Shinkin Central Bank

Annual Report 2016

Shinkin Central Bank

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

Printed in Japan

Annual Report

Shinkin Central Bank

2016

Shinkin Central Bank,
the Central Bank for
Shinkin Banks

International Directory (As of July 31, 2016)
Deputy President(in charge of Treasury Operations)Katsuo Akiyama
Senior Managing Director(in charge of Treasury/
Credit & Alternative Investment)
Hajime Hioki

As the central financial institution in Japan forthe cooperative regional financial institutions,known as shinkin banks, the Shinkin Central Bank
(hereinafter the SCB) occupies a well-establishedposition in Japan’s financial industry. Shinkin banks
currently hold funds totaling some ¥134 trillion(around US$1,195 billion).

Managing Director(in charge of Treasury Business)
Norihiro Takano
Managing Director(in charge of Strategic Planning/
International Business Solution/Overseas Offices)
Hiroshi Sudo
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
Director: Yuuji Takahashi
International Business Solution Division(including International Operations Center/
Correspondent Banking)Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
General Manager: Makoto Asahi
International Operations Center
Address: 8-1, Kyoubashi 3-chome,
Chuo-ku, Tokyo 104-0031
Telephone: +81-3-5250-1700
Facsimile: +81-3-5250-1780
SWIFT: ZENB JPJT
General Manager: Hideo Okada

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

Operational Policies

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

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

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

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

7. Nurture professionals and create an attractive workplace.
8. Enhance public trust in the SCB.

Corporate Data (as of March 31, 2016)
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, 2016)

Shinkin Central Bank (SCB)
June 1, 1950
1,199
14
5
¥34,644 billion ($307 billion)¥33,099 billion ($293 billion)¥690 billion ($6,131 million)¥90 billion ($807 million)

41.10%265
A1 (Moody’s)
A (S&P)
A+ (R&I)
AA (JCR)		* ‌The number of employees includes full-time Directors and Corporate Auditors.
Our overseas network includes Shinkin International Ltd., a subsidiary in London.
The total assets and total funds are the average balances for the year ended March
31, 2016.

Corporate Business Promotion Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7665
Facsimile: +81-3-3278-7045
General Manager: Naoki Hemmi
Treasury Business Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7642
Facsimile: +81-3-3278-7040
SWIFT: ZENB JPJT
General Manager: Kengo Kaji
Treasury Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7660
Facsimile: +81-3-3278-7043
SWIFT: ZENB JPJT
General Manager: Kenji Tanaka
Credit & Alternative Investment Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7664
Facsimile: +81-3-3278-7044
General Manager: Daigo Morishita

Treasury Operations Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7666
Facsimile: +81-3-3278-7046
SWIFT: ZENB JPJT
General Manager: Tomoaki Nishimura

New York

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

LondonOverseas 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: Tomohiro Kishi

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

Hokkaido(Sapporo)

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: Koichi Kawashima

Tohoku(Sendai)

Hokuriku(Kanazawa)
Chugoku(Hiroshima)

Okayama Kobe
Osaka
Shikoku(Takamatsu)

FukuokaMinami-Kyushu(Kumamoto)Head Office

NagoyaShizuokaHead Office
BranchOffice/subsidiary

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

81

Shinkin Central Bank Annual Report 2016

Financial Highlights (Non-consolidated Financial Summary)Millions of Yen
2016

For the years ended March 31,

Millions of US Dollars*

2015

2014

2016

2015

2014

$

$

For the Fiscal Year269,675 ¥278,236 ¥

280,971$ 2,393

Total expenses

213,797

197,230

232,305

1,897

1,641

2,256

Net income (loss)

40,87560,81735,396

362

506

343

Net business profit (loss)

50,321

74,28643,251

446

618

420

¥34,887,645¥33,269,249¥30,939,429$309,589$276,897$300,557

Loans and bills discounted

6,763,822

5,885,739

5,975,832

60,021

48,98658,051

Securities

17,839,405

19,132,160

18,450,501

158,305

159,235

179,235

Total liabilities

33,274,483

31,861,297

29,684,307

295,274

265,179

288,365

Deposits

27,236,823

25,571,093

23,689,313

241,696

212,826

230,127

Debentures

3,055,520

3,007,780

3,168,110

27,11425,03330,776

1,613,161

1,407,951

1,255,122

14,315

11,71812,192

Total income

¥

2,315

2,729

At the Year-end
Total assets

Net assets* ‌US dollar amounts are given for convenience only, converted at the rate of ¥102.94, ¥120.15, and ¥112.69 per US$1.00, the prevailing rate as of March 31, 2014, 2015, and 2016,
respectively. Total assets and total funds amounted to ¥34,644 billion ($307 billion) and ¥33,099 billion ($293 billion) of the average balance at the year ended March 31, 2016.

Contents
Financial Highlights (Non-consolidated Financial

Asset Quality ···························································· 12

Summary) ··································································· 1

Important Management Indices ································ 13

Message from the President and CEO ························ 2

Corporate Governance ············································ 14

Corporate Management and Auditors ························ 3

Strengthening the Compliance System ····················· 15Powerful, TSE-listed Financial Institution ···················· 4

Risk Management ······················································ 16Management Issues and Strategies ······························ 6Corporate Social Responsibility Activities ················ 19

Helping Recovery Following the Great East Japan

What Are Shinkin Banks? ········································· 20

Earthquake··································································· 8Preferred Shares ······················································· 22

Overseas Networks ··················································· 9

Financial Section ······················································· 23

Business Overview ··················································· 10

Organization / The SCB Group ································ 80

Capital Adequacy ······················································ 11International Directory ············································· 81

This material contains certain forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties, while actual results may materiallydiffer from those contained in the forward-looking statements as a result of various factors.
US dollar amounts are converted for convenience only, at ¥112.69 per US$1.00, the prevailing rate on March 31, 2016.

1

Message from the President and CEO
Looking Ahead to the Next 10 years

The Shinkin Central Bank, or SCB, serves
as the central bank for Japan’s 265 shinkinbanks—regional financial institutions, thatspecialize in operations with small andmedium-sized enterprises (SMEs).
Since its establishment in 1950, the SCB
has provided a wide range of financial services
in order to expand the potential of the shinkinbanking industry.

Fiscal 2015 Earnings Performance
In fiscal 2015 (ended March 31, 2016), we carried out measures to maintain a stable portfolio by selecting an appropriate asset allocation
and responding to changes in the market environment. Owing to these efforts, ordinary
income amounted to ¥55.9 billion, while net
income totaled ¥40.8 billion, in line with ourforecast of ¥40.0 billion announced at the startof the fiscal year.

Management Plan Progress, Support
for Disaster-stricken Regions
Fiscal 2015 was the final year of our Mediumterm Action Program 2013, covering fiscal 2013
through to fiscal 2015. Having designated fiscal
2015 as a year during which the SCB would takea solid step with shinkin banks to achieve true
regional revitalization, we implemented various
related measures. In particular, we expanded
and enhanced the functions and services tobetter enable shinkin banks to address issues
in SME financing and regional banking. For
example, we created seven programs to support SMEs at each stage of their development,
and made capital and funds available throughour “Shinkin no Tsubasa fund,” which we had
designed to support the creation, development, and growth of SMEs. We supported

2

regional revitalization efforts by shinkin banks,
and arranged a nationwide legal consulting service in cooperation with the Japan Federationof Bar Associations and other organizations.
This gave customers access to free legal advice
about wills and inheritance.
The SCB also continued to implement
initiatives to help communities rebuild in theaftermath of the earthquake and tsunami thatstruck Japan’s Tohoku region in 2011. We set
up the “Shinkin no Kizuna Reconstruction
Support Fixed-term Deposit II” as a means
to provide funds to the “Shinkin no Kizuna
Reconstruction Support Project,” which wasestablished through the East Japan Earthquake
Local NPO Support Fund, managed by theJapan NPO Center. We also supported volunteer activities in areas that had experienced
disaster-related destruction, while assisting shinkin bank customers in restarting andopening businesses through the “Shinkin no
Kizuna Reconstruction Support Fund.”disaster-stricken areas in the Tohoku region,
we are also focusing on the Kumamoto region.
We are promoting various measures to help it
rebuild and recover in the wake of a series ofearthquakes it experienced of similar force to
the Great East Japan Earthquake.

Strengthening Internal Management
The SCB will continue its efforts to achievethoroughgoing compliance with laws and regulations, strengthen corporate governance,and contribute to society, so as to bolster its
position as a well-respected and distinguishedfinancial institution.
Recognizing our crucial responsibilities as
the central bank of the shinkin banking industry, we will make every effort to facilitate theindustry’s continued development, thereby
contributing to national growth.
I would like to take this opportunity to
express my sincere gratitude to all our shareholders and other stakeholders for their continued understanding and support.

New Medium-term Management Plan
After reviewing our previous action programand considering changes in both domestic andinternational markets, we formulated a new
medium-term management plan, the “SCB
Medium-term Action Program 2016,” covering
fiscal 2016 through to fiscal 2018. Under thisnew action program, we see the three years
as a time in which to strengthen the foundations of the shinkin banking industry, so thatit can leverage its collective capabilities overthe next 10 years. The program comprises
three core action plans, through which wewill execute specific measures to increase thepresence of shinkin banks in regional communities, enabling them to help those communities grow sustainably. Further, along with ourongoing support for the reconstruction of
SCB Medium-term Action Program 2016

Core Plan 1

Core Plan 2

Assist shinkin banks
to enhancetheir customer relations

Assist shinkin banks
to enhance their
management stability

Core Plan 3
Enhance SCB’s
management stability

Mitsuo Tanabe
President and CEO
July 2016

Shinkin Central Bank Annual Report 2016

Corporate Management and Auditors

Koji Sato

Chairman of the Board of Directors

Mitsuo Tanabe

President and Chief Executive Officer

Katsuo Akiyama

Hiroyuki Shibata

Hajime Hioki

Chairman of the Board of
Directors (Part-time)

Directors

Yutaka Nunogaki

Keisuke Izutsu

Hiroyuki Hashimoto

Koji Sato

Toshio Muroi

Hiroshi Tsuboi

Yuzuru Nishino

Akihiro Hasui

President and Chief Executive Officer

Naoki Hemmi

Hiromi Nomura

Mitsuo Tanabe

Takehiko Murotani

Kenichi Toyozumi

Deputy Presidents

Directors (Part-time)

Corporate Auditor

Katsuo Akiyama

Masatoshi Masuda

Naoya Okajima

Hiroyuki Shibata

Toshihisa Sato

Deputy President

Deputy President

Senior Managing Director

Daisuke Watanabe

Corporate Auditors (Part-time)

Senior Managing Director

Hiroshi Hiramatsu

Takashi Abe

Hajime Hioki

Tetsuji Hara

Seiji Hino

Kazuo Kobayashi

Masamichi Narita

Managing Directors

Kazuhiko Jinbo

Akio Okuyama

Norihiro Takano

Kiyoshi Yamachi

Atsushi Kudo

Kenichiro Mimuro

Hiroshi Sudo

Masatoshi Takahashi
Minoru Kondo(As of July 31, 2016)3

Powerful, TSE-listed Financial Institution
The SCB has the dual roles of operating as both the central bank for shinkin banks,
and an independent financial institution.
Founded in 1950, the SCB is one of Japan’s leading financial institutions. It functions as both thecentral cooperative financial institution for all shinkin banks nationwide (see “What Are Shinkin
Banks?” on page 20) and an independent financial institution.
During the fiscal year ended March 31, 2016, the SCB’s funds, comprising deposits fromshinkin banks and funds acquired through the issuance of debentures, had an average outstandingbalance of ¥33,099 billion ($293 billion), and average total assets of ¥34,644 billion ($307 billion).

Overseas Networks and Correspondent Banks
As of March 31, 2016, the SCB had 236 overseas correspondent banks (those banks abroad withwhich the SCB has agreements for foreign exchange trading), with main branches in 49 countries.
Shinkin International Ltd. (London)
New York Representative Office

Europe76 banksAsia
103 banks

Middle East
2 banks

North America
26 banks
Japan 9 banks
Shanghai Representative OfficeHong Kong Representative Office
Bangkok Representative Office

Africa2 banks

Latin America
10 banks

Oceania
8 banks

The SCB’s Functions
The SCB raises funds mostly through deposits—received mainly from shinkin banks—as well as
by issuing debentures. It invests these funds in securities, the proceeds of which are used to extend loans, and draws on the resulting profits to support the activities of shinkin banks.
Total assets: ¥34,887 billion ($309 billion)
Domestic network: 14
Overseas network: 5
Number of employees: 1,199
Number of member shinkin banks: 265

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

Number of shinkin banks: 265
Total assets: ¥147,732 billion ($1,310 billion)
Number of branches: 7,379
Number of employees: 110,428
Number of members: 9,273,887

4

ShinkinBank(As of March 31, 2016)

As the Central Bank
(1) S upplementing Shinkin Banks’ Operations
Japan’s 265 shinkin banks play a key role insupporting regional economies by lending tolocal organizations and small and mediumsized enterprises (SMEs). With total depositsof ¥134 trillion ($1,195 billion), shinkin banks
occupy a very important position within
Japan’s overall financial sector.
As the central financial institution for theshinkin banking industry, the SCB responds
to changes in the operating environment ofshinkin banks. The changes include increasingly sophisticated and diverse customer
needs, intensified competition with other sectors of financial institutions, and demands forever more stringent management control systems.
The SCB provides support for shinkinbanks’ financial services through the shinkinbanks’ network, activities in support ofregional development, and management of
SMEs’, businesses, as well as over-the-countersales of investment trust fund products. Further, the SCB provides support in the areasof asset liability management (ALM) and marketable securities portfolio analysis to help
shinkin banks raise profitability and strengthen
their risk management systems.
Just as the Bank of Japan acts as a clearing house for domestic exchange transactions
among banks, the SCB serves as a clearing
house for shinkin banks. Thus, for the year
ended March 31, 2016, the SCB settled domestic exchange transactions for a total value of¥246 trillion ($2,186 billion). Moreover, the
SCB acts as the intermediary in settling utility
bills handled by shinkin banks.
The SCB also supports other shinkinbanks’ operations. In addition to supplementing international foreign exchange operations,
the SCB has been supplementing shinkinbanks’ lending operations, by commissioning
shinkin banks to lend to local SMEs and business owners who are their customers.
In this way, the SCB is further reinforcing
its supporting role in areas in which it is either
difficult or inefficient for shinkin banks to provide services as individual institutions.

Shinkin Central Bank Annual Report 2016(2) Enhancing Industry Creditworthiness
The SCB acts as a consultant for the shinkinbanking industry, as it lends proactive support
to the management of shinkin banks and provides
function such safety nets as the “Shinkin BankManagement Reinforcement System” and the“Shinkin Bank Mutual Funding Support System.”
The SCB works to maintain and enhance thecreditworthiness of the shinkin banking industry by operating the “Shinkin Bank Management
Reinforcement System” consisting of “Management analysis system,” “Management advisorysystem” and “Capital reinforcement system.”
In recent decades, Japanese financial institutions have experienced several major crises,
including the collapse of the country’s asset bubble in the 1990s and, more recently, the global
financial crisis triggered by the Lehman Brothers
bankruptcy. During such unsettling periods forthe financial system, the SCB’s financial functions
have played a crucial role in maintaining confidence in the shinkin banking industry and contributed to the stability of regional economies.

As the Independent Financial Institution(1) Institutional Investor
Looking at the average balance for the year
ended March 31, 2016, the SCB had assets
under management of ¥34,406 billion ($305
billion). Of this, it invested ¥17,719 billion($157 billion) in securities—as government
bonds, municipal bonds, corporate bonds,
and foreign securities—and ¥9,895 billion($87 billion) in short-term money markets.
As one of Japan’s leading institutional
investors, the SCB manages a vast amount ofmoney in domestic and international markets.
(2) Comprehensive Financial Services Provider
The SCB conducts deposit-related and lending
operations—the core functions of a financial
institution—issues debentures, and conducts
foreign exchange operations.
It also undertakes, either itself, or
through its subsidiaries, auxiliary operations,such as underwriting public bonds, handlingprivate placement bonds, and issuing personalloan guarantees, as well as peripheral operations, including the provision of trusts, securities, financial advice, investment trust funds,
defined contribution pensions, venture capital, and M&A-related advice.
(3) Contributor to Regional Development
The SCB provides loans to community organizations, locally based companies, and publicfinance initiatives for the purpose of helping
develop and revitalize communities all overJapan.It supports shinkin banks in their efforts
to resolve issues confronting communities
and SMEs by providing regional revitalizationrelated information. This includes how to add
value to locally made products, expand sales
channels for such products, and boost tourism, along with programs to support SMEs ateach stage of development—establishment,
growth, re-establishment, and restructuring.
The SCB thus contributes to regional
communities together with sinkin banks.

The Shinkin Bank Management Reinforcement System

Management analysis system

ShinkinCentralBankManagement advisory system

Shinkinbanks

Capital reinforcement system

Management analysis system

Shinkin banks submit materials on their operating and financial conditions, on the basis of which the SCB conducts
management analyses. It identifies those shinkin banks that would benefit from management consultations. Whencertain standards apply, the SCB also conducts more detailed analyses.

Management advisory system

The SCB is a management consultant for shinkin banks that accept consultations and meet certain standard. The
consulting covers everything from overall management to individual issues and is designed to reinforce shinkin banks’management capabilities. Measures to resolve management problems are proposed, information and good practices
are shared, and follow-up is provided.

Capital reinforcement system

The SCB provides capital for shinkin banks which it has provided consultations when analyses indicate this to benecessary. To prevent shinkin banks from facing moral hazard, the SCB provides capital only on receipt of a business
revitalization plan, and after subseguent management and operational guidance.

