debentures－

1,543,995－

1,543,995

Borrowed Money－

4,005,400

165,229

4,170,629

Total Liabilities－

38,685,533

165,229

38,850,762－(40,633)－(40,633)－(40,633)－(40,633)

Total Assets

Derivatives (*)
Interest-Rate-Related Transactions

70

Level 2Millions of U.S. Dollars
Fair Value
Level 1
Monetary Claims Bought

Level 2

Level 3

Total

－

－

4

4

4,020

42

－

4,062

4,020

－

－

4,020

－

42

－

42

－

－

63,28863,2884,020

4263,292

67,355

Deposits－

270,786－

270,786

Debentures－

12,617－

12,617

Borrowed Money－32,731

1,350

34,082

Total Liabilities－

316,135

1,350

317,486

Derivatives (*)

－

(332)

－

(332)

－

(332)

－

(332)

Securities (Held-to-Maturity Debt Securities)
Japanese Government Bonds
OthersLoans and Bills Discounted
Total Assets

Interest-Rate-Related Transactions* The fair value of interest rate swaps for exceptional treatment of interest rate swaps is shown.
For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations are shown inparenthesis.
Note 1: Explanation on valuation techniques used to calculate fair value and inputs for the calculation of fair value
Assets- Monetary Claims Bought
Of the Monetary Claims Bought, the beneficiary rights in trust accounted for in the same way as securities adopt the valuation priceobtained from a third party, such as a broker, as the fair value. If significant unobservable inputs, such as the default rate, recovery rate andprepayment rates, are used for valuation, the fair value is classified as Level 3 fair value, otherwise it is classified as Level 2 fair value. The
fair value of Monetary Claims Bought other than these beneficiary rights in trust is calculated by the same method as for loans, and isclassified as Level 3 fair value.
- Trading Assets
Regarding securities such as bonds held for trading purposes, the fair value for which unadjusted market price in active markets is used isclassified as Level 1 fair value. If the market is not active even if the published market price is used, or if the fair value is estimated bydiscounting the future cash flows using the market interest rate as of the valuation date, the fair value is classified as Level 2 fair value.
- Money Held in Trust
For securities managed as trust assets in Money Held in Trust whose main purpose is to trade securities, the fair value of stocks is based on
exchange prices, and that of bonds is based on market prices, etc. They are classified into Level 2 fair value based on the level of the main
components of the trust assets.
Notes regarding the trust of money for each purpose of holding are described in “Money Held in Trust.”- Securities
For securities, the fair value for which unadjusted market price in active markets is used is classified as Level 1 fair value. These securities
mainly include listed stocks and government bonds. If the market is not active even if the published market price is used, or if the fair value
is estimated by discounting the future cash flows using the market interest rate as of the valuation date, the fair value is classified as Level 2
fair value. These securities mainly include municipal bonds, short-term corporate bonds and corporate bonds.
If the market price is not available, the valuation price obtained from a third party such as a broker is used. When the valuation uses
important unobservable inputs, such as default rate, recovery rate, prepayment rates and credit spread, the fair value is classified as Level 3
fair value.
The fair value of investment trusts is based on published standard prices, etc., and its level is not granted, applying the transitional
provisions in accordance with Paragraph 26 of “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ
Guidance No. 31, July 4, 2019).
Notes regarding securities for each purpose of holding are described in “Securities.”- Loans and Bills Discounted
Of the Loans and Bills Discounted, those with variable interest rates reflect the market interest rate in a short period of time. For this reason,
as long as the credit status of the lender does not change significantly after drawdown, the fair value approximates the carrying value.
Accordingly, the carrying value is used as the fair value. For Loans and Bills Discounted with fixed interest rates, the fair value isdetermined by category based on loan type and credit rating, discounting the total amount of principal and interest using the interest rates,
determined by reflecting credit spread and other factors on market interest rates, that are expected when granting similar loans. For Loans
and Bills Discounted under short-term contracts, the carrying value is used as the fair value since the fair value approximates the carrying
value.
With regard to loans to Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably Bankrupt Borrowers, the Bank estimates loan
loss based on the present value of estimated future cash flows or the estimated recoverable value from collateral and guarantees. Since thefair value therefore approximates the total loan value on the consolidated balance sheet at the closing date less the total recorded value ofthe reserve for possible loan losses, this value is used for the fair value. The fair values determined are classified into Level 3 fair value.


71

Liabilities- Deposits
For demand deposits, the amount payable upon demand on the balance sheet date (carrying value) is used as fair value. Of term deposits,
those with variable interest rates reflect the market interest rate in a short period of time. For this reason, the fair value approximates the
carrying value. Accordingly, the carrying value is used as the fair value. For term deposits with fixed interest rates, the fair value iscalculated by discounting future cash flows using the interest rate that would be applicable to newly taken deposits. The fair values
determined are classified into Level 2 fair value.
- Debentures
The fair value of debentures issued by the Bank is based on the market price, and is classified as Level 2 fair value in consideration ofmarket liquidity.
- Trading Liabilities
The fair value of trading bonds sold is based on the unadjusted market price in an active market and is classified as Level 1 fair value.
- Borrowed Money
For borrowed money, the present value is calculated by type, discounting the total amount of principal and interest using the expectedinterest rate for similar borrowings. If the impact of unobservable inputs on the fair value is important, the fair value is classified as Level 3
fair value, and otherwise it is classified as Level 2 fair value.
For Borrowed Money under short-term contracts, since the fair value approximates the carrying value, the carrying value is used as the fairvalue and is classified as Level 2 fair value.
Derivative Transactions
For derivative transactions, exchange-traded transactions are valued on the basis of closing prices on exchanges, etc., while over the countertransactions are valued using discounted present value or calculation models for option prices, etc. The inputs used in the valuation techniquefor calculating the value of over the counter transactions are mainly interest rates, exchange rates and volatility. The fair value of
exchange-traded transactions is classified as Level 1 fair value, and that of over the counter transactions is classified as Level 2 fair value if
unobservable inputs are not used or their impact is not significant.
Note 2: Information about the Level 3 fair value of financial instruments recorded at fair value in the consolidated balance sheet(1) Reconciliation of beginning balance to ending balance, unrealized gains (losses) recognized in profit (loss) for the fiscal year ended March 31,2022
As of March 31, 2022
Millions of Yen
Balance
as ofApril 1,
2021

Monetary Claims Bought
Securities(Other Securities)
Corporate Bonds
OthersProfit (Loss) or Other
Comprehensive Income for the
fiscal year ended March 31,
2022
Recognized in
Recognized
Other
in Profit
Comprehensive(Loss) (*1)
Income (*2)