5Management Issues and Strategies
Initiatives for the Next 10 Years
In the current fiscal year, we commenced the “SCB Medium-term Action Program 2016,” a management plan spanning three
years from fiscal 2016 through fiscal 2018. The program follows the “SCB Medium-term Action Program 2013” and the “SCB
Medium-term Action Program 2010.” Under the most recent program, the SCB is working to achieve the objectives ofthree core plans, explained below.

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

Core Plan 1

Core Plan 2

Assist shinkin banks to enhancetheir customer relations

Assist shinkin banks to enhancetheir management stability

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

1. Support initiatives to boost earnings capacity
2. Support initiatives to enhance financial
soundness

2. Support initiatives for individual customers
3. Support initiatives for regional communities

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

Target Figures
Profit attributable toowners of parent:¥40 billion
Capital adequacy ratio(domestic standard):
At least 15%

Outlier ratio:
20% maximum
Overhead ratio:
45% maximum

6

Shinkin Central Bank Annual Report 2016

Assist Shinkin Banks to Enhance
Their Customer Relations◦Trust Business Services to Individuals◦Support SMEs during Development
The SCB will continue providing shinkin bankswith programs to support SMEs over each stageof their development—establishment, reestablishment, and restructuring. The SCB will also
step up support for shinkin banks that havepotential for leveraging consulting services.

To encourage individual customers to continue
conducting transactions over an extended
period, it is vital to establish relations withthem that go beyond a single generation. As
Japan’s population ages and property taxes arestrictly enforced, there is growing demand fortrust business services that facilitate the transfer of assets between generations. In responseto this situation, the SCB plans to commence
operating a trust banking business in 2017. It
will provide trust business services to individual customers through shinkin banks, which
will serve as agents to handle trust agreements.

◦Business Matching Services◦Investment Trust Sales, Defined

The SCB will assist shinkin banks to broaden
and enhance their business matching services,
enabling them to more effectively introduce
key products, professionals, and technologies
of one SME to other SMEs and large corporateclients. The SCB will also help shinkin banks
broaden their professional networks, forexample by organizing gatherings of executives
experienced in restructuring shinkin banks.

Contribution Pension plans
To better enable shinkin banks to respond toindividual customers’ needs for asset accumulation, the SCB will help shinkin banks expand
their lineups of Shinkin Investment Trust
products for over-the-counter sale. This will
include extending assistance for the handling ofrevisions to Japan’s Nippon Individual Savings
Account program. The SCB will also support
shinkin banks in promoting defined contribution pension plan services, based on reviews ofdefined contribution pension plan systems andwelfare pension fund systems.

The SCB will support the initiatives of shinkinbanks by assisting them to enhance their service lineups for SMEs and individual customers,
and to help revitalize regional communities.

◦Overseas Expansion
Responding to the needs of Japanese SMEs
operating overseas, the SCB has set up three
Asia offices, in Hong Kong, Shanghai, and Bangkok. The SCB also has established allianceswith seven banks, and seconds staff to some ofthose banks. Leveraging this international network, the SCB will more strongly help shinkinbanks support SMEs hoping to enter overseas
markets and increase their sales channels.
Bank of China
Established a business alliance in May 2011

JETRO Tokyo Head Office
SCB International
Business Solution Division

Beijing

SCB Hong Kong Representative Office
Set up in November 1994

The Bank of East Asia

Shanghai

Established a business alliancein November 2013
Hong Kong
Hanoi

Tokyo

SCB Shanghai
Representative Office
Set up in September 2004

Bank of Communications
Established a business alliance inDecember 2010

Bank of Shanghai

Bangkok

Established a business alliance in
October 2014
Ho Chi Minh

JETRO HO CHI MINH Office

Joint Stock Commercial Bankfor Investment andDevelopment of Vietnam
Established a business alliance inApril 2013

Jakarta

SCB Bangkok
Representative Office
Set up in October 2012

Maybank Indonesia
Established a business alliance in July 2012

SCB office

Alliance member

Bangkok Bank
Established a business alliance in
October 2010

◦Initiatives for Regional Revitalization
As community-based financial institutions,shinkin banks are expected to proactively
contribute to regional revitalization. To support such efforts, the SCB will provide shinkinbanks with the support package categorizedaccording to the issues the regions face, suchas the need to add value to locally made products, expand sales channels for such products,
boost tourism, and promote urban development. The SCB will also continue offering
regional revitalization consulting services
to shinkin banks and simulate to help themunderstand the composition of industries andpopulation trends in their service areas.
Assist Shinkin Banks to Enhance
Their Management Stability
The SCB will help shinkin banks enhance theirfinancial management by supporting theirefforts to deal with the challenges of attaining
higher earnings capacity and greater financial
soundness.

◦Initiatives to Boost Earnings Capacity
The SCB recognizes that for shinkin banks tomore effectively invest the deposits they holdfor customers, their investment tools must be
diversified and made more advanced. Therefore, the SCB plans to leverage the trust banking business to develop investment products
for shinkin banks. Further, to facilitate cooperation among shinkin banks at the district
and prefectural levels, to improve operational
efficiency and reduce costs, the SCB will continue compiling and sharing information on
instructive cases of collaborative business initiatives and marketing campaigns.
◦Initiatives to Enhance Financial Soundness
The shinkin banking industry's operating environment is expected to change. Therefore,
the SCB will help shinkin banks enhance theirfinancial management analysis capabilities
based on projected trends. It will also steadily
expand its support of human resources development by, for example, dispatching the professionals needed by shinkin banks.
Enhance SCB’s Management Stability
In order to make steady progress in carrying out the first and second core plans of the“SCB Medium-term Action Program 2016,”
the SCB will work to enhance its own financial
and earnings stability while promoting organizational reform and human resources development over the medium to long term.

◦Stable Earnings
The SCB aims to secure stable earnings bycontinuing investments in, for example riskdiversified funds, while enhancing its corporate banking functions.
◦Preparing for Stricter Financial Regulations
Ahead of the expected stricter financial regulations, the SCB intends to systematically devise
companywide countermeasures, while closely
monitoring all relevant regulatory trends.
◦Reforming Organizations
The SCB will set up a new framework for its
operations management so that it can carryout management strategies consistent with its
obligations as the central financial institution
for the shinkin banking industry. Further, theSCB will step up cyber-security countermeasures and enhance corporate governance inaccordance with its special role as the central
financial institution for shinkin banks.

7◦Developing Human Resources
The SCB will set up human resources development programs for each area of its operations
and provide training for specialized personnel. It will also continue its efforts to makeits workplace environment dynamic, giving
employees reason to find worth and pride in
their work, while raising motivation and ensuring that female employees can thrive on thejob.

The SCB Principle of Action
Whether the SCB will be able to realize thepolicies set out in the medium-term management plan depends on human resources. Oneof the action program’s plans aims to develop
human resources—people who take pride inworking for a central financial institution andhave a high level of professional expertise. To
cultivate pride and ambition among the SCB’s
directors and employees as members of thecentral financial institution for shinkin banks,
we formulated the SCB Principle of Action. All
SCB executives and employees are expected
to heed the principles, which are our unified
fundamental guidelines for decision-making
and behavior during the conduct of business
operations.

The SCB Principle of Action

As executives and employees of the central
financial institution for shinkin banks, we will
always conduct our business with pride, astrong sense of responsibility, and based on
the following guidelines.

Action Guidelines

1. Be customer oriented
From the perspective of the customers,
including shinkin banks, we should try toprovide optimum products, services, andfunctions.
2. Be innovative
We should be aware of issues and costconscious;
regardless of precedent, we should always
seek to improve our operations.
3. Be professional
We should work to improve our expertiseand skills in our specialties through continuous self-development.

Action Characteristic

1. Speed
2. Challenge
3. Basic

Helping Recovery Following the Great East Japan Earthquake
Since the earthquake and tsunami that struck
the Tohoku region in 2011, the shinkin banking
industry has been making coordinated efforts
to support the reconstruction of areas thatsustained major damage. Shinkin banks remaincommitted to leveraging their ties in the industry to provide a cross-section of support until
the region has made a genuine recovery.

Donations through Bank Accounts
Since fiscal 2011, the SCB has been invitingbank account holders to donate a percentageof their deposits to help support the reconstruction of disaster areas. Over the past five
years, about ¥1.3 billion has been donatedfrom accounts holding deposits of some¥550.0 billion.
Meanwhile, in fiscal 2014 and fiscal 2015,
deposits in the “Shinkin no Kizuna Reconstruction Support Fixed-term Deposit”—handled
by shinkin banks nationwide—reached some¥194.7 billion, of which about ¥400 million
was donated to the “Shinkin no Kizuna Reconstruction Support Project.” This project wasestablished for the purpose of providing mental
health care to disaster victims and helping themrebuild their lives. About ¥200 million in subsi-

8

dies was given to NGOs for 64 related projects,
and the provision of more financial support isplanned for fiscal 2016 and fiscal 2017.

Partnership in the Tohoku Region
The SCB is involved in the New Tohoku Partnership Promotion Committee, set up by
Japan’s Reconstruction Agency. As a member of the committee’s Finance Network for
Reconstruction as well as the Distribution
Channel Development Support Team, the
SCB shares information on reviving industries,
exchanges ideas regarding general issues, andhas been compiling instructive cases related to
the financing of reconstruction.

Shinkin Reconstruction FundThe SCB established the “Shinkin no Kizuna
reconstruction support fund” in December
2011, to support the revival of shinkin banks’customer businesses. At the end of March
2016, a total of ¥2,004 million had been committed for investment in 39 businesses in thedisaster area.

Supporting Shinkin Banks
Volunteer Activities
As part of its earthquake-related recovery
aid, since fiscal 2011, the SCB has been helping shinkin banks and related organizations
nationwide support volunteer activities.
About 2,300 executives and employees haveparticipated to date.
Shinkin executives and employees carrying out volunteer
activities in the Tohoku disaster area.

Shinkin Central Bank Annual Report 2016

Overseas Networks
The SCB has offices in New York, Hong
Kong, Shanghai, Bangkok, and London. Bycollecting and analyzing information on local
economies, financial markets, investment
environments, and consumer markets, theseoffices enable the SCB to support Japan’s
shinkin banks.
The overseas representative offices also
help Japan-side human resource development
programs by accepting trainees, visitors andmissions from shinkin banks.

New York Representative OfficeSince the Overseas Economic Institute of
the SCB opened its New York of f ice
i n N o v e m b e r 19 8 3 , t h e N e w Yo r k
Representative Office has been researching
US markets and assisting head office explore
new investment opportunities.
Taking advantage of its location at thecenter of global financial activities, the New
York Representative Office is well placed to
identify the latest financial market trends andobtain information vital to the SCB’s treasury
operations.
The New York office offers wide-ranging
support by providing shinkin banks with information on the fast-changing US economy andfinancial markets.

Hong Kong Representative OfficeSince a Hong Kong business office was set
up in November 1994, it has supported theactivities of shinkin bank customers in Asian
countries. This it has done by providing information such as that on local bank services,
legal systems, tax systems, and employment,
particularly for its customers in southern
China, Thailand, and the Philippines. The Hong
Kong office, meanwhile, provides shinkinbanks and their customers with economic andfinancial data, and information on the investment environment in Asian countries.

planning to expand, to Thailand and neighboring countries with information on the relevant
economic and financial conditions, the investment and financing environment, as well as local
laws, taxation, and employment. The office alsooffers advice and a variety of support.

Shinkin International Ltd. (London)
This wholly owned subsidiary of the SCB, wasestablished in London in 1990 as an overseas
office to conduct securities business in order
to expand investment opportunities for theshinkin banking industry.
The company arranges eurobonds in astrong relationship with issuing bodies andoffers these securities to the shinkin banking
industry in close cooperation with Shinkin
Securities Co., Ltd., another subsidiary of the
SCB. The company also serves its customers’
secondary market-trading needs, and provides any market information required.

Supporting Overseas Expansion
Alliances with Asian Banks
As globalization of the international economy
advances, the SCB anticipates that SMEs—
shinkin bank customers—will increasingly
look to expand overseas and engage in trading activities, particularly in China and other
Asian countries.
Thus, the SCB supports shinkin bankcustomers that are expanding overseas, specifically through SCB offices in Hong Kong,
Shanghai, and Bangkok.
Since 2010, the SCB has been advancing
business alliances with local Asian banks, inorder to better support the business expansion in the region of shinkin bank customers.

Bangkok Representative OfficeThis office opened in October 2012, and provides shinkin bank customers expanding, or

Support for the Expansion ofOverseas Channels
Providing Information
In addition to printed materials, such as theInternational Business Support Office Monthly
and the China Business Guidebook, the SCB
provides shinkin banks and their customers with up-to-date information in a variety
of formats, including overseas investment
seminars. From time to time we also provide
investment climate survey reports that focus
on Asia, and the latest information from ouroverseas networks.
We have net works in Hong Kong,
Shanghai, and Bangkok, where we hold information exchange meetings for shinkin bankcustomers that are expanding overseas.
Trade and Investment Consultations
Staff with particular expertise hold phoneor interview-format trade and investment
consultations for shinkin bank customers
expanding or conducting business transactions overseas, and for those customers considering the prospects of overseas business orconducting new transactions.
In the area of trade and investment, staff
with expertise in overseas business operations offer support to meet individual customer needs. Information is provided on thelocal investment environment, local legal
issues, and domestic and overseas market
trends.

Expansion into Asia by Shinkin Bank Customers
South Korea: 99
China: 1,291

Shanghai Representative Office
Set up in September 2004, the Shanghai officehas been providing information relating toeconomic and financial conditions, the investment and loan environment, and the laws,
taxation regimes, and employment situationof each region. The office also has been offering support and detailed advice to shinkinbank customers expanding to China andthose planning such a move.

In October 2014, we concluded a businessalliance with Bank of Shanghai (China).

Hong Kong: 108
Taiwan: 90

Thailand: 462
Vietnam: 315

Philippines: 110

Business Allianceswith Asian Banks• Bangkok Bank (Thailand)• Bank of Communications (China)• Bank of China (China)• MayBank Indonesia (Indonesia)• Joint Stock Commercial Bank for
Investment and Development ofVietnam (Vietnam)• The Bank of East Asia (Hong Kong)• Bank of Shanghai (China)

Malaysia: 72
Singapore: 43
Indonesia: 170
Source: Eleventh Survey on the Overseas Business of Shinkin Bank Customers (2015)

9

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

Business Overview

5.1%¥835 Billion

1.3%¥214 Billion

59.5%¥9,767 Billion

9.5%¥1,558 Billion

Earnings Performance
In fiscal 2015 (ended March 31, 2016), the
SCB posted operating income of ¥269 billion($2,392 million), a decrease of ¥8 billion ($76
million), or 3.0%, compared with the previous fiscal year. This decrease was mainly the
result of a decline in interest income, whichreflected falling interest rates in the market
caused by the Japanese government’s ongoing
qualitative and quantitative easing policy andintroduction of negative interest rates. Operating expenses reached ¥213 billion ($1,896
million), up ¥16 billion ($147 million), or 8.4%,
year on year. This was mainly due to higher
financial derivative expenses following selloffs of hedged securities.
As a result of these and other factors,
ordinary income amounted to ¥55 billion($496 million), a year-on-year decrease of¥25 billion ($223 million), or 31.0%. Likewise,
net income totaled ¥40 billion ($362 million),
down ¥19 billion ($176 million), or 32.7%, year
on year.

Funding
In fiscal 2015 (ended March 31, 2016), the total
amount of funding increased ¥1,391 billion($12,346million) year on year, for a total of¥32,643 billion ($289,673 million). Of this figure, deposits received came to ¥27,236 billion($241,695 million), an increase of ¥1,671 billion ($14,831 million), which mainly comprised
fixed-term deposits from shinkin banks.
Debentures totaled ¥3,055 billion ($27,114
million), up ¥47 billion ($423 million) year on
year, and included ¥629 billion ($5,583 million) in debentures issued by the SCB in fiscal
2015. Finally, borrowed money amounted to¥2,350 billion ($20,862 million), a year-onyear decrease of ¥322 billion ($2,858 million),
which mainly comprised call loans.

Asset Management
The amount of assets under management in fiscal
2015 increased ¥1,612 billion ($14,309 million),or 4.8%, to ¥34,653 billion ($307,512 million).
Mainly due to lower government bondand foreign securities holdings, outstanding
invested securities decreased ¥1,292 billion($11,471 million), or 6.7%, to ¥17,839 billion($158,305 million) at fiscal year end.

As a result chiefly of an increase in loans
to national and government agencies and organizations, loans and bills discounted increased¥878 billion ($7,792 million), or 14.9%, during the year under review to ¥6,763 billion($60,021 million).
The outstanding amount of short-termmoney market assets rose ¥2,006 billion($17,804 million) year on year, or 25.9%, to¥9,736 billion ($86,401 million). This primarilyreflects Bank of Japan current deposit increases.
Securities
As of March 31, 2016, the outstanding amount of
securities was ¥17,839 billion ($158,305 million).
Government bonds, corporate bonds,
and other domestic securities accounted for¥14,010 billion ($124,327 million), and foreign
securities for ¥3,828 billion ($33,977 million).
In terms of foreign securities, the SCB
mainly invests in safe assets, which include
government-secured financial institution
bonds and government-agency bonds in major
developed countries.
To advance its diversified investment
portfolio, the SCB also invests in such risk
assets as stocks and investment trust funds
not subject to interest risk, while optimizing
its portfolio in response to shifts in the financing and investment environment.
The SCB also carries out interest rate
swaps and other derivative trading, to hedge
risks linked to assets under management.
Loans and Bills Discounted
The SCB conducts a variety of loan-related
business. As of March 31, 2016, the outstanding amount of loans and bills discounted was¥6,763 billion ($60,021 million). Of the total
amount, loans to shinkin bank customers
through those banks accounted for ¥255 billion ($2,267 million), while direct loans to suchparties as national and government agencies
and organizations, regional public corporations, and charitable organizations accountedfor ¥3,981 billion ($35,332 million). Directloans to business corporations accounted for¥1,994 billion ($17,698 million).

Ordinary Income and Net Income (Non-consolidated)

10(Millions of yen)

FY2011FY2012FY2013

FY2014FY2015

Ordinary income (loss)

35,575

41,16348,651

81,19855,971

Net income (loss)

29,00732,02435,39660,81740,8754.0%¥651 Billion

Breakdown of Funding*Government Bonds
Municipal Bonds
Corporate Bonds
Securities
Investment Trusts
Foreign Securities
Others7.2%(¥2,350 billion)
9.4%(¥3,055 billion)
19.7%¥3,238 Billion
0.0%(¥0.1 billion)
1.3%¥214 Billion

9.5%¥1,558 Billion

5.1%¥835 Billion83.4%(¥27,236 billion)
59.5%¥9,767 Billion

4.0%¥651 Billion

Deposits
Government Bonds
Negotiable deposits
Municipal Bonds
Debentures
Corporate Bonds
Borrowed money
Securities
Investment Trusts
Foreign Securities
OthersBreakdown of Asset Management*
0.2% (¥72 billion)

28.1%(¥9,736 billion)

0.7% (¥240 billion)
19.5%(¥6,763 billion)

Short-term market
operation
51.5%(¥17,839 billion)

Securities
Loans and bills
discounted
Trading assets
Money held in trust

Breakdown of Securities*
1.4%(¥243 billion)
21.5%(¥3,828 billion)
3.5%(¥627 billion)

55.1%(¥9,839 billion)
19.7%¥3,238 Billion
16.5%(¥2,942 billion)
5.1%
1.3%
¥835 Billion
2.0%¥214 Billion(¥357 billion)
59.5%¥9,767 Billion
9.5%¥1,558 Billion

Government bonds
Municipal bonds
Corporate bonds
Stocks & investment
trust funds
Foreign securities
OthersGovernment Bonds
Municipal Bonds
Corporate Bonds
Securities
Investment Trusts
Foreign Securities
OthersBreakdown4.0%
of Loans and Bills¥651 Billion
Discounted*
7.9%(¥532 billion)

National andgovernment
agencies andorganizations

3.8%(¥255 billion)
29.5%(¥1,994 billion)

53.7%(¥3,635 billion)

Regional public
corporations
and charitableorganizations
and others
Business
corporations

5.1%(¥346 billion)* As of March 31, 2016.

Agency loans
OthersShinkin Central Bank Annual Report 2016

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

Raising Capital
In order to improve and enhance its financial
position in preparation for possible changes
in the regulatory framework, the SCB raised¥200 billion ($1,774 million) in specific common shares from the shinkin banking industry,
with September 30, 2015 as the payment date.
Therefore, there is no dilution in the distribution of residual assets for the preferredshareholders, and we have no plan to takeanti-dilution measures.
* ‌If the capital increase by general common shares isdetermined, instead by specific common shares, a dilution
will be caused in the distribution of residual assets forpreferred shareholders. In this case, there is no change in
the normal policy to conduct anti-dilution measures.

Consolidated Capital Adequacy Ratio
The SCB’s consolidated capital adequacy ratio
at March 31, 2016, was 41.10%.
Equity capital, the numerator for calculating the capital adequacy ratio, amounted to¥1,824 billion ($16,193 million).
Risk assets, the denominator for calculating the capital adequency ratio, amounted to¥4,439 billion ($39,395 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.
By adopting integrated risk management
to assess capital adequacy, the SCB sets limits on the amount of risk according to theamount of capital allocated to each category
and thereby controls risks within these limits.
In order to assess the potential impacts ofshock on its capital, the SCB conducts stresstesting to estimate losses under various scenarios and the probability of their occurrence.
Risk limits and risk exposure are reported
to senior management at the Risk Management Committee and at other meetings. The
Risk Management Committee deliberates
measures in response to the results of capital
adequacy assessments, and implements measures as deemed necessary.

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

Capital Adequacy Ratio (Domestic Standard*)

Consolidated
Non-consolidated

Capital adequacy ratio
Amount of capital
Amount of risk-weighted assets
Capital adequacy ratio(%, billions of yen)
FY2011
32.43
1,379
4,253
32.54

FY2012
33.57
1,422
4,236
33.42

FY2013
37.86
1,692
4,469
37.84

FY2014
36.40
1,656
4,551
36.46

FY2015
41.10
1,824
4,439
42.38

* Figures for FY2011 and FY2012 are based on the previous standard; figures for FY2013 to FY2015 are based on the new standard.

11Asset Quality
Risk-Monitored Loans
The amount of risk-monitored loans as of theend of March 2016 was ¥135 million ($1million) for loans to bankrupt borrowers,¥5,517 million ($48 million) for delinquentloans, ¥24 million ($0.2 million) for loans past
due three months or more, and ¥30,912

million ($274 million) for restructured loans.
Total risk-monitored loans decreased¥6,509 million ($57 million) to ¥36,590 million($324 million) during the fiscal year.
The ratio of total risk-monitored loans tototal loans remained as low at 0.54%, and theRisk-monitored Loans (Non-consolidated) (%, millions of yen)
End of March
2015
123
11,49428
31,45243,099Loans to bankrupt borrowers
Delinquent loans
Loans past due three months or more
Restructured loans
Total risk-monitored loans (A)End of March
2016
135
5,517
24
30,912
36,590

Increase or
Decrease
12(5,977)(4)(540)(6,509)

584

310

(274)

5,885,739
0.73

6,763,822
0.54

878,083(0.19)End of March
2015
123
11,49428
31,45243,099End of March
2016
135
5,517
24
30,912
36,590Partial direct write-offs
Total loans (B)Ratio of total risk-monitored loans to total loans (%) (A/B)

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

(%, millions of yen)

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

Increase or
Decrease
12(5,977)(4)(540)(6,509)

584

310

(274)

5,885,741

6,763,824
0.54

878,083(0.19)

0.73

Asset Assessment under
the Financial Reconstruction Law
As of the end of March 2016, bankrupt andquasi-bankrupt assets amounted to ¥253
million ($2 million), doubtful assets ¥5,399
million ($47 million), and substandard assets¥30,936 million ($274 million).
Accordingly, the total amount of bad debts
under the Financial Reconstruction Law fell
¥6,509 million ($57 million) to ¥36,590 million($324 million).

The coverage ratio of bad debts (the totalof claims deemed collectible with collateral andguarantees and the allowance for possible loan
losses divided by total bad debts) was 68.73%.
Bankrupt and quasi-bankrupt assets arerecorded for the remaining amount after
deducting the amounts deemed collectible withcollateral and guarantees, while doubtful assets
are recorded for the loss-expected amount of

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

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

12

End of March2015
863
10,754
31,48143,0995,964,342

End of March
2016
253
5,399
30,93636,5906,832,763

Increase or
Decrease(610)(5,355)(545)(6,509)868,421

584

310

(274)

6,007,441
0.71

6,869,354
0.53

861,913(0.18)

30,26525,151
68.73(5,114)(1.49)

70.22

Shinkin Central Bank Annual Report 2016

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

Capital Adequacy Ratio (%)(As of September 30, 2015)

Nonperforming Loan Ratio (%)(As of September 30, 2015)42.57%
2.21%

16.42%

1.16%

12.16%

Long-term Credit Rating(As of July 31, 2016)

0.53%
SCB

City banks1 Regional banks2

SCB

City banks Regional banks

41.10%

0.54%(As of March 31, 2016)(As of March 31, 2016)

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

Note:
NPL ratio = total risk-monitored loans/total loans.
Source: Japanese Bankers Association

A1

A

A+

AA

Moody’s

S&P

R&I

JCR

Note:	Symbols indicating credit rating are assigned byeach rating agency.

The SCB promotes streamlining of management through ongoingsweeping restructuring.

Funds per Employee(As of September 30, 2015)

Ratio of Expenses (%)(As of September 30, 2015)(Millions of US dollars)

0.90%

205

0.75%

32
SCB

15

City banks Regional banks

0.08%
SCB

City banks Regional banks$223 million

0.08%

Notes:Note:(As of March 31, 2016)

1. Total funds = deposits + CDs + debentures
2. ‌US dollar amounts are converted for convenience only, at ¥120.15 and ¥119.96 per
US$1.00, the prevailing rate on September
30, 2015 and March 31, 2016, respectively.
Source: Japanese Bankers Association(As of March 31, 2016)

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

13

Corporate Governance
The SCB strives to maintain fairness andtransparency in its management by fortifying
our corporate governance system as we
implements 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 anever more distinguished financial institution
well respected in society.

porate auditors are able to utilize their professional knowledge and experience to conduct
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.

Institutional Structure

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

General Assembly of Representatives
The SCB is a cooperative financial institution
comprising 265 shinkin banks nationwide (asof March 31, 2016) that are its members andinvestors. The General Assembly of Representatives, equivalent to the general meetingof shareholders in a joint-stock company, isheld annually to elect directors and resolve
important issues.
Board of Directors
The SCB’s Board of Directors, comparable to
the Board of Directors in a joint-stock company, holds regular meetings nine times per
year, and makes decisions regarding importantbusiness matters.
The Board of Directors includes 12 fulltime directors, and 18 part-time directors. In
accordance with Article 32-4 of the Shinkin
Bank Act, the SCB’s Articles of Incorporation
stipulate that more than half the total numberof board members must be executive officersof shinkin banks. As such, part-time directors
are selected from among the presidents
or board chairs of shinkin banks from eachregion in Japan. There are no board members
corresponding to the outside directors as
defined by the Companies Act.
The SCB is confident that the appropriate
check on management provided by the parttime directors ensures that supervision andsafeguard functions are in place and have ahigh degree of objectivity and transparency inbusiness operations.
Corporate Auditors
The SCB’s corporate auditors, comparable
to the corporate auditors of a joint-stockcompany, audit the execution of duties by the
directors.
The SCB selects one full-time corporate
auditor and two part-time corporate auditorsfrom among the presidents and board chairsof shinkin banks, and two part-time corporate
auditors who are not executives of the SCB
or shinkin banks (non-member corporate
auditors), equivalent to outside corporate auditors as defined by the Companies Act. Nonmember corporate auditors are selected fromamong persons who meet the requirements
stipulated in Article 32-5 of the Shinkin Bank
Act. There are no stipulations of standards
or guidelines regarding independence for theselection of non-member corporate auditors.
The SCB is confident that non-member cor-

14Part-time Directors and Corporate Auditors
The General Affairs Division provides information and other support for part-time directors,
and the staff members exclusively assisting corporate auditors under their direction provide
the same for part-time corporate auditors, inorder to facilitate the timely and appropriate
execution of duties by part-time directors andcorporate auditors.

Checks on Business Operations

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

Improving Internal Control Systems

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

Shinkin Central Bank Annual Report 2016

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

Compliance System

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

accidents, the SCB has established the Risk
Management Committee.
7. In addition to conducting regular lectures
and training seminars for directors andemployees, each division and branch also
carries out its own training programs as
part of the SCB’s efforts to strengthen
compliance education.
8. The audit items used by the Internal Audit
Division include compliance-related items,
and internal audits include investigation ofwhether the compliance system is functioning adequately.
9. In cases of compliance violation, reports from the heads of the divisions or
branches concerned are promptly called
for, and appropriat 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. Pursuant to the Law on Sales of Financial
Products, the SCB has formulated andmade public its Financial Products Solicitation Policy. To ensure that solicitation iscarried out fairly, important points regarding a product must be explained to thecustomer at the time of sale.

12. Pursuant to the Law on Protection of Personal Information, the SCB has published
its Personal Information Protection Policy
on its Internet website. The SCB takes
necessary and appropriate safety measures
to protect personal information.
13. 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
Division or branch

Corporate
lawyerCorporate
Auditors

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

Deputy head ofcomplianceadministration

Head of complianceadministration(general manager ofLegal & Compliance Office)(general manager ofGeneral Affairs Division)

Supervisor of compliance

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

Compliance hotline

Employees

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

Risk Management Committee

Directors (full time)

Executive Committee
Board of Directors

15

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

In the wake of the global financial crisis, financial
institutions face significant changes in economic
and financial market conditions and otheraspects of their operating environment. To
respond promptly and appropriately to thesechanges, financial institutions require very finely
tuned risk management.
The SCB believes that its future depends onrisk management, and that a strong risk management system is a prerequisite for maintaining
sound management and securing adequate profits.
The SCB classifies risk 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. Risk
is managed by divisions that are independent
from those involved in business operations.
The Risk Management Division coordinates
the management of different risks to provide
comprehensive risk management.
The SCB has also established five crossorganizational bodies—the Risk Management
Committee ALM Committee, and Credit Committee, —to manage risk from a Bank-wide
perspective. These committees deliberate andmake decisions on specific issues relating to theirrespective risk management functions based on
the policies determined by the Board of Directors and the Executive Committee.
To ensure the effectiveness of its risk management systems, the SCB has also establishedthe Internal Audit Division—a body independent from its risk management systems—tomonitor the SCB’s risk management activities.

Integrated Risk Management

To manage risk in a comprehensive manner,
the SCB employs the integrated risk management method to cope with quantifiable risk.
Integrated risk management is a way tomanage its diverse risks by calculating themwith uniform criteria, such as the Value-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 risk limit amounts for operationalrisk and other types of risk.* Separately, theSCB estimates losses under various stressscenarios as part of its efforts to monitor
potential impacts on capital.
The quantit ative risk limits and re ser ve amount s for e ach f iscal ye ar are
determined by the Executive Committee
following deliberation by the Risk Management Committee. The Risk Management
Division, which oversees integrated risk
management, measures the amount of risk
exposure both during and at the end of eachmonth, to ensure that quantitative limits
for each type of risk are not exceeded. The
Risk Management Division provides reports
on risk status to senior management andrelated divisions through the Risk Management Committee.
* ‌With regard to subsidiaries within the SCB’s scope of
consolidation, the SCB monitors risk exposure at eachsubsidiary and allocates capital commensurate with theamount of risk. These allocations enable subsidiaries totake risks.

Risk Categories
Category
Market risk

Must becontrolled

Must beminimized

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

Liquidity risk

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

Credit risk

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

Operational risk

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

Administrative risk

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

Information
technology risk

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

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

16

Shinkin Central Bank Annual Report 2016

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

Executive Committee

Risk Management
Committee
Risk Management Division

Risk Management Division

Responsible for integrated risk
management

Responsible for overall management ofoperational risk

Risk Management Division(Assessment)

Operations Division

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

Systems Division

Credit Planning & Supervision Division
Responsible for credit assessment

Responsible for administrative risk
management

Responsible for liquidity risk
management

Responsible for the management of otheroperational risk

Responsible for credit control

Market Risk Management Framework
Board of Directors
Executive Committee
Decisions

Matters for discussion

Risk Management Committee
ALM Committee
Decisions

Responsible for market risk
management

Financial Management Division

Divisions stipulated by Risk
Management Division

Risk Management Division, Credit
Planning & Supervision Division

Risk Management Division

Risk Management Division

Responsible for information technology
risk management

Responsible for capital adequacy

ALM
Committee

CreditCommittee

Decisions

Reports, etc.

Divisions responsible formarket risk management

Matters for discussion

under various scenarios. These include theinterest rate risk amount calculated using
outlier standards; the possible stress loss
during a period of very high market volatility;
the basis-point-value (BPV) indicator, whichmeasures the potential change in portfolio
market value for every 0.01 percentage point
fluctuation in interest rates.
The status of these risk management
activities is reported to senior management at
biweekly meetings of the ALM Committee.

Liquidity Risk Management
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.
Based on risk status information—obtained

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

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

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

17

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

18

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

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

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

Information Technology Risk Management
The Systems Division takes charge of information technology risk management. It provides
control and guidance to divisions involved insystem development, operation, and utilization.
Recognizing t h at c yber at t ack s are
becoming increasingly sophisticated and ingenious, 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). The SCB also periodically conducts crisis response drills, based on
system failure crisis scenarios.
To prevent damage caused by system
failure, the SCB has issued a security policy
and undertakes internal communications
programs to ensure that all directors andemployees have a thorough understanding of
the SCB’s security policy.

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

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

Shinkin Central Bank Annual Report 2016

Corporate Social Responsibility Activities
The SCB aims to be a financial institution highly valued throughout society. To this end, it consistently strives to conduct its
duties according to management philosophy. Thus, as the central bank for all shinkin banks, the SCB supports the growth of theshinkin banking industry thereby contributing to nationwide economic development.
The SCB’s duties include assisting shinkin banks with regional and SME financing for the purpose of revitalizing regional economies, as well as maintaining and improving the credibility of the shinkin banking industry in order to ensure its continued growth.
The SCB believes that it should fulfill its corporate social responsibility, play a leading role as the central bank for shinkinbanks, and put into practice its management philosophy.
Regional Financial Institution

Community and Environmental

Assisting Local Society

Since the SCB’s funds are principally deposits received from many local shinkin banks,
we believe it appropriate that they be used
for the social and economic development oflocal communities.
To this end, the SCB is working on making available direct loans for local public agencies and business entities.
Further, in collaboration with shinkinbanks, the SCB contributes to the development and revitalization of local economies by
providing support for syndicated loans, private finance initiatives, and SMEs according totheir life stage, as well as promoting regional
industry research and local contributions.