Net ofpurchases,
sales,
issuances,andsettlements

Transfers
to Level 3
fair value(*3)

TransfersfromLevel 3fair value

Balanceas ofMarch
31, 2022

Amount of unrealized gains
or losses on financial assets
and liabilities held at March
31, 2022 of recognized in
profit (loss) for the fiscal
year ended March 31, 2022

160,3770(938)

43,595－－203,034－

244,413

3,767

(734)

(30,049)

7,091－

224,488

－

5,094

－

(12)

(3,525)

－

－

1,556

－

239,318

3,767

(722)

(26,523)

7,091－

222,931－

Millions of U.S. Dollars
Balance
as ofApril 1,
2021

Monetary Claims Bought
Securities(Other Securities)
Corporate Bonds
Others72

Profit (Loss) or Other
Comprehensive Income for the
fiscal year ended March 31,
2022
Recognized in
Recognized
Other
in Profit
Comprehensive(Loss) (*1)
Income (*2)

Net ofpurchases,
sales,
issuances,andsettlements

Transfers
to Level 3
fair value(*3)

TransfersfromLevel 3fair value

Balanceas ofMarch
31, 2022

Amount of unrealized gains
or losses on financial assets
and liabilities held at March
31, 2022 of recognized in
profit (loss) for the fiscal
year ended March 31, 2022

1,310

0

(7)

356

－

－

1,659

－

1,997

30

(6)

(245)

57

－

1,834

－

41

－

(0)

(28)

－

－

12

－

1,955

30

(5)

(216)

57

－

1,821

－

*1. Mainly included in “Other Operating Income” and “Other Operating Expenses” in the consolidated statement of income.
*2. Included in “Net Unrealized Gains (Losses) on Other Securities” in “Other Comprehensive Income” in the consolidated statement ofcomprehensive income.
*3. These are transfers from Level 2 fair value to Level 3 fair value due to a lack of observable market data resulting from reduced market
activities for foreign bonds.
The transfers are made on the last day of fiscal year.
(2) Explanation on the fair value measurement process
The fair value calculation department of the Group has established the policies and procedures for fair value measurement and determines fairvalue in accordance with these policies and procedures. In determining fair value, the Group uses the method that can most appropriatelyreflect the nature, characteristics and risks of each asset. Regarding the fair value measurement results and level classification, the Group
verifies the appropriateness of the valuation techniques and inputs used for the fair value calculation by comparing prices between similar
products, checking price trend of the same securities and matching with benchmarks published in the market for consistency. In addition,
when using the prices obtained from a third party, the Group verifies the appropriateness of those prices by confirming the valuation
techniques and inputs and comparing them with the fair values of similar financial products.
28. Fair Value of Securities and Money Held in Trust:
1. Securities
The following tables contain information relating to Securities, Trading Assets (trading account securities and short-term corporate bonds), Cashand Due from Banks (negotiable certificates of deposit) and Monetary Claims Bought (beneficiary rights in trust) in the consolidated balance
sheet.
(1) Trading Securities

Millions of Yen

Net Unrealized Gains (Losses)
Recognized as Income

2022

Millions of U.S. Dollars
2022

2021

(32)

2

(0)

(2) Held-to-Maturity Debt Securities
As of March 31, 2022
Millions of Yen

445,204－－－
3,097
448,301
－
－
－
－
2,054
2,054

492,019－－－3,138
495,157
－
－
－
－
2,016
2,016

Unrealized
Gains (Losses)
46,815－－－40
46,856
－
－
－
－
(37)
(37)

450,356

497,174

46,818Carrying Value

Securities with Fair
Value Exceeding
Carrying Value

Securities with Fair
Value notExceeding Carrying
Value

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

Fair Value

Millions of U.S. Dollars
Carrying Value

Securities with Fair
Value Exceeding
Carrying Value

Securities 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



3,638
－
－
－
25
3,663
－
－
－
－
16
16
3,680

Fair Value
4,020
－
－
－
25
4,046
－
－
－
－
16
16
4,062

Unrealized
Gains (Losses)
382
－
－
－
0
382
－
－
－
－
(0)
(0)
382

73

As of March 31, 2021
Millions of Yen

445,881－－－4,627
450,509
－
－
－
－
291
291

503,911－－－
4,784
508,695
－
－
－
－
290
290

Unrealized
Gains (Losses)
58,029－－－156
58,185
－
－
－
－
(0)
(0)

450,801

508,986

58,185Carrying Value

Securities with Fair
Value Exceeding
Carrying Value

Securities with Fair
Value notExceeding Carrying
Value

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

Fair Value(3) Other Securities
As of March 31, 2022
Millions of Yen
Carrying Value

Securities with
Carrying Value
ExceedingAcquisition Cost

Securities with
Carrying Value not
ExceedingAcquisition Cost

74



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

53,407
4,195,524
1,762,989
645,234－
1,787,300
3,084,409
7,333,341
3,290
5,617,391
2,655,396
1,288,829－
1,673,166
2,758,260
8,378,942
15,712,283

Acquisition Cost
27,284
4,152,204
1,728,552
643,151－
1,780,500
2,836,093
7,015,582
3,422
5,679,671
2,707,253
1,294,219－
1,678,198
2,870,871
8,553,965
15,569,547

Unrealized
Gains (Losses)
26,12343,32034,437
2,083
－
6,799
248,315
317,759(131)(62,280)(51,857)(5,390)－(5,032)(112,610)(175,022)
142,736Millions of U.S. Dollars

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others436
34,285
14,407
5,272－
14,60525,205

222
33,931
14,125
5,255－
14,55023,176

Unrealized
Gains (Losses)
213
354
281
17
－
55
2,029

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

59,92726
45,904
21,69910,532－
13,67322,54068,472
128,399

57,33027
46,41322,123
10,576－
13,714
23,46069,902
127,233

2,596
(1)
(508)
(423)
(44)
－
(41)
(920)
(1,430)
1,166

Carrying Value

Securities with
Carrying Value
ExceedingAcquisition Cost

Securities with
Carrying Value not
ExceedingAcquisition Cost

Acquisition Cost

As of March 31, 2021
Millions of Yen
Carrying Value

Securities with
Carrying Value
ExceedingAcquisition Cost

Securities with
Carrying Value not
ExceedingAcquisition 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

61,337
7,057,548
3,222,800
1,260,135－
2,574,612
4,469,467
11,588,353
1,585
4,410,662
2,309,509
561,758－
1,539,394
1,260,563
5,672,812
17,261,165

Acquisition Cost
29,1806,980,548
3,164,134
1,256,062－
2,560,351
4,064,681
11,074,411
1,772
4,435,365
2,332,102
562,361－
1,540,901
1,321,573
5,758,711
16,833,123

Unrealized
Gains (Losses)
32,15676,99958,666
4,072－
14,260404,786
513,942(186)(24,702)(22,593)(602)－(1,506)(61,009)(85,899)
428,042(4) Held-to-Maturity Debt Securities Sold during the Fiscal Year
Not applicable.