As part of its efforts to contribute to local
communities, the SCB sponsors Metrolink Nihonbashi, to realize human- and environmentfriendly transportation in the Tokyo metropolitan government’s urban planning vision.
Metrolink Nihonbashi uses low-emission,
low-noise electric buses that provide a highdegree of accessibility through a low-floor design. The buses serve a circular route that runs
through Nihonbashi and Yaesu, near the SCB’s
head office, providing shoppers and people
working in the area with a transportation
option that is convenient and free of charge.
This service aims to revitalize the local area byhelping to improve the environment and by attracting shoppers and sightseers.
In addition, to promote the spread ofmusic and the arts, and contribute to the advancement of culture in society, the SCB is asponsor of the Tokyo Philharmonic Orchestra.

Shinkin banks are born of their communities,
and develop together with them. The “Shinkin
Bank Social Contribution Award” was createdin 1997 to help publicize the shinkin banking
industry’s dedication to community and social
contributions in a wide range of fields, and tofurther enhance the value of shinkin banks inthe community.
The “19th Shinkin Bank Social Contribution Award” elicited submissions for 583 social contribution initiatives in a wide range ofareas, from 164 shinkin banks and four relatedorganizations, between October 2015 and December 2015. Activities were evaluated on thebasis of continuity, social significance, integrity
with the community, and impact on the local
society. Awards were presented for activities at six shinkin banks, with individual prizes
awarded to three people, as good examples
for shinkin bank employees to emulate.

Provision of Financial Products
Charitable Trusts
Shinkin Trust Bank, Ltd., a wholly owned
subsidiary of the SCB, sets up and manages
charitable trusts on behalf of individuals andcompanies, in order to contribute to activities
for the public good, including environmental
conservation, scholarships, academic research, and subsidies for social welfare.
Socially Responsible Investing (SRI) and
Environment, Social and Governance (ESG) Fund
Shinkin Asset Management Co., Ltd., a wholly
owned SCB subsidiary, offers the Shinkin SRI
Fund, which focuses on the social responsibility of companies and investments.
SRI is based on the philosophy that“companies with the best potential for steady
growth are those that maintain sustainableeconomic growth by fulfilling their corporatesocial responsibilities.” Consequently, SRI
backs investment on the basis of research andanalysis carried out from a broad range ofperspectives, including financial, environmental, social, and ethical considerations.
Amid growing expectations that companies shall improve their governance functions,
Shinkin Asset Management began managing the
Shinkin ESG Special Fund in March 2016. Limited to qualified institutional investors, the fundprovides a source of information for making
investment decisions based on non-financial
factors, namely environmental performance,social contribution, and good governance.

Metrolink Nihonbashi

Shinkin Bank Social
Contribution Award

Contributing to SocietyWith branches and offices throughout Japanand overseas, the SCB aims to contribute not
only to local communities, but also to society
in the broadest possible way.
The SCB has become a supporter of theTable For Two program, a social contribution
project that began in Japan. Table For Two
enables consumers to contribute to famine
relief efforts in developing countries, while
enhancing their health. When a customer
purchases an item on the healthy menu offered at the SCB head office cafeteria, partof the price of the meal (¥20) is donated to adeveloping country.

19

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

Outline of Shinkin Banks

Japan’s 265 shinkin banks form an extensive
network, with approximately 7,400 locations
across the country, from Hokkaido in the northto Kyushu and Okinawa in the south.
Shinkin banks dedicate themselves to providing high-quality services to local residents,
as financial institutions that are deeply rooted
in their respective regions, and contribute toregional development.
Total deposits outstanding at 265 shinkinbanks as of March 31, 2016, reached approximately ¥134 trillion ($1,195 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, 2016)

Shinkin Bank Services

Shinkinbanks

City Banks

2,195

Shinkin Banks

1,195

Agricultural Cooperatives

Overseas expansion

Personal lending businessBusiness start-ups

Local-area revitalization

Shinkinbankcustomers

Hokuriku (16 banks)
Kinki (29 banks)

Hokkaido (23 banks)

Chugoku (21 banks)
Tohoku (27 banks)

Kyushu (28 banks)

Kanto (49 banks)

Tokyo (23 banks)
Tokai (38 banks)

Okinawa (1 bank)

Shikoku (10 banks)

Deposits Outstandingat Shinkin Banks

Loan and Bills Discounted
Outstanding at Shinkin Banks(Trillions of yen / billions of US dollars)
131.9(1,098)122.5(1,490)124.8(1,327)(Trillions of yen / billions of US dollars)

134.7(1,195)128.0(1,244)

63.7
(775)

63.6
(676)

2012

2013

64.4
(626)

65.8
(547)

67.3
(597)

569
173

Labor Credit Associations

166

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

20

Product and service expansion

851
2

Credit Cooperatives
Notes:

Succession support / M&As

$2,843

Regional Banks2Second-tier Regional Banks

Co-financing

Nationwide Network of Shinkin Banks (265 banks)(Billions of US dollars)
2Management improvement /enterprise renewal

2012

2013

2014

2015

2016

Note:	Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥82.22, ¥94.10, ¥102.94, ¥120.15
and ¥112.69 per US$1.00, the prevailing rateon March 31, 2012, 2013, 2014, 2015, and 2016,
respectively.
Source: The SCB.

2014

2015

2016

Note:	Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥82.22, ¥94.10, ¥102.94, ¥120.15
and ¥112.69 per US$1.00, the prevailing rateon March 31, 2012, 2013, 2014, 2015, and 2016,
respectively.
Source: The SCB.

Shinkin Central Bank Annual Report 2016

Capital Adequacy Ratio of Shinkin Banks
12.85%FY201213.04%

13.16%

13.17%FY2013

FY2014FY2015The capital adequacy ratio of shinkin banks asof March 31, 2016, decreased 0.09 percentage
point over the previous fiscal period to 13.08%(preliminary figure).
The ratio maintains a level that is not inferior to that of other business categories,
and is outperforming other domestic regionalbanks (10.27%) and second-tier regional banks(9.70%).

13.08%FY2016(Preliminary figure)

Source: The SCB.

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

Nonperforming-loan Ratioof Shinkin Banks (%)(as of March, 31, 2016)17.11%
6.80%

13.08%
10.27%

6.84%
6.45%

9.70%

5.91%
5.30%

Shinkinbanks

City banks(Preliminary figure)

Regional Second-tierbanks regional banks

FY2012FY2013

FY2014FY2015

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

FY2016(Preliminary figure)(Domestic)

Source: The SCB.

Difference between Shinkin Banks and Commercial Banks
Category

Shinkin Banks

Commercial Banks

Legal foundation

Shinkin Bank Act

Banking Act

Organization

Cooperative organizationFor-profit joint stock
corporations

Membership qualifications•T hose who have an address or location in theNoneregion• Those who have a business office in the region• Those who work in the region21Preferred Shares
The SCB’s Preferred Shares
The SCB issues preferred shares under the
Law Concerning Preferred Shares of Cooperative Financial Institutions. The preferredshares, which are regulated by the Financial
Instruments and Exchange Law, are issued tocomplement members’ (shinkin banks’) common shares and offered publicly to increase thenet worth of cooperative financial institutions.
Although the preferred shares do notcarry the voting rights that holders of common shares receive, the preferred shares havecertain advantages over common shares, suchas the guarantee of priority in the payment
of dividends.

Listing of Preferred Shares
The SCB has issued preferred shares since
fiscal 1995 and, 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, andbasically apply the same listing criteria anddisclosure rules with them.

Trading of Preferred Shares
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.

Dividends of Preferred Shares
The SCB’s basic policy is to pay stabledividends while securing sound management,enhancing internal reserves, and boostingearnings power.
The SCB’s preferred shares pay a dividend
to the holders at the end of March of every
fiscal year. As the rule of interim dividends is
not provided at the Law Concerning Preferred
Shares of Cooperative Financial Institutions,
the SCB does not pay interim dividends.
Dividends of preferred shares 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.
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 2015, the dividend for preferred

Composition of Preferred Shares (March 31, 2016)
・Number of Investors (21,053)
Foreign institutions
and others
46(0.2%)
Financial institutions
213(1.0%)
Other corporations
214(1.0%)

Other corporations
38,366(5.4%)(Closing price,yen)First day of listing (December 22, 2000) 200,500
Foreign institutions
and others
6,470(0.9%)

Highest price (March 15, 2006)

311,500

Lowest price (April 14, 2009)

102,400

Closing price (July 29, 2016)

226,400* The price of preferred shares is split-adjusted, reflecting
the stock split of preferred shares as at July 31, 2009.

Individuals
119,615(16.9%)
Individuals
20,569(97.7%)

22

Price of Preferred Shares*

・Number of Subscription (708,222)
Securities companies
7,221(1.0%)

Securities companies
11(0.1%)

shares was ¥6,500 ($57) per share, which
included a preferred dividend of ¥3,000 ($26)
and a participating dividend of ¥3,500 ($31).

Financial institutions
536,550(75.8%)

Financial Section

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

23Five-Year
Summary(Consolidated)
Five-Year Summary(Consolidated)(Millions of yen)
FY2011FY2012FY2013

FY2014FY2015

Total Income

395,277

408,917308,171

307,894

302,154

Total Expenses

357,662

367,469

255,548

223,028

242,097

Profit Attributable to Owners of Parent

29,80532,862

37,612

62,69642,781

Comprehensive Income

63,791

171,545

48,004

173,51218,303

Net Assets

1,092,354

1,249,229

1,276,826

1,433,756

1,632,969

Total Assets

30,248,492

30,410,702

31,184,564

33,516,073

35,092,905

Net Assets per Share (yen)229,768.12

263,016.93

268,795.17

301,997.98

301,512.71

Net Income per Share (yen)5,879.26

6,528.60

7,537.36

12,865.13

7,115.71

14,603

16,603

16,603

18,957

18,115General Common Shares

10,00012,00012,00014,00012,000 Specific Common Shares

－

－

－

－

1,512

4,603

4,603

4,603

4,957

4,603

Dividends

Preferred Shares

Notes:
1. Consumption tax and local consumption tax incurred by the Bank and its domestic consolidated subsidiaries are excluded
from transaction amounts.
2. Net assets per share is obtained by deducting preferred dividends from net assets and is divided by the number of shares atterm-end. This calculation complies with ASBJ (Accounting Standards Board of Japan) statement No. 2, September 13,
2013 “Accounting Standards for Earnings Per Share” and ASBJ Guidance No. 4, September 13, 2013 “Guidance on
Accounting Standards for Earnings Per Share”.
3. Net income per share is obtained by dividing the value obtained by deducting preferred dividends from current profit. This
calculation complies with ASBJ statement No. 2, September 13, 2013 “Accounting Standards for Earnings Per Share” andASBJ Guidance No. 4, September 13, 2013 “Guidance on Accounting Standards for Earnings Per Share”.
4. The Bank has applied the Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21,

September 13, 2013). As a result, the presentation method was amended and consolidated net income was changed
to profit attributable to owners of parent.

24Consolidated Balance Sheet
Consolidated Balance Sheet
Millions of Yen
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks (Note 2 (2), 9, 25)
Bills Bought and Call Loans (Note 25)
Receivables under Resale Agreements (Note 25)
Receivables under Securities Borrowing Transactions (Note 25)
Monetary Debts Purchased (Note 25)
Trading Assets (Note 3, 9, 25, 26)
Money Held in Trust (Note 25, 26)
Securities (Note 4, 7, 9, 25, 26)Loans and Bills Discounted (Note 5, 6, 9, 25)
Foreign Exchanges Assets
Other Assets (Note 9)
Tangible Fixed Assets (Note 8, 14, 24)
Intangible Fixed Assets (Note 24)
Deferred Tax Assets (Note 22)
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Total Assets

Millions of
U.S. Dollars(Note 1)
2016

2016

2015

9,113,465
339,088
14,999120,541
177,689
274,153
72,826
17,808,601
6,763,824
13,800106,115
74,342
16,596
3,637
239,266(46,043)
35,092,905

6,861,925
510,601
49,987
142,726
231,858
217,866
132,774
19,101,480
5,885,741
9,178
87,29475,67914,687
3,370
234,952(44,051)
33,516,073

80,872
3,009
133
1,069
1,576
2,432
646
158,03160,021
122
941
659
147
32
2,123
(408)
311,410

Liabilities and Net Assets
Liabilities
Deposits (Note 25)
Debentures (Note 12, 25)
Trading Liabilities (Note 10, 25)
Borrowed Money (Note 9, 11, 25)
Bills Sold and Call Money (Note 9, 25)
Payables under Repurchase Agreements (Note 9, 25)
Payables under Securities Lending Transactions (Note 9, 25)
Foreign Exchanges Liabilities
Other Liabilities (Note 13)
Reserve for Employee Bonuses
Reserve for Directors' Bonuses
Net Defined Benefit Liability(Note 23)
Reserve for Directors' Retirement Allowances
Reserve under Specific Law
Deferred Tax Liabilities (Note 22)
Deferred Tax Liabilities for Land Revaluation (Note 14)
Acceptances and Guarantees
Total Liabilities

27,214,026
3,052,920
129,461829,320
54,39763,804
1,414,550
256
310,449
1,765
80
40,419554
1102,554
6,109
239,266
33,459,936

25,555,350
3,000,680
146,314935,320
415,108
73,944
1,299,828
264
272,465
1,616
80
27,906524
1111,851
6,106
234,952
32,082,317

241,494
27,091
1,148
7,359
482
566
12,552
2
2,754
15
0
358
4
0
910
54
2,123
296,920

Net Assets
Common Shares and Preferred Shares (Note 21)
Capital Surplus
Retained Earnings
Total Shareholders' Equity
Net Unrealized Gains (Losses) on Other Securities (Note 22, 26)
Net Deferred Gains (Losses) on Hedging Instruments (Note 22, 27)
Land Revaluation Excess (Note 14)
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans (Note 23)
Total Accumulated Other Comprehensive Income
Non-controlling interests
Total Net Assets
Total Liabilities and Net Assets

690,998
100,678
520,923
1,312,600
477,944(168,850)
13,455(1,653)(10,270)
310,625
9,743
1,632,969
35,092,905

490,998
100,678
497,099
1,088,776
440,090(114,477)
13,457(1,285)(2,563)335,222
9,758
1,433,756
33,516,073

6,131
893
4,622
11,6474,241(1,498)
119
(14)
(91)
2,756
86
14,490311,410

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

25

Consolidated Statement of Income
Consolidated Statement of Income

Millions of
U.S. Dollars(Note 1)
2016

Millions of Yen
Shinkin Central Bank For the year ended March 31,
IncomeInterest Income:Interest on Loans and Discounts
Interest on Due from Banks
Interest on Bills Bought and Call Loans
Interest on Receivables under Resale Agreements
Interest on Receivables under Securities Borrowing Transactions
Interest and Dividends on Securities
OthersFees and Commissions (Note 15)
Trading Income (Note 16)
Other Operating Income
Other Income (Note 18)
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 15)
Trading Losses (Note 17)
Other Operating Expenses
General and Administrative Expenses
Other Expenses (Note 19)
Total Expenses

Profit before Income Taxes
Income Taxes (Note 22):
Current
Deferred
Total Income Taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

2015

2016
204,873
23,783
9,532
1,064
20
75
169,535
860
40,562
12,55537,5596,603
302,154219,763
27,652
7,481
1,107
58
279
181,761
1,422
37,122
18,83622,542
9,630
307,894

1,818
211
84
9
0
0
1,504
7
359
111
333
58
2,681

127,33144,591
10,561
10,933
690
239
4,478
55,835
14,24947,696
48,611
4,207
242,097

130,841
48,542
13,921
11,224731
97
2,237
54,086
12,363
231
29,092
46,1604,337
223,028

1,129
395
93
97
6
2
39
495
126
423
431
37
2,148

60,05784,866532

16,909(278)
16,631
43,425643
42,781

18,9882,594
21,58363,282586
62,696

150
(2)
147
385
5
379

2015
12,865.13
3,500.00
7,000.00

U.S. Dollars(Note 1)
2016
63.14
26.62
13.31
57.68

Yen
Net Income per Share (Note 30)
Dividend Declared per Share (General Common Shares)
Dividend Declared per Share (Specific Common Shares)
Dividend Declared per Share (Preferred Shares)
The accompanying notes are an integral part of these financial statements.

26

2016
7,115.71
3,000.00
1,500.00
6,500.00

Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income

Millions of Yen
Shinkin Central Bank For the year ended March 31,
ProfitOther Comprehensive Income (Note 20)
Net Unrealized Gains (Losses) on Other Securities
Net Deferred Gains (Losses) on Hedging Instruments
Land Revaluation Excess
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans
Comprehensive Income
Comprehensive Income attributable to owners of the parent
Comprehensive Income attributable to non-controlling interests

2016
43,425(25,121)37,854(54,372)(2)(368)(8,232)
18,30318,185118

2015
63,282110,229
153,676(45,041)
4
580
1,009
173,512
172,842
670

Millions of
U.S. Dollars(Note 1)
2016
385
(222)
335
(482)
(0)
(3)
(73)
162
161
1

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

27

Consolidated Statement of Changes in Net Assets
Consolidated Statement of Changes in Net Assets

Shinkin Central Bank For the year ended March 31,2016

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

Capital Surplus

490,998

Total Shareholders’ Equity

Retained Earnings

100,678

497,099

1,088,776

Fluctuation Amount during the Fiscal Year
Increase of Common shares

200,000

200,000

Surplus Dividends(18,957)(18,957)

Profit attributable to owners of parent

42,78142,781Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year

200,000-

23,824

223,824

Balance at End of Year690,998

100,678

520,923

1,312,600

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

440,090(114,477)

Land
Revaluation
ExcessForeign
Currency
Translation
Adjustments

13,457

Total
Remeasurements Accumulated
Otherof Defined
Benefit Plans Comprehensive
Income(1,285)(2,563)335,222

Noncontrollinginterests

9,758

Total Net
Assets1,433,756

Fluctuation Amount during the Fiscal Year
Increase of Common shares

200,000

Surplus Dividends(18,957)

Profit attributable to owners of parent

42,781Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year37,854(54,372)

(2)

(368)

(7,707)(24,596)(14)(24,611)

Total Fluctuation Amount during the Fiscal Year37,854(54,372)

(2)

(368)

(7,707)(24,596)(14)

199,212

Balance at End of Year477,944(168,850)

13,455(1,653)(10,270)

310,625

9,743

1,632,969

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

Capital Surplus

4,357

Total Shareholders’ Equity

Retained Earnings
893

4,411

9,661

Fluctuation Amount during the Fiscal Year
Increase of Common shares

1,774

1,774

Surplus Dividends

(168)

(168)

Profit attributable to owners of parent

379

379

Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year

1,774

-

211

1,986

Balance at End of Year

6,131

893

4,622

11,647

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

3,905

(1,015)Land
Revaluation
Excess119

Foreign
Currency
Translation
Adjustments
(11)

Total
Remeasurements Accumulated
Otherof Defined
Benefit Plans Comprehensive
Income(22)

2,974

Noncontrollinginterests

86

Total Net
Assets12,723

Fluctuation Amount during the Fiscal Year
Increase of Common shares

1,774

Surplus Dividends(168)

Profit attributable to owners of parent
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year
Total Fluctuation Amount during the Fiscal Year
Balance at End of Year

28

379
335

(482)

(0)

(3)

(68)

(218)

(0)

(218)

335

(482)

(0)

(3)

(68)

(218)

(0)

1,767

4,241

(1,498)

119

(14)

(91)

2,756

86

14,490Shinkin Central Bank For the year ended March 31,2015

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

Capital Surplus

490,998

Total Shareholders’ Equity

Retained Earnings

100,678

450,930

1,042,60787

87

451,017

1,042,694

Surplus Dividends(16,603)(16,603)

Profit attributable to owners of parent

62,696

62,696(11)(11)

Cumulative Effects of Changes in
Accounting Policies
Restated balance

490,998

100,678

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

46,081

46,081490,998

100,678

497,099

1,088,776

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

286,413(69,436)

Land
Revaluation
Excess13,441

Foreign
Currency
Translation
Adjustments(1,865)

Total
Remeasurements Accumulated
Otherof Defined
Benefit Plans Comprehensive
Income(3,489)225,064

Noncontrollinginterests

9,154

Cumulative Effects of Changes in
Accounting Policies
Restated balance

Total Net
Assets1,276,826
87

286,413(69,436)

13,441(1,865)(3,489)225,064

9,154

1,276,914

Fluctuation Amount during the Fiscal Year
Surplus Dividends(16,603)

Profit attributable to owners of parent

62,696

The revarsal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year(11)
153,676(45,041)

16

580

925

110,157603

110,761

Total Fluctuation Amount during the Fiscal Year

153,676(45,041)

16

580

925

110,157603

156,842

Balance at End of Year

440,090(114,477)

13,457(1,285)(2,563)335,222

9,758

1,433,756

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

29

Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Millions of
U.S. Dollars
Millions of Yen
Shinkin Central Bank For the year ended March 31,
Cash Flows from Operating Activities:
Profit before Income Taxes
Depreciation
Loss on Impairment of Fixed Assets
Increase (Decrease) in Reserve for Possible Loan Losses
Increase (Decrease) in Reserve for Investment Losses
Increase (Decrease) in Reserve for Employee Bonuses
Increase (Decrease) in Reserve for Directors' Bonuses
Increase (Decrease) in Net Defined Benefit Liability
Increase (Decrease) in Reserve for Directors' Retirement AllowancesInterest Income
Interest Expenses
Net Losses (Gains) on Securities
Net Losses (Gains) on Money Held in Trust
Net Losses (Gains) on Foreign Exchange
Net Losses (Gains) on Disposal of Fixed Assets
Net Decrease (Increase) in Trading Assets
Net Increase (Decrease) in Trading Liabilities
Net Decrease (Increase) in Trading Receivable
Net Increase (Decrease) in Trading Payables
Net Decrease (Increase) in Loans and Bills Discounted
Net Increase (Decrease) in Deposits
Net Increase (Decrease) in Debentures
Net Increase (Decrease) in Borrowed Money (Excluding Subordinated Borrowings)
Net Decrease (Increase) in Due from Banks (Excluding Due from Central Bank)Net Decrease (Increase) in Call Loans and Others
Net Decrease (Increase) in Receivables under Securities Borrowing Transactions
Net Increase (Decrease) in Call Money and Others
Net Increase (Decrease) in Payables under Securities Lending Transactions
Net Decrease (Increase) in Monetary Debts Purchased
Net Decrease (Increase) in Foreign Exchanges (Assets)
Net Increase (Decrease) in Foreign Exchanges (Liabilities)
Net Increase (Decrease) in Due to Trust Accounts
Interest Received
Interest Paid
Other, Net
Sub-total
Income Taxes Paid
Net Cash Provided by (Used in) Operating Activities

2016

2015

(Note 1)
2016

60,057
8,984
1,992
148
12,51229(204,873)
127,331(24,225)721
127,630
118(56,286)(16,853)(2,681)(7,054)(878,083)
1,658,676
52,240(6,000)252,517
206,500
22,185(370,851)
114,72154,169(4,622)(8)
2,963
288,660(158,037)(82,091)
1,180,492(17,962)
1,162,530

84,866
8,442
64
3,867
(5)
22
2
(507)
15
(219,763)
130,841(11,585)(1,465)(183,218)
128
19,394(12,222)(2,607)90,093
1,877,551(161,130)(2,000)594,734
104,743
30,66345,547333,169
37,724(3,965)(293)(61)
312,999(176,962)(19,646)
2,879,440(3,857)2,875,582

532
79
17
1
111
0
(1,818)
1,129
(214)
6
1,132
1
(499)
(149)
(23)
(62)
(7,792)
14,718
463
(53)
2,240
1,832
196
(3,290)
1,018
480
(41)
(0)
26
2,561
(1,402)(728)
10,475(159)
10,316

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(2,434,862)
1,150,848
2,492,517(40,000)
98,717(3,532)(3,061)117
1,260,745(4,093,109)
1,832,394
1,929,034
㻔㻞㻝㻘㻜㻠㻤㻕
㻞㻝㻘㻜㻜㻜
(5,876)(3,660)(341,264)(21,606)
10,212
22,118
(354)
876
(31)
(27)
1
11,187

Cash Flows from Financing Activities:
Repayment of Subordinated Borrowings
Proceeds from Increase of Shares
Dividends Paid
Dividends Paid to Non-controlling Interests
Net Cash Provided by (Used in) Financing Activities(100,000)
200,000(18,957)(133)
80,908(16,603)(66)(16,670)

(887)
1,774
(168)
(1)
717

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) )(1)
2,504,183
5,630,169
8,134,353

02,517,648
3,112,521
5,630,169(0)22,221
49,961
72,183

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

3030Notesto Consolidated
Notes to Consolidated
Financial StatementsFinancial 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 ¥112.69 to U.S.$1, theexchange rate prevailing as of March 31, 2016. The amounts in U.S.
dollars are presented in millions of U.S. dollars by rounding down
figures. As a result, the totals in U.S. dollars shown in the
consolidated financial statements do not necessarily agree with thesums of the individual account balances. The U.S. dollars amounts
are included solely for the convenience of readers outside Japan andthis translation should not be construed as representation thatJapanese yen amounts have been or could be readily converted,
realized or settled in U.S. dollars at that or at any other rates.

2. Significant Accounting Policies:(1) Principles of Consolidation
The consolidated financial statements include the accounts of the
Bank and its eight consolidated subsidiaries as of March 31, 2016
listed below:
Ownership
Location
Name
Percentage
The Shinkin Banks Information
System Center Co., Ltd.
Tokyo
 50.7%
Shinkin International Ltd.
London 100%
Shinkin Chukin Business Co., Ltd.
Tokyo
 100%
Shinkin Asset Management Co., Ltd.
Tokyo
 100%
Shinkin Trust Bank, Ltd.
Tokyo
 100%
Shinkin Securities Co., Ltd.
Tokyo
 100%
Shinkin Capital Co., Ltd.
Tokyo
 100%
Shinkin Guarantee Co., Ltd.
Tokyo
 100%
Unconsolidated subsidiaries
Shinkin no Kizuna Limited Liability Investment Partnership
Shinkin no Tsubasa Limited Liability Investment Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because their total assets, total income, net income(amount based on the equity method), retained earnings (amountbased on the equity method) and accumulated other comprehensive
income (amount based on the equity method) are immaterial and do
not hinder a rational judgment of the Bank’s financial condition andresults of operation when excluded from the scope of consolidation.
The fiscal year and the closing date thereof for the financial
statements of the consolidated subsidiaries are in agreement withthose of the Bank, except for Shinkin International Ltd., which has afiscal year ended on December 31. For the consolidation of thesubsidiary, the Bank makes appropriate adjustments for any materialtransactions subsequent to December 31.
All significant intercompany accounts and transactions havebeen eliminated in consolidation. The Bank’s share of net assets ofsubsidiaries is valued at fair value on acquisition. Minority interests
in net assets of subsidiaries are valued at fair value on acquisition in
the consolidated financial statements. The excess of the cost over thefair value of the underlying net equity in subsidiaries on acquisitionis expensed when incurred.
The application of equity-method to unconsolidated subsidiaries 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 Limited Liability Investment Partnership
Shinkin no Tsubasa Limited Liability Investment Partnership
Unconsolidated subsidiaries that are not accounted for by the equity
method are excluded from the scope of equity method because theireffect on the accompanying consolidated financial statements, interms of net income (amount based on the equity method) andretained earnings (amount based on the equity method), would not bematerial.
Affiliated companies to which the equity method is not applied due
to immateriality:
Aozora Loan Services Co., Ltd.
(2) Cash and Cash Equivalents
In the consolidated 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, 2016 and 2015 is as follows:
Millions ofMillions of Yen
U.S. dollars
2016
2015
2016
Cash and Due fromBanks
Due from Banks(Excluding Duefrom Central
Bank )Cash and Cash
Equivalents

9,113,465

6,861,925

80,872(979,112)(1,231,755)(8,688)8,134,353

5,630,169

72,183(3) Trading Assets & Liabilities
Transactions for “Trading Purposes” (for purposes of seeking tocapture gains arising from short-term changes in interest rates,
currency exchange rates or market prices of financial instruments andother market related indices or from gaps among markets) are
included in “Trading Assets” and “Trading Liabilities” on the
consolidated balance sheet on a trade date basis. In addition, gains
and losses from “Trading Assets” and “Trading Liabilities” arerecorded as “Trading Income” and “Trading Losses” on the
consolidated statement of income on a trade date basis.
Securities and monetary debts purchased for trading purposes
are stated at fair value at the fiscal year end. Trading-related financial
derivatives such as swaps, futures and options are stated at thedeemed amounts that would be received or paid for settlement if suchtransactions were terminated at the fiscal year end.

31

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

32

specified prior to the commencement of transactions, and there exists
spot and forward liabilities exceeding the acquisition costs of theforeign currency securities designated as hedged items on a foreign
currency basis.
(c) Internal Derivative Transactions
Internal derivative transactions between trading accounts 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. designatedas hedging instruments are conducted in a manner without any
subjection and are appropriately covered by third party transactions
conducted in accordance with the standard articulated by JICPA
Industry Audit Committee Reports No. 24 and No. 25.
(5) Tangible Fixed Assets (excluding Leased Assets)
Tangible fixed assets of the Bank are depreciated by the decliningbalance method, except for buildings acquired on or after April 1,
1998 (excluding facilities installed in buildings), which are
depreciated by the straight-line method.
The estimated useful lives of major items are as follows:
Buildings ................. 5 to 50 years
Others ...................... 3 to 20 years
Tangible fixed assets of consolidated subsidiaries are, in
principle, depreciated using the declining balance method, based on
their estimated useful lives.
(6) Intangible Fixed Assets (excluding Leased Assets)
Intangible fixed assets are amortized by the straight-line method. The
costs of software for internal use are amortized by the straight-line
method, mainly over a 5 year period (the estimated useful life of thesoftware).
(7) Leased Assets
Leased assets of Tangible Fixed Assets and Intangible Fixed Assets
related to finance leases that do not transfer ownership are
depreciated using the straight-line method with estimated useful lives
equal to lease terms, and zero residual values.
(8) Deferred Debenture Charges
Debenture charges are expensed in the fiscal year of issuance.
(9) Reserve for Possible Loan Losses
Reserve for possible loan losses of the Bank is provided inaccordance with the Bank’s predetermined internal rules forwrite-offs and provisions as follows:
The reserve for loans to borrowers who are classified as
substantially bankrupt or who are bankrupt in the legal sense isprovided at 100% of the amount remaining after write-offs anddeduction of expected collection from the disposal of collateral andthe execution of guarantees. In addition, a reserve is provided forloans to borrowers who, although not actually bankrupt in the legal
sense, are experiencing serious financial difficulties and whose
failure is imminent. In such cases, the reserve is provided at theamount deemed necessary based on the borrower’s capability of
repayment after deduction of expected collection from the disposal ofcollateral and the execution of guarantees.
The Bank calculates the reserve by the cash flow estimate
method to those borrowers who owe the debts classified as Loans toProbably Bankrupt Borrowers and Restructured Loans by the Bank,
whose total credit exceeds a certain amount and also the cash flowrelated to collection of the principal and interests from whom can be
estimated. The cash flow estimate method is to determine the amountof reserve for possible loan losses from the gap between the amounts
calculated by discounting the cash flow by the contracted interest rateprior to relaxation of terms and conditions of loans and their bookvalues.
For all other loans, a reserve is provided based on the ratio of
actual defaults for a certain period in the past.
All claims are assessed by the Operating Related Division
based on internal rules for self-assessment of asset quality.
Subsequently, the Asset Auditing Division, that is independent fromthe Operating Related Division, audits these self-assessments. The
reserve is provided based on the results of the assessments.
For loans to Bankrupt Borrowers and Substantially Bankrupt
Borrowers, amounts deemed uncollectible, which are calculated after
deduction of expected collection from the disposal of collateral andthe execution of guarantees, are written off. The amount written off
was ¥310 million ($2 million) as of March 31, 2016 and ¥584 million
as of March 31, 2015.
Reserve for possible loan losses of the consolidated subsidiaries
for general claims is provided as the amounts deemed necessary
based on the default rate calculated from actual default during acertain period in the past, and for doubtful claims as the amounts
deemed uncollectible based on the assessment of each claim.
(10) Reserve for Employee Bonuses
Reserve for Employee Bonuses is set aside to pay employee bonuseswith respect to the portion of estimated bonus payments to employeesthat correspond to this fiscal year.
(11) Reserve for Directors’ Bonuses
Reserve for Directors’ Bonuses is set aside to pay directors andcorporate auditors bonuses with respect to the portion of estimatedbonus payments to directors and corporate auditors that correspond to
this fiscal year.
(12) Reserve for Directors’ Retirement Allowances
Reserve for Directors’ Retirement Allowances provided for by the
Bank is calculated based on the estimated allowances to be paid up to
the end of this fiscal year.
(13) Reserve under Specific Law
This reserve amount is calculated pursuant to Article 46-5, Paragraph
1 of the Financial Instruments and Exchange Act and Article 175 of
the Cabinet Office Ordinance on Financial Instruments Business toindemnify any losses incurred from accidents in the conduct ofmarket derivative transactions on behalf of clients.
(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
the straight-line method over a certain number of years (10 years)
within the average remaining service period of current employees at

each time the cost is incurred.
Also, certain consolidated subsidiaries calculate the net defined
benefit liability and retirement benefit cost using the simplified
method which assumes the retirement benefit obligation to be equal
to the necessary payments of the voluntary retirement for all
employees at the fiscal year-end.
(15) Translation of Foreign Currencies
Foreign currency-denominated assets and liabilities are translated
into Japanese yen at exchange rates prevailing at the end of the fiscal
year. Foreign currency-denominated assets and liabilities of
consolidated subsidiaries are translated into Japanese yen at exchange
rates prevailing at the end of the fiscal year.
(16) Consumption Tax
Consumption tax and local consumption tax incurred by the Bankand its domestic consolidated subsidiaries are excluded fromtransaction amounts. However, consumption tax and local
consumption tax paid on purchases of tangible fixed assets andintangible fixed assets, which are not deductible as a tax credit, areexpensed at the end of the fiscal year.
(17) Amortization of Goodwill
Goodwill is fully amortized in the fiscal year incurred.
(18) Changes in Accounting Policies
From this fiscal year, the Bank has applied the Revised AccountingStandard for Business Combinations (ASBJ Statement No. 21,
September 13, 2013), Revised Accounting Standard for Consolidated
Financial Statements (ASBJ Statement No. 22, September 13, 2013),
and Revised Accounting Standard for Business Divestitures (ASBJ
Statement No. 7, September 13, 2013). Consequently, the accounting
method was changed so that any differences arising from changes inthe equity stake in subsidiaries under ongoing control of the Bank arerecorded as capital surplus, and acquisition-related costs are recorded
as expenses for the fiscal year in which they are incurred. In addition,with respect to any business combination entered into at thecommencement date of the fiscal year ended March 31, 2016, or later,
the accounting method was changed to reflect adjustments to theallocation amount of acquisition cost on the consolidated financial
statements of the fiscal year in which the relevant businesscombinations become effective. This is done through theconfirmation of previously applied provisional accounting treatment.
Furthermore, the presentation of net income was changed andminority interests is now presented as non-controlling interests. In
order to reflect the changes in the presentation, certain
reclassifications have been made to the consolidated financial
statements for the previous fiscal year.
In the Consolidated Statements of Cash Flows for this fiscal
year, cash flows relating to the acquisition or sale of shares in
consolidated subsidiaries—in cases where there is no change in thescope of consolidation—are recorded under cash flows fromfinancing activities. Cash flows relating to the acquisition expensesof shares of consolidated subsidiaries—in cases that involve a change
in the scope of consolidation—and expenses arising from theacquisition or sale of shares of consolidated subsidiaries—in cases
where there is no change in the scope of consolidation—are recorded
under cash flows from operating activities.
The Bank has applied these revised accounting standards inaccordance with transitional provisions in paragraph 58-2(4) of the
Accounting Standard for Business Combinations, paragraph 44-5(4)of the Accounting Standard for Consolidated Financial Statements33

and paragraph 57-4(4) of the Accounting Standard for Business
Divestitures, as of April 1, 2015.
There is no impact on the consolidated financial statements as aresult of the application of these revised accounting standards.
(19) Accounting standards issued but not yet effective
Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance
No. 26, March 28, 2016)(i) Overview
Basically, this guidance carries over the framework of the JapaneseInstitute of Certified Public Accountants (JICPA) Audit Committee
Report No. 66, “Audit Treatment on Determining the Recoverabilityof Deferred Tax Assets,” with regard to guidance stipulated therein
relating to the recoverability of deferred tax assets. A portion of thecontents were revised.
(ii) Application schedule
The Bank expects to adopt the revised guidance from the beginningof the fiscal year commencing April 1, 2016.
(iii) Impact of the application of this accounting standard
There is no impact on the consolidated financial statements as aresult of the application of this revised guidance.