75

(5) Other Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2022

StocksAmounts ofSecurities Sold
33,939Millions of Yen
Aggregate Gains on
Sale
7,606

Aggregate Losses on
Sale
(100)

Bonds

701,612

1,483(1,872)

Japanese Government Bonds

700,812

1,482(1,872)

Municipal Government Bonds

100

－

－

Short-Term Corporate Bonds

－

－

－

700

0

－

OthersCorporate Bonds

1,070,455

13,024(26,927)

Total

1,806,007

22,114(28,900)

StocksAmounts ofSecurities Sold
277

Bonds

5,733

12

(15)

12

(15)

Millions of U.S. Dollars
Aggregate Gains on
Aggregate Losses on
Sale
Sale
62
(0)

Japanese Government Bonds

5,726

Municipal Government Bonds

0

－

－

Short-Term Corporate Bonds

－

－

－

5

0

－

OthersCorporate Bonds

8,747

106

(220)

Total

14,758180(236)

StocksAmounts ofSecurities Sold
39,038Millions of Yen
Aggregate Gains on
Sale
9,236

Aggregate Losses on
Sale(2,980)

Bonds

219,091

9,977(2,528)For the Fiscal Year Ended March 31, 2021

Japanese Government Bonds

198,468

9,968(2,437)

Municipal Government Bonds

10,623－(86)

Short-Term Corporate Bonds

－

－

－

9,999

8

(4)

OthersCorporate Bonds

265,005

19,509(1,648)

Total

523,135

38,723(7,157)(6) Impaired Securities
Of Securities other than Trading Securities (excluding stocks and other equity securities, with no market prices and investment in investment
partnerships), if the fair value falls by 30% or more compared with the acquisition price and it is not expected to recover up to the acquisition
price in view of the rate of decline over past periods, the securities are devalued and the fair value is recorded as the carrying amount on the
consolidated balance sheet. In addition, the difference between the fair value and the acquisition price is recognized as impairment losses in thefiscal year. When determining that the fair value of stocks and investment trusts has declined by 30% or more, the amount calculated based on the
average market price for one month before the end of the current fiscal year is used.
In the case where the issuer is classified as in bankrupted, de facto bankrupted, or doubtful borrower, impairment loss is recognized for
securities when the market price is below the acquisition price.
In the fiscal year ended March 31, 2022, the amount of impairment losses on securities was ¥246 million ($2 million) (all impairment losses
were incurred on stocks).
In the fiscal year ended March 31, 2021, there were no impairment losses.

76

2. Money Held in Trust(1) Money Held in Trust for Trading Purposes
As of March 31, 2022

Millions of Yen
Unrealized Gains (Losses)
Recognized as Income

Carrying Value
Money Held in Trust for
Trading Purposes

69,998Carrying Value
Money Held in Trust for
Trading Purposes－
Millions of U.S. Dollars
Unrealized Gains (Losses)
Recognized as Income572

As of March 31, 2021－

Millions of Yen
Unrealized Gains (Losses)
Recognized as Income

Carrying Value
Money Held in Trust for
Trading Purposes

60,000－(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)
As of March 31, 2022
Millions of Yen
Carrying
Value
Other Money Held in Trusts

48,624

Acquisition
Cost
50,000

Unrealized
Gains(Losses)(1,375)

Items with
Carrying Value
ExceedingAcquisition Cost

Items with
Carrying Valuenot Exceeding
Acquisition Cost－

(1,375)

Items with
Carrying Value
ExceedingAcquisition Cost

Items with
Carrying Valuenot Exceeding
Acquisition Cost

Millions of U.S. Dollars
Carrying
Value

Acquisition
Cost

Unrealized
Gains(Losses)

Other Money Held in Trusts
397
408
(11)
－
(11)
Note:
Components of “Unrealized Gains (Losses)” are shown in “Items with Carrying Value Exceeding Acquisition Cost” and “Items with Carrying
Value not Exceeding Acquisition Cost.”
As of March 31, 2021

Millions of Yen
Carrying
Value

Acquisition
Cost

Unrealized
Gains(Losses)

Items with
Carrying Value
ExceedingAcquisition Cost

Items with
Carrying Valuenot Exceeding
Acquisition Cost

Other Money Held in Trusts
48,03050,000(1,969)－(1,969)Note:
Components of “Unrealized Gains (Losses)” are shown in “Items with Carrying Value Exceeding Acquisition Cost” and “Items with Carrying
Value not Exceeding Acquisition Cost.”

77

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 sheet are as follows:
As of March 31, 2022
Millions of
U.S. Dollars
Millions of Yen
Other Securities

145,484

1,188

Other Money Held in Trust(1,375)(11)

Net Unrealized Gains

144,109

1,177

Deferred Tax Liabilities

39,673324

Net Unrealized Gains(Prior to Equity Method Adjustment)

104,436

853

Non-Controlling Interests’ Portion－－

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

104,436853

Net Unrealized Gains

Note:
Translation adjustments of foreign currency-denominated stocks and other equity securities, with no market prices, and Unrealized
Gains (Losses) on investment in investment partnerships are included in “Other Securities” within “Net Unrealized Gains(Losses).”
As of March 31, 2021
Millions of Yen
Other Securities

428,582

Other Money Held in Trust(1,969)Net Unrealized Gains

426,613

Deferred Tax Liabilities

118,718

Net Unrealized Gains(Prior to Equity Method Adjustment)

307,894

Non-Controlling Interests’ Portion－

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

Net Unrealized Gains

307,894

Note:
Translation adjustments of foreign currency-denominated other securities where there is significant difficulty in determining fairvalue are included in “Other Securities” within “Net Unrealized Gains (Losses).”7829. Derivatives:
1. Derivative transactions to which hedge accounting is not applied
The following tables summarize the notional amount 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 consolidated balance
sheet date, which are classified by types of financial instruments. Please note that the notional amount in themselves do not reflect the market risk
associated with the Bank’s derivative transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2022
Millions of Yen
Notional Amount(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－Fixed Rate Receivable/Floating Rate Payable

3,847,075

3,218,135

6,620

6,620

Floating Rate Receivable/Fixed Rate Payable

3,924,176

3,068,971(6,479)(6,479)Floating Rate Receivable/Floating Rate Payable

80,75072,750

63

63

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

466,000

299,800

(71)

(71)

Bought442,200

303,500

855

17

987

149

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

Interest Rate Swaps:

Fixed Rate Receivable/Fixed Rate Payable
Interest Rate Options:

Others:

Total



79

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

Total
Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－Fixed Rate Receivable/Floating Rate Payable

31,43826,29854

54

Floating Rate Receivable/Fixed Rate Payable

32,06825,079(52)(52)

Floating Rate Receivable/Floating Rate Payable

659

594

0

0

Fixed Rate Receivable/Fixed Rate Payable

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

3,808

2,449

(0)

(0)

Bought

3,613

2,480

6

0

8

1

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

Interest Rate Swaps:

Interest Rate Options:

Others:

Total

Note:
Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.

80As of March 31, 2021
Millions of Yen
Notional Amount(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－Fixed Rate Receivable/Floating Rate Payable

4,927,409

3,489,591

69,50869,508Floating Rate Receivable/Fixed Rate Payable

4,741,064

3,459,445(70,103)(70,103)

Floating Rate Receivable/Floating Rate Payable

95,08080,750

73

73

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

554,540

352,000

210

210

Bought582,500

376,400(802)(1,996)(1,112)(2,306)

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

Interest Rate Swaps:

Fixed Rate Receivable/Fixed Rate Payable
Interest Rate Options:

Others:

Total

Note:
Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.

81

(2) Currency-Related Transactions
As of March 31, 2022
Total Notional
AmountMillions of Yen
Notional Amount(Over 1 Year until
Fair Value
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

30

30

0

0

Currency Options:Over the Counter Transactions
Currency Swaps:
Forward Foreign Exchange Contracts:
Sold275,560－(11,888)(11,888)

Bought223,050

－

8,493

8,493

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－Currency Options:

Others:

Total

82



－

－

(3,394)(3,394)

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

Total Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

0

0

0

0

Sold

2,251

－

(97)

(97)

Bought

1,822

－

69

69

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

(27)

(27)

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

Currency Options:

Others:

Total

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.
2. Fair value and Net Unrealized Gains (Losses) on currency swaps are stated at the amounts after deduction of principal.

83

As of March 31, 2021
Total Notional
AmountMillions of Yen
Notional Amount(Over 1 Year until
Fair Value
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

2,608

44

34

34

Currency Options:Over the Counter Transactions
Currency Swaps:
Forward Foreign Exchange Contracts:
Sold247,652

1,772(6,517)(6,517)

Bought115,256

1,627

3,595

3,595

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－Currency Options:

Others:

Total

－

－

(2,887)(2,887)

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.
2. Fair value and Net Unrealized Gains (Losses) on currency swaps are stated at the amounts after deduction of principal.

(3) Stock-Related Transactions
Not applicable.

84

(4) Bond-Related Transactions
As of March 31, 2022
Millions of Yen
Notional Amount(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:
Sold

1,643

－

(2)

(2)

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

(2)

(2)

Bond Futures Options:Over the Counter Transactions
Bond Options:

Others:

Total

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

Total
Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:
Sold

13

－

(0)

(0)

Bought－－－－Bond Futures Options:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

(0)

(0)

Over the Counter Transactions
Bond Options:

Others:

Total

Note:
Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.

85

As of March 31, 2021
Millions of Yen
Notional Amount(Over 1 Year until
Fair Value
Settlement or Expiry)

Total
Notional
AmountNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:
Sold

1,511

－

0

0

Bought

302

－

(0)

(0)

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

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

Others:

Total

－

－

－

－

Note:
Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statement of income.

(5) Commodity-Related Derivative Transactions
Not applicable.

(6) Credit Derivative Transactions
Not applicable.

86

2. Derivative transactions to which hedge accounting is applied
The following summarizes the notional amount or the contracted principal equivalents, fair values and the valuation methods of the fair values of
the Bank’s derivative transactions that qualify for hedge accounting as of the consolidated balance sheet date, which are classified by types offinancial instruments and methods for hedge accounting. Please note that the notional amount in themselves do not reflect the market risk
associated with the Bank’s derivative transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2022
Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Items

Millions of Yen
Notional Amount(Over 1 Year until
Settlement or Expiry)

Total Notional
AmountInterest Rate Swaps
Fixed Rate Receivable/Floating Rate Payable

640,000

640,000(98)

Floating Rate Receivable/Fixed Rate Payable

2,837,500

1,981,584

44,730

Fixed Rate Receivable/Floating Rate Payable

－

－

－

Floating Rate Receivable/Fixed Rate Payable

1,035,638

1,017,638(40,633)

Interest Rate Swaps

Total

Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Fair Value

3,998

Items

Millions of U.S. Dollars
Notional Amount
Total Notional(Over 1 Year until
AmountSettlement or Expiry)

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Floating Rate Payable

5,230

5,230

(0)

Floating Rate Receivable/Fixed Rate Payable

23,187

16,193365

Fixed Rate Receivable/Floating Rate Payable

－

－

－

Floating Rate Receivable/Fixed Rate Payable

8,463

8,316

(332)

Interest Rate Swaps

Total

32

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted,
Other Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Loans and Bills Discounted, Held-to-Maturity Debt
Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the Industry Committee
Practical Guidelines No. 24.

87

As of March 31, 2021
Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Items

Millions of Yen
Notional Amount(Over 1 Year until
Settlement or Expiry)

Total Notional
AmountFair Value

Interest Rate Swaps
Fixed Rate Receivable/Floating Rate Payable

－

－

－

Floating Rate Receivable/Fixed Rate Payable

3,901,015

2,596,065(33,805)

Fixed Rate Receivable/Floating Rate Payable

－

－

－

Floating Rate Receivable/Fixed Rate Payable

1,046,891

1,040,819(57,195)

Interest Rate Swaps

Total(91,001)

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted,
Other Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Loans and Bills Discounted, Held-to-Maturity Debt
Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the Industry Committee
Practical Guidelines No. 24.

(2) Currency-Related Transactions
As of March 31, 2022
Millions of Yen
Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Notional Amount(Over 1 Year until
Settlement or Expiry)

Total Notional
Amount514,851

Fair Value

403,667(1,997)37,446－(1,679)－－－Forward Foreign Exchange Contracts:
Sold
BoughtTotal(3,677)
Millions of U.S. Dollars

Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Notional Amount(Over 1 Year until
Settlement or Expiry)

Total Notional
Amount4,207

Fair Value

3,298

(16)

Forward Foreign Exchange Contracts:
Sold

306

－

(13)

Bought

－

－

－

Total

(30)

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 Industry Committee
Practical Guidelines No. 25.
3. Fair value on currency swaps is stated at the amount after deduction of principal.