3. Trading Assets:
The details of Trading Assets as of March 31, 2016 and 2015 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2016

2015

33,22857,717294

Trading Bonds-Related
Financial Derivatives

11

6

0

Derivatives of Securities
related to Trading
Transactions

1

－

0

Trading-Related
Financial Derivatives

62,88255,153

558

Other Trading Assets

178,028

104,989

1,579

Total

274,153

217,866

2,432

Trading AccountSecurities

2016

4. Securities:
The details of Securities as of March 31, 2016 and 2015 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016
Japanese Government
9,855,041 11,238,729
87,452
Bonds
Municipal Government
Bonds

358,089

175,837

3,177－

14,997－2,942,390

2,814,263

26,110Stocks

65,77374,133583

Others

4,587,305

4,783,519

40,707

Total

17,808,601 19,101,480

158,031

Short-term Corporate
Bonds
Corporate Bonds

Notes:
1. Stocks include investments in affiliated companies totaling ¥189
million ($1 million) as of March 31, 2016 and 2015.
2. Others include common shares and investment in unconsolidated
subsidiaries totaling ¥8,418 million ($74 million) as of March 31,
2016 and ¥9,440 million as of March 31, 2015. Others also include
preferred shares issued by Shinkin Banks which were contributedin accordance with the Shinkin Bank Management Reinforcement
System. The amount was ¥231,880 million ($2,057 million) as ofMarch 31, 2016 and ¥239,190 million as of March 31, 2015,
respectively. Others also include foreign bonds and equities.

34

5. Loans and Bills Discounted:
Loans and Bills Discounted include the following non-performing
loans:
Millions ofMillions of Yen
U.S. Dollars
2016

2015

2016

Loans to Bankrupt
Borrowers

135

123

1

Delinquent Loans

5,517

11,494

48

24

28

0

Restructured Loans

30,912

31,452274

Total

36,59043,099324

Loans Past Due Three
Months or More

The above amounts are the amounts before exclusion of reserves forpossible loan losses.
Loans to Bankrupt Borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Article 96-1-3 or 4of the Order for Enforcement of the Corporation Tax Act (Article 97
of 1965 Cabinet Order).
Delinquent Loans represent non-accrual loans other than Loans
to Bankrupt Borrowers and Restructured Loans.
Loans Past Due Three Months or More represent loans forwhich the principal and interests are past due three months or moreother than Loans to Bankrupt Borrowers and Delinquent Loans.
Restructured Loans represent loans on which contracts wereamended in favor of the borrowers (e.g. the reduction of or
exemption from stated interests, the deferral of interest payments, theextension of maturity dates, and the renunciation of claims in order toassist or facilitate the business restructuring of borrowers underfinancial difficulties) other than Loans to Bankrupt Borrowers,
Delinquent Loans and Loans Past Due Three Months or More.
Loans include subordinated loans with a covenant stipulatingthat repayment of principal is preceded by that of general credits. The
amount was ¥37,100 million ($329 million) as of March 31, 2016and ¥47,000 million as of March 31, 2015, respectively. Of theseamounts, ¥17,800 million ($157 million) as of March 31, 2016, and¥20,200 million as of March 31, 2015, respectively, were provided to
Shinkin Banks in accordance with the Shinkin Bank Management
Reinforcement System.
Bills Discounted are accounted for as financial transactions inaccordance with JICPA Industry Audit Committee Report No.24,
February 13, 2002 “Accounting and Auditing Treatment of
Accounting Standards for Financial Instruments in Banking Industry”.
The face value of bills of lading amounted to ¥258 million($2 million) as of March 31, 2016 and ¥217 million as of March 31,
2015, respectively. The Bank has the right to freely dispose of, sell or
re-collateralize such bills.
With respect to loan participation, in accordance with
“Accounting and Presentation of Loan Participation” (JICPA
Accounting Committee Report No. 3, November 28, 2014), theamount of the participation principal is accounted for as a loan to theoriginal debtor, and this amounted to ¥32,432 million ($287 million)
as of March 31, 2016 and ¥46,890 million as of March 31, 2015.

6. Commitments to Overdrafts and Loans:
Commitments related to overdrafts and loans represent agreements toextend overdrafts or loans up to a pre-agreed amount at thecustomer’s request as long as there is no violation of the conditions
stipulated in commitment agreements.
The amount of unused commitment lines does not necessarily
have a significant effect on the future cash flows of the Bank because
most of these commitment lines are terminated without being
exercised. Most of these agreements have provisions which stipulatethat the Bank may not extend the loan or may decrease thecommitment when there are certain changes in the financial
conditions, certain issues relating to collateral and other reasons. The
Bank limits the commitment line to an amount below the amount of
the related customer’s time deposit. The Bank periodically checks thefinancial condition of its customers based on its internal rules andperforms certain actions to secure loans or revises the contracts, asnecessary.
The amounts of unused commitment lines under suchagreements are ¥20,861,883 million ($185,126 million) as of March
31, 2016 and ¥19,673,398 million as of March 31, 2015, respectively.
The amounts which the Bank could cancel at any time without
penalty or of which the original contractual maturity is less than one
year are ¥20,780,913 million ($184,407 million) as of March 31,
2016 and ¥19,587,477 million as of March 31, 2015, respectively.

7.

Special Contracts for Securities and Cash-Collateralized
Securities Lending and Borrowings:
Securities lending based on non-collateralized special contracts(securities lending and borrowings) are stated as Japanese
Government Bonds and Others in “Securities.” The amount in total
was ¥105,845 million ($939 million) as of March 31, 2016 and¥135,291 million as of March 31, 2015.
Of cash-collateralized securities borrowings, those freely
disposable for sale or re-collateralized, and pledged as collateralamounted to ¥9,567 million as of March 31, 2015. Those held by the
Bank without being disposed of as of March 31, 2016 amounted to¥141,541 million ($1,256 million) and as of March 31, 2015
amounted to ¥164,501 million.

8.

Tangible Fixed Assets:
Millions of Yen
2016
2015

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
2016

87,90785,793

780

1,764

1,764

15

（－)

（－)

（－)

35

9. Assets Pledged as Collateral and Associated Liabilities:
Assets pledged as collateral for the fiscal years ended March 31,
2016 and 2015 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016
Assets Pledged as Collateral
－

0

－

9,331

12,83482

Securities

2,758,030 3,136,284

24,474Loans andBills Discounted

2,876,152 2,285,468

25,522

Total

5,643,514 5,434,586

50,079Cash and Due from Banks
Trading Assets

Liabilities associated with
Assets Pledged as Collateral
Borrowed Money

115,500

121,500

1,024－

210,000－

Bills Sold and Call Money

Payables under Repurchase
63,80473,944
Agreements
Payables under Securities
1,414,550 1,290,211
Lending Transactions

566
12,552

Trading Assets of ¥506 million ($4 million) as of March 31, 2016and ¥528 million as of March 31, 2015 and Securities in the amountof ¥1,140,646 million ($10,121 million) as of March 31, 2016 and¥1,082,445 million as of March 31, 2015, respectively, were secured
as collateral for exchange settlement transactions, etc. or futures or as
substitute for margin money in futures transactions, etc.
Other assets include initial margins of futures markets,
guarantee money, and cash collateral paid for financial instruments.
The amounts are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016

2015

2016

Initial margins of
futures markets

－

338

－

Guarantee money

399

555

3

Cash collateral paid
for financial
instruments

6,146

1,601

54

10. Trading Liabilities:
The details of Trading Liabilities as of March 31, 2016 and 2015 are
as follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016

36

Trading Bonds Sold

18,43847,054

163

Trading-Related Financial
Derivatives

111,022

99,260985

Total

129,461

146,3141,148

11. Borrowed Money and Lease Obligations:
Balance as ofApril 1, 2015
(Millions of Yen)

Balance as ofMarch 31, 2016
(Millions of Yen)

Balance as ofMarch 31, 2016
(Millions of U.S.
Dollars)

Borrowings

935,320829,320

7,359

1.01

Borrowed Money935,320829,320

7,359

1.01

1,566

1,458

12

2.28

－

2,986

1,743

15

1.89

May. 2017～
May. 2022

Category

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

Average
Interest Rate (%)

Maturity－
July. 2016～
No maturity

Notes:
1. Average interest rates were computed by the weighted average method using the interest rates and the balances at the fiscal year-end.
2. The repayment schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Over 4 years,
Within 1 year
within 2 years
within 3 years
within 4 years
within 5 years
Borrowed Money
115,500－－－－
Lease Obligations

1,458

Within 1 year
Borrowed Money

1,024

1,057

497

180

5

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－

Lease Obligations
12
9
4
1
0
3. Borrowed Money includes subordinated borrowings of ¥713,820 million ($6,334 million) as of March 31, 2016 and ¥813,820 million as ofMarch 31, 2015, respectively.

12. Debentures:
IssuerName of Issue

No.245-316
5-yearInterest-bearing
debentures
No.2
7-yearThe Bank
Interest-bearing
debentures
No.2
10-year
The Bank
Interest-bearing
debentures
 Total     －The Bank

Issuance Date

Balance as of Balance as of Balance as ofApril 1,March 31,
March 31,
2015
2016
2016
(Millions of (Millions of (Millions of
Yen)
Yen)
U.S. Dollars)Interest
Rate (%)

Collateral

Redemption
Date

Apr. 2010～
Mar. 2016

3,000,680

3,022,920

26,825

0.07～
0.75

－

Apr. 2015～
Mar. 2021

Sep. 25, 2015－

10,000

88

0.29

－

Sep. 27, 2022

Sep. 25, 2015－

20,000

177

0.52

－

Sep. 26, 2025

3,000,680

3,052,920

27,091－－－－

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
578,860
579,460
627,110
638,730

Over 4 years,
within 5 years
598,760

Millions of U.S. Dollars
Within 1 year
5,136

Over 1 year,
within 2 years
5,142Over 2 years,
within 3 years
5,564Over 3 years,
within 4 years
5,668Over 4 years,
within 5 years
5,313

37

13. Asset Retirement Obligations:
The details of Asset Retirement Obligations were omitted because theamount was one-hundredth or less of the total balance of Liabilities
and Net Assets as of April 1, 2015 and as of March 31, 2016,
respectively.

16. Trading Income:The details of Trading Income for the fiscal years ended March 31, 2016
and 2015 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016

14. Land Revaluation:
Based on the Act on the Revaluation of Land (Law 34, promulgated on
March 31, 1998), land used for business was revalued. Deferred tax on
the revaluation of the land was recorded as “Deferred Tax Liabilities
for Land Revaluation” under Liabilities, and unrealized gain on therevaluation of the land, net of deferred tax, was recorded as “Land
Revaluation Excess” under Net Assets.

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

Date of Revaluation: March 31, 1999
Revaluation method in accordance with Article 3-3 of Law 34:
Revaluations were made based on the method, determined by theCommissioner of the National Tax Administration, which formed
the basis for calculating land value taxes (prescribed by the Land
Value Tax Law), as set forth in Article 2-4 of the Order for
Enforcement of the Act on Revaluation of Land (Government
Ordinance No. 119, dated March 31, 1998), with appropriate
adjustments.
The difference between the total fair value at the end of thisfiscal year and the total post-revaluation book value of land that isused for business and has been revalued pursuant to Article 10 of
Law 34.: ¥ 2,239 million ($19 million) as of March 31, 2016, and¥ 3,948 million as of March 31, 2015.

15. Fees and Commissions:
The details of Fees and Commissions for the fiscal years ended March
31, 2016 and 2015 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016
Deposit, Fixed Income
376
431
3
Securities and Lending
433

573

3

Securities Related Business

8,653

7,803

76

Agency Business

2,263

2,259

20

Guarantee Business

8,793

7,339

78

Trustee Business

19,44818,016

172

595

697

5

40,562

37,122359

Exchange

245

236

2

Others

14,004

12,127

124

Expenses on Fees andCommissions Businesses

14,24912,363

126

Exchange Business

OthersIncome on Fees andCommissions Businesses

38

2015

2016

501

651

4

129

－

1

11,785

17,996

104

138

188

1

12,555

18,836

111

17. Trading Losses:
The details of Trading Losses for the fiscal years ended March 31, 2016
and 2015 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016
Expenses from231－－
Trading-Related Securities
Total

－

231

－

18. Other Income:The details of Other Income for the fiscal years ended March 31, 2016
and 2015 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016
Gains on sale of stocks and other
6,554
8,114
58
securities
Others

48

1,515

0

Total

6,603

9,630

58

19. Other Expenses:
The details of Other Expenses for the fiscal years ended March 31, 2016
and 2015 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2016
2015
2016
Losses on sale of stocks and
1,158
68
10
other securities
Others

3,048

4,269

27

Total

4,207

4,337

37

20. Consolidated Statement of Comprehensive Income:For the fiscal year ended March 31, 2016 and 2015
Reclassification adjustment amount and tax effect amount related to Other Comprehensive Income
Millions ofMillions of Yen
2016

U.S. Dollars
2015

2016

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

70,878

175,794

628

Reclassification Adjustment Amount(17,880)

39,425(158)

Prior to Tax Effect Adjustment

52,998215,220470

Tax Effect Amount(15,143)(61,543)(134)

Net Unrealized Gains (Losses) on Other Securities

37,854

153,676335(150,746)(119,268)(1,337)

Net Deferred Gains (Losses) on Hedging Instruments :The Amount Arising during the Period
Reclassification Adjustment Amount75,28056,778668

Prior to Tax Effect Adjustment(75,465)(62,489)(669)

Tax Effect Amount

21,093

17,448187

Net Deferred Gains (Losses) on Hedging Instruments(54,372)(45,041)(482)

Land Revaluation Excess:
The Amount Arising during the Period

－

－

－

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Tax Effect Amount

(2)

4

(0)

Land Revaluation Excess

(2)

4

(0)

The Amount Arising during the Period

(368)

580

(3)

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Foreign Currency Translation Adjustments:

Tax Effect AmountForeign Currency Translation Adjustments

－

－

－

(368)

580

(3)

(12,200)

709

(108)

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

632

727

5

Prior to Tax Effect Adjustment(11,568)

1,436

(102)

Tax Effect Amount

3,335

(426)

29

Remeasurements of Defined Benefit Plans(8,232)

1,009

(73)

Other Comprehensive Income(25,121)110,229(222)

39

21. 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, 2016
April 1, 2015 (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

4,708

2,000

－

6,708

General Common Shares

－

－

－

－

Specific Common Shares

－

－

－

－

Preferred Shares (Type-A)

－

－

－

－

－

－

－

－

Total
Treasury Shares

Total

Note: On September 30, 2015, the Bank implemented a capital increase through the issuance of specific common shares totaling ¥200.0 billion(issuance price per share: ¥100,000; number of shares issued: 2,000,000 shares). The details are as follows.
Private offering of common shares; issuance price per share: ¥100,000; Capital incorporation per share : ¥100,000.
(2) Dividends
Dividends paid during the fiscal year ended March 31, 2016
Resolution

Annual General Meeting of
Shareholders, June 19, 2015

Class of share

Total Dividend
Amount (Million Yen)

Amount Per Share(Yen)

Record Date

Effective Date

GeneralCommon shares

14,0003,500

Mar 31, 2015

Jun 19, 2015

Preferred shares(Type-A)

4,957

7,000

Mar 31, 2015

Jun 19, 2015

Among the dividends whose record date falls within the fiscal year ended March 31, 2016, those whose effective date will fall within thefollowing fiscal year:
Resolution

Annual General Meeting of
Shareholders, June 24, 2016

Class of share

Total Dividend
Amount (Million Yen)

Resource ofDividends

Amount Per Share(Yen)

Record Date

Effective Date

GeneralCommon shares

12,000Retained Earnings

3,000

Mar 31, 2016

Jun 24, 2016

Specific
Common shares

1,512

Retained Earnings

1,500

Mar 31, 2016

Jun 24, 2016

Preferred shares(Type-A)

4,603

Retained Earnings

6,500

Mar 31, 2016

Jun 24, 2016

Note: The total dividend amount for the specific common shares is calculated on a per-diem basis from the date of payment (September 30,2015) to the fiscal year-end (March 31, 2016).