88As of March 31, 2021
Millions of Yen
Method for Hedge
Accounting
Basic Treatment

Items

Notional Amount(Over 1 Year until
Settlement or Expiry)

Total Notional
AmountCurrency Swaps

522,290

Fair Value

400,876(2,815)

Forward Foreign Exchange Contracts:
 Sold

626

㸫

(33)

 Bought

㸫

㸫

㸫

Total

(2,849)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 Industry Committee
Practical Guidelines No. 25.
3. Fair value on currency swaps is stated at the amount after deduction of principal.
(3) Stock-Related Transactions
Not applicable.

(4) Bond-Related Transactions
Not applicable.

30. Related Party Transactions:
For the Fiscal Year Ended March 31, 2022
There were no significant related-party transactions.
For the Fiscal Year Ended March 31, 2021
There were no significant related-party transactions.

31. Revenue Recognition:
Disaggregation of Revenue from Contracts with Customers is provided in Note 32.

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

89

(3) Amounts by Reportable Segment
For the Fiscal Year Ended March 31, 2022

(Millions of Yen)

Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers
Inter-segment
Total

212,986

36,674

249,660(8)

249,652

3,109

2,142

5,251

(5,251)－

216,095

38,816

254,911(5,259)249,652

Segment profit

34,0462,534

36,580(638)

35,942

Segment assets

43,757,754

262,701

44,020,455(88,659)

43,931,795

Segment liabilities

42,199,230

170,82142,370,052(34,586)

42,335,466

Depreciation
Interest Income

3,864
174,827

5,911
467

9,776
175,295

(0)
(96)

9,776
175,199

Interest Expenses

70,18034

70,214(30)

70,183

Income Taxes

10,815

1,183

11,998(101)

11,897

Increase in Tangible andIntangible Fixed Assets

4,810

1,935

6,745

(11)

6,734

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

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers
Inter-segment
Total

1,740

299

2,040

(0)

2,040

25

17

42

(42)

－

1,765

317

2,083

(42)

2,040

Segment profit

278

20

298

(5)

293

Segment assets

357,5852,146

359,732(724)

359,007

Segment liabilities

344,849

1,395

346,245(282)

345,962

Depreciation
Interest Income

31
1,428

48
3

79
1,432

(0)
(0)

79
1,431

Interest Expenses

573

0

573

(0)

573

Income Taxes

88

9

98

(0)

97

Increase in Tangible andIntangible Fixed Assets

39

15

55

(0)

55

Other items

Notes:
1. The “Other” is a business segment not included in our reportable segment and relates to businesses performed by consolidated
subsidiaries.
The Bank’s consolidated subsidiaries provide such financial services as brokerage & dealing, regional business supports operations,overseas business support, consumer credit guarantees, asset management, investment and M&A advisory operations, and dataprocessing services. Shinkin Regional Innovation Co., Ltd. was established on July 1, 2021 to provide regional business supports
operations, etc.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥638 million ($5 million) comprises reduction of ¥341 million ($2 million) on
profit attributable to non-controlling interests and ¥297 million ($2 million) on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥88,659 million ($724 million) comprises reduction of ¥44,295 million ($361
million) on eliminations relating to capital consolidation and ¥44,364 million ($362 million) on inter-segment eliminations, etc.
(iii) The adjustment for other items including reduction of ¥34,586 million ($282 million) on the adjustment of segment liabilities
comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the consolidated statement of income.

90For the Fiscal Year Ended March 31, 2021

(Millions of Yen)

Reportable segment
Other

Shinkin Central Bank
business

Total

Amount presented
in the consolidated
financial statements

Adjustment

IncomeExternal customers
Inter-segment
Total

224,31236,707

261,020(9)261,011

2,934

1,533

4,467

(4,467)

㸫

227,247

38,241

265,488(4,476)

261,011

Segment profit

29,5792,990

32,569(919)

31,649Segment assets

43,654,176

272,879

43,927,055(83,526)

43,843,528

Segment liabilities

41,963,346

183,520

42,146,866(30,659)

42,116,207

Depreciation
Interest Income

4,934
174,728

5,325
605

10,259175,333(0)(171)

10,259175,162Interest Expenses

83,92048

83,968(38)

83,930

Income Taxes

10,201

1,358

11,560(174)

11,385

Increase in Tangible andIntangible Fixed Assets

4,343

3,418

7,761

㸫

7,761

Other items

Notes:
1. The “Other” is a business segment not included in our reportable segment and relates to businesses performed by consolidated
subsidiaries.
The Bank’s consolidated subsidiaries provide such financial services as brokerage & dealing, overseas business support, consumer credit
guarantees, asset management, investment and M&A advisory operations, and data processing services. Shinkin Singapore Pte. Ltd. wasestablished on February 3, 2021 to provide overseas business support services.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥919 million comprises reduction of ¥390 million on profit attributable tonon-controlling interests and ¥529 million on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥83,526 million comprises reduction of ¥43,199 million on eliminations relating tocapital consolidation and ¥40,327 million on inter-segment eliminations, etc.
(iii) The adjustment for other items including reduction of ¥30,659 million on the adjustment of segment liabilities comprises
inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the consolidated statement of income.
(4) Disaggregation of Revenue from Contracts with Customers
For the Fiscal Year Ended March 31, 2022

(Millions of Yen)

Reportable segment

Investment Trust Commission

Shinkin Central
Bank business
5,297

Other

Total

6,687

11,984

Adjustment

Amount presented
on the consolidated
statement of income(2,908)

9,075

Trust Fees

1,921

㸫

1,921

㸫

1,921

Fund Transfer Operations Commission

1,648

㸫

1,648

(1)

1,646

Others

1,684

22,554

24,239(1,433)22,805

Revenue from Contracts with Customers

10,55029,242

39,792(4,343)35,449Other Ordinary Income

205,5449,574

215,118(916)

214,202

Ordinary Income

216,095

38,816

254,911(5,259)249,65291

(Millions of U.S. Dollars)
Reportable segment
Other

Shinkin Central
Bank business
Investment Trust Commission

Total

Adjustment

Amount presented
on the consolidated
statement of income

(23)

74

43

54

97

Trust Fees

15

－

15

－

15

Fund Transfer Operations Commission

13

－

13

(0)

13

Others

13

184

198

(11)

186

Revenue from Contracts with Customers

86

238

325

(35)

289

Other Ordinary Income

1,679

78

1,757

(7)

1,750

Ordinary Income

1,765

317

2,083

(42)

2,040

Notes:
1. “Investment Trust Commission” mainly arises from investment trust management services and is recorded under “Fees andCommissions” in the consolidated statement of income.
2. “Trust Fees” mainly arise from trustee services for trust assets and are recorded under “Trust Fees” in the consolidated statement ofincome.
3. “Fund Transfer Operations Commission” mainly arises from fund transfer services and is recorded under “Fees and Commissions” in the
consolidated statement of income.
4. “Others,” services not included in 1-3 above, mainly arise from contracted data processing services, etc. and are recorded under “Feesand Commissions” in the consolidated statement of income.

(Related Information)
For the Fiscal Year Ended March 31, 2022
1. Information by service(Millions of Yen)

Securities investment
operations
Income from externalcustomers

Lending operations

174,607

Other

15,759Total
59,285

249,652(Millions of U.S. Dollars)

Securities investment
operations
Income from externalcustomers

Lending operations

1,426

Other

Total

128

484

2. Information by geographic region(1) Income
Japan
104,932

Japan

United States
24,610EuropeUnited States

EuropeOther
15,632

104,476

Other

857
201
127
Note: Income from derivative transactions and Trading income are included in Other.

2,040(Millions of Yen)
Total
249,652(Millions of U.S. Dollars)
Total
853
2,040

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

92

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

IncomeName of customer
The Government of Japan

Income26,642(Millions of Yen)
Related segment
Shinkin Central Bank business

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

For the Fiscal Year Ended March 31, 2021
1. Information by service(Millions of Yen)

Securities investment
operations
Income from externalcustomers

Lending operations

188,775

17,565

Other

Total
54,671

2. Information by geographic region(1) Income
Japan

United States
EuropeOther
121,567
21,496
26,264
91,683
Note: Income from derivative transactions and Trading income are included in Other.

261,011(Millions of Yen)
Total
261,011(2) Tangible fixed assets
The Group’s tangible fixed assets located in Japan account for over 90% of the tangible fixed assets presented in the consolidated balance sheet.
Consequently, this information is omitted.
3. Information by principal customer
Name of customer
The Government of Japan

Income30,486(Millions of Yen)
Related segment
Shinkin Central Bank business(Information related to Impairment Losses of Fixed Assets by Reportable Segment)
Not applicable.
(Information related to Amortization of Goodwill and Balance of Unamortized Goodwill by Reportable Segment)
Not applicable.
(Information related to Accrual of Income from Negative Goodwill by Reportable Segment)
Not applicable.



93

33. Amounts per Share:

Yen
2022

U.S. Dollars
2022

2021

Net Assets per Share

292,802.41

320,620.85

2,392.76

Net Income per Share

5,041.19

4,401.33

41.19

－

－

－

Net Income per Share after Adjustment for Common
Share equivalents
Notes:
1. The basis for calculation of net assets per share is as follows:
2022

2021

2022

Total Net Assets

Millions of Yen

1,596,329

1,727,321

Millions of U.S.
Dollars

13,045

Amount Deducted from Total Net Assets

Millions of Yen

217,751

217,767

Millions of U.S.
Dollars

1,779

Non-Controlling Interests

Millions of Yen

12,626

12,642Millions of U.S.
Dollars103

Preferred Dividends

Millions of Yen

2,124

2,124

Millions of U.S.
Dollars

17

Dividend Attributable to SpecificCommon Shares

Millions of Yen

3,000

3,000

Millions of U.S.
Dollars

24

Distribution of Residual Assets
Millions of Yen
Attributable to Specific Common Shares

200,000

200,000

Millions of U.S.
Dollars

1,634

Millions of Yen

1,378,578

1,509,554

Millions of U.S.
Dollars

11,265

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

4,708,222

4,708,222－－

Number of General Common Share
Units

Unit

4,000,000

4,000,000－－

Number of Preferred Share UnitsUnit

708,222708,222－－

Net Assets at Fiscal Year-end Used to
Calculate Net Assets per Share* When calculating net assets per share, of dividend attributable to preferred shares, preferred dividends are deducted from total net assets
whereas participating dividends are not deducted from total net assets.
Dividend attributable to specific common shares and distribution of residual assets attributable to specific common shares are
deducted from total net assets, and the number of specific common shares is not included within the number of shares.

942. The basis for calculation of net income per share is as follows:
2022

2021

2022

Millions of Yen

35,942

31,649Millions of U.S.
Dollars

Amount Deducted from Profit Attributable
Millions of Yen
to Owners of Parent

2,124

2,124

Millions of U.S.
Dollars

17

Millions of Yen

2,124

2,124

Millions of U.S.
Dollars

17

Profit Attributable to Owners of Parent
Used to Calculate Net Income per Share

Millions of Yen

33,81729,525

Millions of U.S.
Dollars

276

Average Number of Share Units for the
Fiscal YearUnit

6,708,222

6,708,222－－

Average Number of General Common
Share Units

Unit

4,000,000

4,000,000－－

Average Number of Specific Common
Share Units

Unit

2,000,000

2,000,000－－

Average Number of Preferred
Share UnitsUnit

708,222708,222－－

Profit Attributable to Owners of Parent

Preferred Dividend

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

34. Subsequent Events:
Not applicable.

95Independent Auditor’s Report

The Board of Directors
Shinkin Central Bank
OpinionWe have audited the accompanying consolidated financial statements of Shinkin Central Bankand its consolidated subsidiaries (the Group), which comprise the consolidated balance sheet as
at March 31, 2022, and the consolidated statements of income, comprehensive income,changes
in net assets, and cash flows for the year then ended, and notes to the consolidated financial
statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2022, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on thesematters.

96

Reasonableness of determination of the borrower classification in light of the effect of the
COVID-19 pandemic and the appropriateness of the inputs applied to the cash flow estimate method
Description of Key Audit Matter

Auditor’s Responses

The Group extends loans to central and local
governments, public service corporations, as wellas domestic and overseas companies mainly
including listed companies, and recorded Loans
and Bills Discounted of ¥7,754,789 million,
representing 17.7% of total assets, on its
consolidated balance sheet as of March 31, 2022.