40

22. Income Taxes:(1) Breakdown of Deferred Tax Assets and Liabilities is as follows:
Millions ofMillions of Yen
U.S. Dollars
2016

2015

2016

Depreciation

3,142

2,906

27

Reserve for Possible Loan
Losses

6,596

6,656

58

Net Defined Benefit Liability

11,6736,533

103

Write-Downs for Securities

4,531

4,417

40

Net Deferred Losses on
Hedging Instruments

65,43644,342580

Tax Loss Carryforwards

15

7

0

Others

3,022

4,058

26

Valuation Allowances(8,484)(7,653)(75)

Total Deferred Tax Assets

85,933

61,268762(184,443) (169,298)(1,636)

Deferred Tax Assets:

Deferred Tax Liabilities:
Net Unrealized Gains on Other
Securities
Others

(406)

(449)

(3)

Total Deferred Tax Liabilities(184,850) (169,748)(1,640)Net Deferred
Tax Liabilities(98,916) (108,480)(877)(2) Reconciliation between the effective statutory tax rate and theactual effective tax rate for the fiscal years ended March 31, 2016
and 2015:
2016
Statutory effective tax rate

－ %

2015
27.87 %

(Adjustments)
Change in Valuation Allowances－%

(2.50%)

Dividends received, not taxable－%

(1.49%)

Reduction and adjustment of Deferred
Tax Assets due to changes in tax rate

－ %0.06 %

Others－ %1.49 %

Actual effective income tax rate after
the application of tax effectaccounting－ %25.43 %

Notes: In this fiscal year, since the difference between the statutory
effective tax rate and the actual effective income tax rate after
the application of tax effect accounting is less than 5% of thestatutory effective tax rate, notes on this are omitted.

(3) Amendments to the amounts of deferred tax assets and deferred
tax liabilities owing to the changes in corporate tax rates
The “Act to partially revise the Income Tax Act and Others” (ActNo. 15, 2016) and the “Act to partially revise the Local Tax Act andOthers” (Act No. 13, 2016) were enacted on March 31, 2016. As aresult, the effective statutory tax rate used to measure the Company'sdeferred tax assets and liabilities was changed from 27.92% to27.93% for the temporary differences expected to be realized or
settled in the year beginning April 1, 2017, or later. At certain
consolidated subsidiaries, the statutory effective tax rate used for
calculating temporary differences expected to be reversed in thefiscal years beginning April 1, 2016, or later, has been changed.
There is no significant impact on the consolidated financial
statements as a result of these changes.

23. 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, 2016 and 2015 is as follows:(i) Reconciliation of beginning- and end-of-period balance ofRetirement Benefit Obligation
Millions ofMillions of Yen
U.S. Dollars
2016

2015

49,307

48,120

437

－

(120)

－

Restated Balance

49,30747,999437

Service Cost

2,257

2,251

20

Interest Cost

690

672

6

Actuarial Difference
Incurred

10,879(170)

96Retirement Benefits Paid

(1,408)(1,445)(12)

Prior Service Cost

－

－

－

Other

－

－

－

61,72649,307547

Retirement Benefit
Obligation at Beginningof Period
Cumulative effects of
Changes in Accounting
Policies

Retirement Benefit
Obligation at End of
Period2016

41

(ii) Reconciliation of beginning- and end-of-period balance ofPension Plan Assets
Millions ofMillions of Yen
U.S. Dollars
2016
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

21,4002016

19,706

189

2016

2,251

20

Interest Cost

690

672

6

(642)

(492)

(5)

628

722

5

4

4

0

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

(1,321)

538

(11)

1,452

1,490

12

Other

(533)

(554)

(4)

(867)

(827)

(7)

2,405

2,604

21

－

－

－

Retirement Benefit
Expenses Related toDefined Benefit Plan

21,307

21,400

189

2016

2015

Funded Plan Retirement
Benefit Obligation

50,687

39,833449

Pension Plan Assets(21,307)(21,400)(189)

29,37918,433

260

11,0399,473

9740,4192016

27,906358

Millions of
U.S. Dollars

Notes: Other includes the employee contribution amount to the
Employees’ Pension Fund.
(v) Remeasurements of Defined Benefit Plan
Remeasurements of Defined Benefit Plan (before tax effects)
comprise the following
Millions ofMillions of Yen
U.S. Dollars
2016
Prior Service Costs
Amortization ofActuarial
Differences

2016
4

0

(11,572)

1,431

(102)

Other

－

－

－

Total

(11,568)

1,436

(102)

(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
2016

2015

40,41927,906358

Unrecognized
Actuarial Differences
UnrecognizedPrior Service Cost

Net Defined Benefit Asset

－

－

－

Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
Sheets40,41927,906

358

2016

2015
4

2016
Net Defined Benefit
Liability

2015

2,257

5

Millions of Yen

42

2016
Service Cost

492(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
consolidated balance sheets
Millions ofMillions of Yen
U.S. Dollars

Unfunded Plan Retirement
Benefit Obligation
Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
SheetsMillions of
U.S. Dollars

Millions of Yen

642

Other
Balance of Pension Plan
Assets at End of Period

2015(iv) Breakdown of Retirement Benefit Expense

2015

2016

－

4

－

15,493

3,920

137

Other

－

－

－

Total

15,493

3,925

137

(vii) Pension Plan Assets(a) The ratios by main asset categories in total pension plan assets are
as follows:
2016
2015
Bonds

67 %

67 %

Stocks24 %24 %Cash and Deposits

7%

7%

Other

2%

2%

Total

100 %

100 %

2. Operating Leases
Future lease payments related to non-cancelable operatingleases: Not applicable(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, 2016 and2015, are as follows:

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

2016

2015

0.0～0.6 %1.1～1.5 %

3.0 %

2.5 %

0.0～7.4 %0.0～7.0 %Notes: The bank used the discount rate of 1.1%-1.5% for calculating
at the beginning of this fiscal year. However, the bankrevisited the discount rate at the end of this fiscal year
considering the impact on the retirement benefit liabilities
based on the recent benchmark rate level and changed thediscount rate to 0.0%-0.6%.

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

43

25. Financial Instruments:
1. Matters concerning financial instruments(1) Policies on financial instruments
Shinkin Central Bank Group (the “Group”) works to ensure thestable procurement of funds through the acceptance of deposits
mainly from its Shinkin Bank members and through the issuance ofdebentures. Additionally, the Group takes steps to diversify its
funding methods by procuring funds from short-term money
markets depending on market conditions.
Procured funds are invested in short-term money market
instruments, marketable securities, and loans.
Moreover, the Group uses derivative transactions for the
purpose of risk-hedging in ALM (asset liability management)
activities and engages in short-term trading of securities andderivatives.
To appropriately manage the various risks that result fromthese financial instruments, the Group engages in ALM activities
including the above-mentioned derivative transactions. For its
trading activities, the Group establishes risk limit and loss limit
amounts and engages in transactions within the scopes of these risk
limits, as a way to preserve a sound management and to ensurestable earnings.
(2) Types and related risks of financial instruments
Financial assets held by the Group consist mainly of short-term
funds, securities, and loans assets.
Short-term funds are invested in the call loan and euro-yen
deposits.
These investments are exposed to market risks such as thecounterparty credit risk, interest rate risk, and foreign currency risk.
Securities portfolios of the Group consist of domestic
securities including Japanese government bonds (JGBs), corporate
bonds 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 to diversify its
portfolio.
These investments are exposed to market risks such as theindividual issuers’ credit risk, interest rate risk, price fluctuation risk,
and foreign currency risk, and market liquidity risk.
Loans assets consist of direct loans to low-risk borrowers
including Shinkin Banks, central and local governments, public
service corporations, good standing domestic and overseas
companies, and agency loans provided through Shinkin Banks.
These loans are exposed to market risks such as counterparty
credit risk, interest rate risk, and foreign currency risk.
Meanwhile, financial liabilities of the Group consist mainly of
deposits and debentures.
Deposits include current deposits, ordinary deposits, deposits
at notice, term deposits, and foreign currency-denominated deposits,
most of which are deposits from Shinkin Bank members.
These deposits are exposed to market risks such as interest
rate risk and foreign currency risk, and liquidity risk.
As a debenture issuer, the Group issues interest-bearing
debentures .
These debentures are exposed to interest rate risk and liquidity
risk.

44

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 bondderivatives (bond futures and bond futures options).
These transactions are exposed to market risks such ascounterparty credit risk, interest rate risk, and foreign currency risk.
The Bank hedges market risks of its financial assets andliabilities through ALM activities.
The Group partially avoids exposure to market risks by
mitigating (i) interest rate risk through interest rate swaps and(ii) foreign currency risk of foreign currency-denominated assets
through foreign currency-denominated fund procurement, currency
swaps, and forex swaps.
Hedge accounting is applied to risk hedges through ALM
activities including the use of derivatives. With regard to hedge
accounting, hedged items, hedging methods, policies, and methodsof hedge effectiveness assessment, etc. are described in the“Significant Accounting Policies.”(3) Risk management frameworks of financial instruments
The basic policies for risk management of the Bank are broadly
divided into “risks to be minimized” and “risks to be controlled”.
Credit risk, market risks, and liquidity risks fall into the latter
category. Both categorized risks are managed by risk management
divisions that are independent of the client service divisions. The
Risk Management Division comprehensively manages of theserisks.
<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
and market risks using VaR methodology, and monitors this on adaily basis to prevent risk limits from being breached.
These risk limit amounts are reviewed each fiscal year by the
Risk Management Committee and determined at the Executive
Committee. The values of risk are measured weekly by the Risk
Management Division, which takes steps to prevent any of thevarious risk limits from being breached, and through the Risk
Management Committee, reports regularly to the management andrelevant divisions.
The values of risk at consolidated subsidiaries are aggregatedand managed through the integrated risk management framework.
(i) Credit risk management
For the accurate identification and strict management of credit risk,
the Bank has established credit risk management policies. Moreover,the Bank has created a structure in which divisions responsible for
credit control, credit management and credit assessment are clearly
segregated from divisions involved in client services, with mutuallyindependent tasks to ensure effective internal checking functions.
The Bank established the Credit Committee and the Risk
Management Committee, comprised of senior management andheads of divisions related to credit risk, as bodies to deliberate andmake decisions on matters relating to credit risk management. The

Credit Committee deliberates on credit transactions that exceed thecredit limit, while the Risk Management Committee deliberates on
the establishment and the review of policies regarding credit
management. The Executive Committee deliberates and makes
decisions on matters related to asset self-assessments including theresults 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 andother criteria. These analyses are used to monitor the diversificationof credit risk as well as changes in portfolio credit risk. Additionally,
divisions responsible for credit control quantify credit risk in VaR
methodology using Monte Carlo simulation methods and manage
credit risks based on the limits set at the Executive Committee.
Divisions responsible for credit management accurately
monitor each borrower’s financial condition, the purposes for whichfunds are used and repayment resources. In addition to appropriate
assessment and post-transaction management, these divisions
continually check whether the client service divisions are
conducting appropriate credit control, and provide guidance asnecessary.
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 thecredit 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 inmarket operations, providing a risk management structure in whichinternal checks are maintained through independent functions.
The Bank has established the ALM Committee as the body
responsible for deliberating and making decisions on mattersrelating to market risk management. The ALM Committee iscomprised of senior management and heads of divisions related tomarket risk. Based on risk status information—obtained via reports
from divisions responsible for market risk management and othersources—the ALM Committee deliberates broadly and in a timely
manner ALM related policies and market transactions including theBank’s fund-raising and management as well as the usage ofhedging transactions involving derivatives such as interest rate
swaps.
Divisions responsible for market risk management quantify
and manage market risk mainly by VaR within the limit set by the
Executive Committee. In addition, market risk is classified into
several categories, and the amount of risk for each category ismonitored. Market risk management at the Bank not only uses VaR
methodology but takes multi-faceted approaches, that is, monitoring
sensitivity to change in individual risk factors such as the interest
rate risk based on outlier standard and the basis point value (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 thisway, market risks including those that cannot be captured throughVaR methods alone are managed.
Moreover, for trading operations, clear regulations are in placeconcerning the trading instruments and trading management
methods, enabling appropriate trading operations by setting a
specific loss limit amount.
Market risks of consolidated subsidiaries are not directly
added to the values of market risk of the 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 historicalmethod and uses a 99.0% confidence interval, a holding period offive business days and an observation period of one year. In
addition, with regard to market risk related to trading operations at
consolidated subsidiaries, which is managed separately within the
integrated risk management framework, the Bank uses a market
risk-equivalent amount under the regulations on banks’ capital ratio.
The market risk amount (estimated loss amount) of the Bank’s
trading operations was ¥193 million ($1 million) as of March 31,
2016 and ¥646 million as of March 31, 2015 and the market risk
amount (estimated loss amount) of the trading operations of theBank’s consolidated subsidiaries was ¥516 million ($4 million) as
of March 31, 2016 and ¥1,099 million as of March 31, 2015.
The Bank conducts back testing to compare VaR calculatedusing the model with actual loss amounts. Based on the results ofback testing covering the fiscal year ended March 31, 2016, theactual loss amount exceeded the VaR model on two occasion, andthe Bank believes that the measurement model it uses has anadequate level of accuracy to capture market risk. However, it
should be noted that VaR measures the amount of market risk atcertain probability levels statistically calculated based on historicalmarket fluctuation. Hence, there may be cases where market risk
cannot be captured in situations where market conditions change
unprecedentedly.
(b) Financial instruments other than those held for trading
purposes
The Bank uses VaR analysis for quantifying market risk 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
VaR model is based on the delta method and uses a 99.0%
confidence interval, a holding period of one year and an observation
period of five years. In addition, with regard to market risk at
consolidated subsidiaries related to operations other than trading
operations, which is managed separately within the integrated risk
management framework, such risk is calculated in accordance withmethods used by the Bank.
The Group’s market risk amount (estimated loss amount)45other than for trading purposes was ¥266,515 million ($2,365
million) as of March 31, 2016 and ¥260,684 million as of March 31,
2015. The Bank conducts back testing to compare VaR calculatedusing the model with actual loss amounts, and believes that themeasurement model it uses has an adequate level of accuracy tocapture market risk. However, it should be noted that VaR
measures the amount of market risk at certain probability levels
statistically calculated based on historical market fluctuation. Hence,
there may be cases where market risk cannot be captured insituations where market conditions change unprecedentedly.
(iii) Liquidity risk management related to fund-raising
For the accurate identification and strict management of liquidity
risk, the Bank has established liquidity risk management policies.
Divisions responsible for liquidity risk management are clearly
separated from divisions involved in cash management and market
operations, allowing internal checks to be maintained through theindependent functions. In addition, the ALM Committee deliberates
and makes decisions on matters relating to liquidity risk
management.
Methods used for managing liquidity risk include the setting
and daily monitoring of risk limit amounts relating to the gap
between cash receipts and payments. This is carried out forindividual currencies and periods. In the event that a significant
liquidity risk arises, the Bank has preparations to respond rapidly,
including the securing of funding sources.
The liquidity risk management frameworks created by the
Bank include subsidiaries as well, by providing overdraft facilities
for consolidated subsidiaries with operations involving fundmovements in relatively large amounts.
(4) Supplementary explanation concerning the fair values of  
financial instruments
Fair values of financial instruments, in addition to values based onmarket prices, also include values based on reasonable estimates ifmarket prices are unavailable. Since value estimates are predicatedon certain assumptions, values may vary if the underlying
assumptions change.

46

2. Matters concerning fair value and others of financial instruments
Carrying values stated on the consolidated balance sheet, fair value and differences between them are as follows. Unlisted stocks and similar
items with significant difficulty in determining fair value are not included in the table below. (See Note 2.)
Immaterial items have been omitted.
As of March 31, 2016
Millions of YenCarrying Value

Fair Value

Difference(1) Cash and Due from Banks

9,113,465

9,113,466

0(2) Bills Bought and Call Loans

339,088

339,088－(3) Receivables under Resale Agreements

14,99914,999－(4) Receivables under Securities Borrowing Transactions

120,541

120,541－(5) Monetary Debts Purchased (*1)

177,688

177,6891

Trading Securities

211,257

211,257－(7) Money Held in Trust

72,826

72,826－

Held-to-Maturity Debt Securities

1,693,329

1,832,724

139,394

Other Securities

15,865,459

15,865,459－(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

6,763,824


(40,163)
6,723,661

6,792,741

69,080Total Assets

34,332,319

34,540,794

208,475(1) Deposits

27,214,026

27,228,590

14,563(2) Debentures

3,052,920

3,068,397

15,477

18,43818,438－(4) Borrowed Money829,320854,428

25,108(5) Bills Sold and Call Money54,39754,397－(6) Payables under Repurchase Agreements

63,80463,804－(7) Payables under Securities Lending Transactions

1,414,550

1,414,550－

Total Liabilities

32,647,457

32,702,607

55,150

To which Hedge Accounting is not applied(12,743)(12,743)－To which Hedge Accounting is applied(217,685)(310,840)(93,154)(230,429)(323,584)(93,154)(3) Trading Liabilities
Trading Bonds Sold

Derivatives (*2)

Total Derivatives

47

Millions of U.S.Dollars


Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

80,87280,8720(2) Bills Bought and Call Loans

3,009

3,009

－

133

133

－

(4) Receivables under Securities Borrowing Transactions

1,069

1,069

－

(5) Monetary Debts Purchased (*1)

1,576

1,576

0

Trading Securities

1,874

1,874

－

(7) Money Held in Trust

646

646

－

Held-to-Maturity Debt Securities

15,026

16,263

1,236

Other Securities

140,788

140,788－(3) Receivables under Resale Agreements(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

60,021
(356)
59,66560,278613

Total Assets

304,661

306,5111,849(1) Deposits

241,494

241,623129(2) Debentures

27,091

27,228137(3) Trading Liabilities
163

163

－

7,359

7,582

222

(5) Bills Sold and Call Money

482

482

－

(6) Payables under Repurchase Agreements

566

566

－

Trading Bonds Sold
(4) Borrowed Money(7) Payables under Securities Lending Transactions

12,552

12,552－Total Liabilities

289,710290,199489
Derivatives (*2)
To which Hedge Accounting is not applied
To which Hedge Accounting is applied
Total Derivatives

(113)

(113)

－

(1,931)(2,758)(826)(2,044)(2,871)(826)*1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Debts Purchased are immaterial and have therefore been deducted directly from the carrying value.
*2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
  For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.