We performed the following audit procedures to
examine the reasonableness of determination of theborrower classification and the appropriateness of
the inputs applied to the DCF method, among
others:･ We evaluated the design and operating
effectiveness of the Group’s internal control over
It is possible that these loans may default due toassignment of internal credit ratings anddomestic and global economic situation,
determination of the borrower classification as
fluctuations in the real estate and stock markets,
well as application of the DCF method.
deterioration in the business conditions of･ We involved our credit risk assessment experts
individual borrowers, and the impact of stagnant
to examine the appropriateness of the credit
economy caused by the recent COVID-19
rating system used as the basis for determining
pandemic.
the borrower classification, by inspecting theConsequently, the Group calculates the amount of
results of the Group’s validation of its internal
expected losses from future defaults and records
rating model in the credit rating system andthem as Reserve for Possible Loan Losses.
comparing the internal rating model withindustry practices.
As of March 31, 2022, the Group had Reserve for
Possible Loan Losses of ¥25,312 million on its ･ In order to examine the reasonableness of theconsolidated balance sheet. The specific principles
assumptions made by the Group about thetiming when the COVID-19 pandemic will be
to calculate reserve for possible loan losses arecontained and the degree of the effect on thestated in Note 2 Significant Accounting Policies
borrower’s debt servicing capacity, we(9) Reserve for Possible Loan Losses and (19)Significant Accounting Estimates.
compared those assumptions with available
external information such as economic
The reserve for possible loan losses is calculated inforecasts published by public institutions.
accordance with the Group’s internal rules for selfassessment of asset quality and write- ･ In order to examine the appropriateness of theclassification of individual borrowers, we
offs/provision, and the calculation processincludes determination of the borrower
selected sample borrowers, taking into accountclassification in the self-assessment of asset
factors such as borrowers’ industry, repayment
quality based on the credit rating system, by which
history,financial
position,
operatingperformance and the degree of the impact of
the Group evaluates the borrower’s debt servicing
the COVID-19 pandemic on the borrowers’
capacity in terms of the borrower’s repayment
history, financial condition, business performance
debt servicing capacity, in addition to theand prospects thereof. For certain borrowers’
monetary impact of the migration of theloans, the reserve for loan losses is calculated usingborrower classification on the amount of thethe cash flow estimate method (hereinafter referredreserve for possible loan losses.
to as the “DCF method”).

97

In determining the borrower classifications, the ･ In order to comprehend the recent repayment
Group assumed that the impact of the stagnation inhistory, financial condition and operating
performance of the borrowers selected as
economic activities caused by the COVID-19
samples, we inspected the sets of thepandemic will persist until the end of the fiscal
documents used for self-assessment of asset
year ending March 31, 2023, that the pace ofrecovery in economic and corporate activities will
quality by the Group, which include but are not
be slow during that period, and that the businesslimited to explanatory materials on the
borrowers’ business profile, supporting
performance of certain industries, such as airlinesmaterials on historical experiences ofand natural resources, will be significantly affectedborrowing activities, supporting materials toover a certain period of time. The classification of
the borrower is determined considering such
understand the actual financial condition,
factors as whether their future performance isfinancial statements and trial balances in light
expected to be significantly affected by theseof the available external information. In
assumptions. In applying the DCF method, theaddition, we made inquiries of the Credit
reserve for loan losses is calculated based on the
Planning & Supervision Division as necessary.
key assumptions of the repayment plan prepared by･ In order to examine the reasonableness of thethe borrowers, their credit conditions, the Group’sGroup’s prospects of individual borrowers, welending policy, and inputs such as default rates
comprehended the Group’s analysis of theissued by the external rating agencies based on theextent of effect of the COVID-19 pandemic oncreditworthiness of the borrower.
the individual borrowers and the borrowers’
Prospects of such factors as the individual
repayment history. We then analyzed the trend
borrowers’ performance are highly uncertainfrom the past in respect of forecasts of major
because they are affected by changes in theincome statement items, such as net sales andbusiness environment surrounding the borrowers,
ordinary income, and major balance sheet
including the COVID-19 pandemic, and theitems, such as shareholders’ equity of theborrowers, in the Group’s analysis, andoutcome of the borrowers’ business strategies. If
compared the assumptions used in these
the borrower classification is downgraded, thecredit cost may increase, significantly affecting theforecasts with the available external
information on the industry in which thefinancial performance and financial position of theborrower operates.
Group. In addition, since the various inputs used in
the DCF method cannot be objectively or uniquely･ In order to examine the appropriateness of thedetermined, there is a high degree of reliance onGroup’s assessment of the reasonableness andmanagement’s judgment.
feasibility of the repayment plan which
underlies the future cash flows used as inputs
Therefore, we have determined that thefor the DCF method, we compared thereasonableness of determination of theassumptions in the repayment plan withborrower classification and theavailable external information and the Group’s
appropriateness of the inputs applied to thelending policies, and compared the cash flows
DCF method are a key audit matter.
estimated in the previous year with the actual
results.

･ In order to assess the reasonableness of theprobability of default used as an input for
the DCF method, we compared it with thedefault rates available in external
information. Also, we recalculated thepresent value of the cash flows using those
inputs.

98

Other Information
The other information comprises the information included in the Annual Report that contains
audited consolidated financial statements but does not include the consolidated financial
statements and our auditor’s report thereon. Management is responsible for preparation anddisclosure of the other information. The Corporate Auditors are responsible for overseeing theGroup’s reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information is materiallyinconsistent with the consolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Corporate Auditors for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting
principles generally accepted in Japan, matters related to going concern.
The Corporate Auditors are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
・ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
99

・ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Group to cease tocontinue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentationin accordance with accounting principles generally accepted in Japan.
・ Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance ofthe group audit. We remain solely responsible for our audit opinion.
We communicate with the Corporate Auditors regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide the Corporate Auditors with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the consolidated financial
statements in Japan, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Corporate Auditors, we determine those matters thatwere of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

100

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2022 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 1 to the consolidated financial
statements.
Ernst & Young ShinNihon LLC
Tokyo, Japan
September 21, 2022
/s/ Ryuji Takagi
Designated Engagement Partner
Certified Public Accountant/s/ Ken Komatsuzaki
Designated Engagement Partner
Certified Public Accountant/s/ Mitsutaka Kumagai
Designated Engagement Partner
Certified Public Accountant

101

Non-Consolidated Balance Sheet
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks
Call Loans
Receivables under Resale Agreements
Monetary Claims Bought
Trading Assets
Money Held in Trust
Securities
Loans and Bills Discounted
Foreign Exchanges Assets
Other Assets
Tangible Fixed Assets
Intangible Fixed Assets
Customers' Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets

102

Millions of
U.S. Dollars

Millions of Yen
2022

2021

16,755,378
1,329,496
31,999204,459
314,639
118,623
16,163,857
7,758,748
19,622
999,560
67,614
4,309
14,456(25,013)43,757,754

15,057,804
494,181365,228
180,309257,067
108,030
17,744,905
8,451,005
20,676917,274
66,472
4,863
15,981(29,625)
43,654,176

136,923
10,864
261
1,670
2,571
969
132,090
63,404
160
8,168
552
35
118
(204)
357,585

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

33,165,342
1,547,370
24,6804,167,880
5,637
1,191,685
1,719,877
1,159
42,821
242,749
1,296
93
27,224430
40,492
6,033
14,45642,199,230

33,787,924
1,774,270
29,2354,020,480
10,166
285,725
1,695,042
2,055
30,300180,768
1,361
91
26,362395
97,106
6,081
15,981
41,963,346

271,025
12,645
201
34,05946
9,738
14,054
9
349
1,983
10
0
222
3
330
49
118
344,849

Total Net Assets
Total Liabilities and Net Assets

1,558,523
43,757,754

1,690,829
43,654,176

12,736
357,585

2022

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

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

Millions of
U.S. Dollars

Millions of Yen
2022

2022

2021

174,827
15,786
7,112(169)(1,170)152,714
553
1,921
9,132
942
17,24812,023
216,095

174,728
17,597
7,747
80(1,224)150,048
477
1,258
7,842
856
31,82010,741
227,247

1,428
129
58
(1)
(9)
1,247
4
15
74
7
140
98
1,765

70,18029,222
1,163
1,771
7
55
1,480
36,39088
7,925
861,35331,398368
171,233

83,92033,297
1,696
1,950
60
152
3,287
43,255
221
7,040
155
60,821
32,426
3,101
187,466

573
238
9
14
0
0
12
297
0
64
0
501
256
3
1,399

44,86139,780366

10,459355
10,81534,0469,970
230
10,201
29,579

85
2
88
278

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

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



2022

4,758.56
3,000.00
1,500.00
6,500.00

U.S. Dollars
2021

4,092.69
3,000.00
1,500.00
6,500.00

2022

38.88
24.51
12.25
53.11

103

Statement of Trust Account (Consolidated)
Shinkin Central Bank As of March 31,
AssetsBeneficiary Rights in Trust
Securities Held in Custody Accounts
Monetary Claims
Other Claims
Due from Banking AccountCash and Due from Banks
Total Assets
Liabilities
Money Trust
Investment Trusts
Money Held in Trust Other than Money Trust
Securities Trusts
Monetary Claims Trusts
Composite Trusts
Total Liabilities

Millions of
U.S. Dollars

Millions of Yen
2022

2021

2022

2,248,331
63,000354,167
42,821166
2,708,486

1,654,325
63,000266,855
28
30,3001,188
2,015,700

18,373514
2,894

54,46028,961
7,557
70,100354,274
2,193,133
2,708,486

40,18257,362
8,561
77,200267,028
1,565,365
2,015,700

445
236
61
572
2,895
17,922
22,133(Note 1) Consolidated companies conducting trust business pursuant to the “Act on Engagement in Trust Business Activities by Financial
Institutions” comprised only the Bank in the fiscal years ended March 31, 2022 and 2021.
(Note 2) No trust assets were entrusted to other trust banks for asset administration as of March 31, 2022 and 2021.

104



349
1
22,133-

Organization (As of July 31, 2022)
General Meeting of Members
Corporate Auditors

Chief Secretary
Internal Audit DivisionCorporate Business Division I

General Affairs Division

Board of Directors
Chairman of the Board of Directors (part-time)
President and Chief Executive Officer

Legal & Compliance Office
BCP Management OfficeOsaka Corporate Business Division
AML／CFT Division
Personnel Division

Deputy President
Senior Managing Directors
Managing Directors

Corporate Business Division II

Nagoya Corporate Business Division

Strategic Planning Division
Investor & Public Relations Office

Tokyo Business Division

Shinkin Innovation Hub

Kanto Business Division I
SDGs Promotion Division

Directors

Financial Management Division

Kanto Business Division II

Risk Management Division
Credit Planning & Supervision Division

Hokkaido Branch

Trust Business Division
Consulting Promotion Division
Disaster Recovery & Reconstruction
Support Office*Tohoku Branch(Disaster Recovery & Reconstruction Support office)

Hokuriku Branch

Regional Innovation Division
Green Project Promotion Office
SME Business Division

Shizuoka Branch

Nagoya BranchInternational Business DivisionInternational Operations Center

Osaka Branch

Retail Business Division
Support & Advisory Division for Shinkin Banks
Portfolio Management Support Office

Kobe Branch

Okayama BranchTransfer & Clearing Division
Management Office for Domestic FundTransfer System
Operations Division

Chugoku Branch

Shikoku Branch

Shinkin Business Transformation Office
Operations Center

Fukuoka Branch

Systems Division
Systems Center
Corporate Business Promotion Division

Minami-Kyushu Branch

New York Representative Office

Project Finance OfficeTreasury Business Division

Hong Kong Representative OfficeTreasury Division
Credit & Alternative Investment Division

Shanghai Representative OfficeTreasury Operations Division

Bangkok Representative Office(Shinkin Central Bank) Research Institute* Located in the Tohoku Branch.

105International Directory (As of July 31, 2022)
Deputy President(in charge of Strategic Planning)
Hiroshi Sudo
Deputy President(in charge of Corporate Business Promotion/
Treasury Operations/Reserch Institute)
Hiroshi Nakahara
Managing Director(in charge of Treasury Business)
Takehiko Murotani
Managing Director(in charge of Treasury/
Credit & Alternative Investment)
Hideki Sasaki
Managing Director(in charge of International Business/
Overseas Offices)
Kenji Tanaka
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
International Business Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
International Operations Center(including Correspondent Banking)Address: 8-1, Kyoubashi 3-chome,
Chuo-ku, Tokyo 104-0031
Telephone: +81-3-5250-1700
Facsimile: +81-3-5250-1780
SWIFT: ZENB JPJT
Corporate Business Promotion Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7679
Facsimile: +81-3-3278-7045
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

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

New York

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

LondonShanghai
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: Yosuke Abe

ShanghaiHong Kong
Bangkok
Singapore

Bangkok
Bangkok Representative Office
Address: 19th Floor, 1903, Athenee Tower, 63
Wireless Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
Telephone: +66-2-168-8796
Facsimile: +66-2-168-8799
Chief Representative: Naotaka Yoshikawa

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

Hokkaido(Sapporo)

Singapore
Shinkin Singapore Pte. Ltd.
Address: 8 Marina View, #15-07B Asia Square Tower
1, Singapore
Telephone: +65-6360-9500
Facsimile: +65-6223-2558
Managing Director: Satoshi Igarashi

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

Tohoku(Sendai)

Credit & Alternative Investment Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7664
Facsimile: +81-3-3278-7044
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
Research Institute
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7671
Facsimile: +81-3-3278-7048

106

Hokuriku(Kanazawa)
Chugoku(Hiroshima)

Okayama Kobe
Osaka
Shikoku(Takamatsu)

FukuokaMinami-Kyushu(Kumamoto)Head Office

NagoyaShizuokaHead Office
BranchOffice/subsidiary

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

Shinkin Central Bank Annual Report 2022

Shinkin Central BankSCB supports the Sustainable Development Goals.

3-7, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028, Japan
https://www.shinkin-central-bank.jp/
Printed in Japan