48

As of March 31, 2015
Millions of YenCarrying Value

Fair Value

Difference(1) Cash and Due from Banks

6,861,925

6,861,925－(2) Bills Bought and Call Loans

510,601

510,601－(3) Receivables under Resale Agreements

49,98749,987－(4) Receivables under Securities Borrowing Transactions

142,726

142,726－

(5) Monetary Debts Purchased (*1)

231,839

231,858

19

Trading Securities

162,707

162,707－(7) Money Held in Trust

132,774

132,774－

Held-to-Maturity Debt Securities

1,860,770

1,984,444

123,674

Other Securities

16,983,171

16,983,171－(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

5,885,741


(39,653)
5,846,087

5,902,295

56,208

Total Assets

32,782,591

32,962,492

179,901(1) Deposits

25,555,350

25,562,742

7,391(2) Debentures

3,000,680

3,008,919

8,239(3) Trading Liabilities
47,05447,054－(4) Borrowed Money935,320

959,514

24,194(5) Bills Sold and Call Money

415,108

415,108－(6) Payables under Repurchase Agreements

73,94473,944－

Trading Bonds Sold

(7) Payables under Securities Lending Transactions

1,299,828

1,299,828－Total Liabilities

31,327,286

31,367,112

39,825

Derivatives (*2)
To which Hedge Accounting is not applied(14,497)(14,497)－To which Hedge Accounting is applied(213,144)(283,042)(69,898)(227,641)(297,539)(69,898)

Total Derivatives*1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Debts Purchased are immaterial and have therefore been deducted directly from the carrying value.
*2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
 For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.
Note1: Calculation method of fair value for financial instruments
Assets(1) Cash and Due from Banks
For deposits that do not mature and have maturities with variable-interest-rates, since fair value approximates carrying value, carrying value isused as fair value. For deposits that have maturities with fixed-interest-rate, present value is calculated by discounting future cash flows using the
expected interest rate that would be applied to new deposits. For term deposits with short maturities, since fair value approximates carrying value,
carrying value is used as fair value.
(2) Bills Bought and Call Loans，(3) Receivables under Resale Agreements and (4) Receivables under Securities Borrowing Transactions
Since contract durations are short-term and fair value approximates carrying value, carrying value is used as fair value.
(5) Monetary Debts Purchased
Monetary debt purchased is stated at amounts obtained from brokers.

49

(6) Trading Assets
Securities including bonds held for trading are stated at market prices, etc.
(7) Money Held in Trust
Securities managed as trust assets of money held in trust whose main purpose is securities investment are valued at the prices quoted by theexchanges in the case of listed equity shares and at market prices in the case of bonds.
Note concerning securities categorized by holding purpose is stated in “Fair Value of Securities and Money Held in Trust”.
(8) Securities
Stocks are valued at the price quoted by the exchanges. Investment trusts are valued at the announced standard price. Bonds are valued at thequoted market prices or price calculated on the basis of rational estimation, etc.
For overseas Collateralized Loan Obligations (CLOs), fair value has been determined using a valuation technique that management
believes provides a reasonable estimate of the securities’ fair value at the end of the fiscal year. Fair value based on management’s reasonableestimates is calculated using the discounted cash flow approach, with the primary price variables including default rates for similar assets,
recovery rates, early redemption rates, and discount rates.
Note concerning securities categorized by holding purpose is stated in “Fair Value of Securities and Money Held in Trust”.
(9) Loans and Bills Discounted
For floating rate loans, since market interest is reflected in fair value in short term and fair value approximates carrying value unless theborrower’s credit standing after the lending undergoes significant change, carrying value is used as fair value. For fixed rate loans, categorized bytype of loan and internal credit rating, fair value is determined by discounting loans to present value using the interest rate that would conceivably
be applied in case of a newly made loan of the same principal and interest total. For loans with short contractual maturities, since fair value
approximates carrying value, carrying value is used as fair value.
With regard to loans to Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably Bankrupt Borrowers, the Bank estimates loan
loss based on the present value of estimated future cash flows or the estimated recoverable value from collateral and guarantees. Since fair value
therefore approximates the total loan value on the consolidated balance sheet at the consolidated closing date less the total recorded value of thereserve for possible loan losses, this value is used for fair value.
Liabilities(1) Deposits
For demand deposits, the amount payable upon demand on the balance sheet date (carrying value) is used as fair value. For term deposits, fairvalue is calculated by discounting future cash flows to present value. The discount rate is the interest rate that would be applicable to newly madedeposits. For term deposits with short contractual maturities and term deposits with variable interest rates, since fair value approximates carrying
value, carrying value is used as fair value.
(2) Debentures
For debentures issued by the Bank, market prices are used as fair value.
(3) Trading Liabilities
For trading bonds sold, market prices, etc. are used as fair value.
(4) Borrowed Money
For borrowed money, categorized by types of loans, fair value is calculated by discounting borrowed money to present value using the interest
rate that would conceivably be applied in case of a newly made loan of the same principal and interest total.
In instances with short contractual maturities, since fair value approximates carrying value, the carrying value is used as fair value.
(5) Bills Sold and Call Money, (6) Payables under Repurchase Agreements, and (7) Payables under Securities Lending Transactions
Since contract durations are short term and fair value approximates carrying value, carrying value is used as fair value.
Derivative Transactions
With regard to derivative transactions, these are noted in“Derivatives”.

50

Note 2: The following financial instruments have significant difficulty in determining fair value and are not included in fair value
information of financial instruments.
Millions of Yen
Category

2016

Millions of U.S.Dollars
2015

2016

Unlisted stocks, etc.(*1) (*2)

237,355

244,745

2,106

Investment in investment partnerships(*3)

12,456

12,792

110

Total

249,812257,538

2,216*1. Unlisted stocks, etc. means unlisted common shares and preferred shares held by the Bank. Since unlisted stocks, etc. have no market prices
and therefore are with significant difficulty in determining fair value, unlisted stocks, etc. are not included in fair value disclosure
information.
*2. In the fiscal year ended March 31, 2016, the Bank recognized impairment losses totaling ¥72 million ($0 million) on unlisted stocks.
In the fiscal year ended March 31, 2015, the Bank recognized impairment losses totaling ¥23 million on unlisted stocks.
*3. Investment in investment partnerships is not included in fair value disclosure information given that investment partnership assets include
items such as unlisted stocks, etc., which are with significant difficulty in determining fair value.
Note 3: Amounts of monetary claims and securities with maturities scheduled for redemption after the consolidated balance sheet date
As of March 31, 2016
Millions of Yen

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

8,833,829
339,088
14,99979,538－－

171,380－－

13,000
－
－

－
－
－

－
－
－

120,541

－

－

－

－

－

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

11,492

5,445

14,868

6,993

13,439124,699

284,057
283,700－－－
2,363,312
1,485,700
35,404－
530,805
4,200,125705,268
701,400
200－－
2,781,891
1,711,700
63,529－671,916
1,091,234

148,334
91,600200－－
2,651,100
1,556,700
53,180－612,347
746,658

113,9838,800－－－
2,968,127
1,851,000
40,714－
499,756
306,420

87,49571,900－－－1,662,685
533,500
154,664－
509,100
262,264

366,000
366,000－－－
1,055,472
739,000－－
38,906
153,604

Total

16,167,448

4,663,378

3,732,342

3,408,525

2,025,885

1,699,776

51

Millions of U.S.Dollars
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

78,390
3,009
133

705
－
－

1,520
－
－

115
－
－

－
－
－

－
－
－

1,069

－

－

－

－

－

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

101

48

131

62

119

1,106

2,520
2,517
－
－
－
20,971
13,183314－
4,710
37,271

6,258
6,224
1
－
－
24,68615,189
563
－
5,962
9,683

1,316
812
1
－
－
23,525
13,814
471
－
5,433
6,625

1,011
78
－
－
－
26,33816,425
361
－
4,434
2,719

776
638
－
－
－
14,754
4,734
1,372
－
4,517
2,327

3,247
3,247
－
－
－
9,366
6,557
－
－
345
1,363

Total

143,468

41,382

33,12030,246

17,97715,083

1. Current deposits, ordinary deposit, deposits at notice, and transfer deposits, included in “Due from banks,” are stated under amounts
redeemable “Within 1 year.”*2. The loans of ¥5,481 million ($48 million) which obligor categories are Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably
Bankrupt Borrowers and which periods of redemption cannot be foreseen are not included in Loans and Bills Discounted.
As of March 31, 2015
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

6,771,462
510,601
49,987

9,007－－

63,022
－
－

1,000
－
－

－
－
－

－
－
－

142,726

－

－

－

－

－

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

47,023

6,471

7,659

18,854

9,868

141,858

93,68476,600－－15,4002,418,746
1,425,600
50,39515,000342,476
3,497,311

623,846
619,400－－－
3,466,535
2,243,800
50,366－748,992
963,413498,811456,400400－－
2,656,604
1,667,500
40,182－
655,156
717,701

143,7291,800－－－
2,732,802
1,878,800
7,746－
445,297
317,338

114,596
49,300－－－2,475,509
1,243,500
23,814－515,480
234,693

404,488395,500－－－
1,039,290
799,000－－
29,014
146,601

Total

13,531,543

5,069,274

3,943,799

3,213,724

2,834,668

1,732,238*1. Current deposits, ordinary deposit, deposits at notice, and transfer deposits, included in “Due from banks,” are stated under amounts
redeemable “Within 1 year.”*2. The loans of ¥8,785 million which obligor categories are Bankrupt Borrowers, Substantially Bankrupt Borrowers or Probably Bankrupt
Borrowers and which periods of redemption cannot be foreseen are not included in Loans and Bills Discounted.

52

Note 4: Amounts of deposits, debentures and other interest bearing debt scheduled for repayment after the consolidated balance sheet date
As of March 31, 2016
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Deposits (*1)

13,959,911

11,167,257

Debentures

578,860

1,206,570

Borrowed Money (*2)

115,500－

Bills Sold and Call Money54,397

Payables under Repurchase Agreements

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

761,462

81,801

1,243,594－

1,237,490

10,00020,000－－324,350－

162,480

－

－

－

－

－

63,804

－

－

－

－

－

Payables under Securities Lending
Transactions

1,414,550

－

－

－

－

－

Total

16,187,023

12,373,827

1,998,952

416,151

1,263,594

162,480

Millions of U.S.Dollars
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

Deposits (*1)

123,878

99,097

6,757

725

11,035－

Debentures

5,136

10,706

10,981

88

177－

Borrowed Money (*2)

1,024

－

－

2,878

－

1,441

Bills Sold and Call Money

482

－

－

－

－

－

Payables under Repurchase Agreements

566

－

－

－

－

－

Payables under Securities Lending
Transactions

12,552

－

－

－

－

－

Total

143,642

109,804

17,738

3,692

11,213

1,441

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years－*1. Demand deposits, included in “Deposits,” are stated under amounts payable “Within 1 year.”*2. Borrowed Money without maturity is not included.

As of March 31, 2015
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Deposits (*1)

13,428,175

9,626,162957,648

189,464

1,353,900

Debentures

581,020

1,158,320

1,261,340－－－

Borrowed Money (*2)

111,500

10,000－108,150

216,200

162,480

Bills Sold and Call Money

415,108

－

－

－

－

－

Payables under Repurchase Agreements

73,944

－

－

－

－

－

Payables under Securities Lending
Transactions

1,299,828

－

－

－

－

－

Total

15,909,577

10,794,482

2,218,988

297,614

1,570,100

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

5326. Fair Value of Securities and Money Held in Trust:
1. Securities
The following tables contain information relating to Securities, Trading Assets (trading account securities and short-term corporate bonds),
Cash and Due from Banks (negotiable certificates of deposit) and Monetary Debts Purchased (trust beneficiary rights) in the consolidatedbalance sheet.
(1) Trading Securities
Millions of Yen
2016
Net Unrealized Gains (Losses)
Recognized as Income

478

Millions of U.S. Dollars
2016

2015
89

4

(2) Held-to-Maturity Debt Securities
As of March 31, 2016

Millions of YenItems with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding
Carrying Value

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



Items with Fair
Value notExceeding
Carrying Value

1,696,329

1,835,724

139,394

Fair Value

Millions of U.S. Dollars
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

54

1,504,841
418－－
180,329
1,685,589
145,467
－
－
－
4,667
150,134

Items with Fair
Value Exceeding
Carrying Value

1,386,262
400－－
159,186
1,545,849
145,798
－
－
－
4,681
150,480

Unrealized
Gains (Losses)
118,579
18－－
21,142
139,740
(331)
－
－
－
(14)
(345)

Carrying Value

Fair Value

Unrealized
Gains (Losses)

12,3013－－
1,412
13,717
1,293
－
－
－
41
1,335

13,3533－－
1,600
14,957
1,290
－
－
－
41
1,332

1,052
0
－
－
187
1,240
(2)
－
－
－
(0)
(3)

15,053

16,2901,236

As of March 31, 2015

Millions of YenItems with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding
Carrying Value

1,223,479
400－
15,400236,356
1,475,636
385,134
－
－
－
2,000
387,134

1,319,456
422－
15,414
265,439
1,600,733
383,710
－
－
－
2,000
385,710

Unrealized
Gains (Losses)
95,97722－
1429,083125,097(1,423)－－－－
(1,423)

1,862,770

1,986,444

123,674

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, 2016

Millions of Yen 

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

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

Carrying Value
60,294
11,376,195
8,207,782
326,830－
2,841,582
3,536,183
14,972,673
5
246,864
115,197
30,858－100,808
847,218
1,094,088
16,066,761

Acquisition Cost
26,901
10,961,519
7,844,506
321,073－
2,795,939
3,290,370
14,278,790
5249,232
117,399
30,878－100,954866,763
1,116,001
15,394,792

Unrealized
Gains (Losses)
33,393414,676363,275
5,757－
45,642245,812693,882－(2,367)(2,201)
(20)
－
(145)
(19,545)(21,913)
671,969

55

Millions of U.S. Dollars

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others535
100,951
72,8352,900－
25,21531,379238
97,271
69,611
2,849－
24,81029,198

Unrealized
Gains (Losses)
296
3,679
3,223
51
－
405
2,181

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

132,866
0
2,190
1,022
273
－
894
7,518
9,708
142,574

126,708
0
2,211
1,041
274
－
895
7,691
9,903
136,611

6,157
－
(21)
(19)
(0)
－
(1)
(173)
(194)
5,962

 

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

Carrying Value

Acquisition Cost

As of March 31, 2015

Millions of Yen 

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others
Total
Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
OthersTotal
Total(4) Held-to-Maturity Debt Securities Sold during the Fiscal Year
Not applicable.

56

Carrying Value
68,57912,289,438
9,611,891
161,700
14,9972,500,848
4,101,037
16,459,055－
329,975
18,224
13,736－
298,014411,639
741,615
17,200,670

Acquisition Cost
26,90812,002,801
9,352,998
159,760
14,9952,475,046
3,793,147
15,822,857－
330,351
18,29813,754－298,299
422,133
752,484
16,575,342

Unrealized
Gains (Losses)
41,671
286,636
258,8931,940
125,801
307,889
636,198
－
(376)
(73)
(17)
－
(285)
(10,493)(10,869)
625,328

(5) Other Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2016  Millions of Yen
Amounts ofSecurities Sold 

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks64,905

6,499

1,158

Bonds

618,322

32,993

870

Japanese Government Bonds

617,322

32,981870

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

1,000

11

－

Others306,302

1,641

1,965

Total

989,529

41,134

3,994

Corporate Bonds   Millions of U.S. Dollars
Amounts ofSecurities Sold 

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks

575

57

10

Bonds

5,486

292

7

Japanese Government Bonds

5,478

292

7

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

8

0

－

Others

2,718

14

17

Total

8,780

365

35

For the Fiscal Year Ended March 31, 2015
  

 

Millions of Yen
Amounts ofSecurities Sold

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks37,372

8,106

62

Bonds

1,263,314

18,3192,463

Japanese Government Bonds

1,250,457

18,3192,283

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

12,857－

179

Others200,778

1,535

862

Total

1,501,464

27,962

3,387

Corporate Bonds

57

(6) Impaired Securities
Of Securities other than Trading Securities (excluding those where there is significant difficulty in determining fair value), if the fair value
falls by 30% or more compared with the acquisition price and it is not expected to recover up to the acquisition price in view of the rate of
decline over past periods, the securities are devalued and the fair value is recorded as the carrying amount on the consolidated financialbalance sheet. In addition the difference between the fair value and the acquisition price is treated as impairment losses in the fiscal year.
In the case where the issuer is in bankruptcy, de facto bankruptcy, or has a likelihood of falling into bankruptcy, impairment loss isrecognized for securities when the market price is below the purchase price.
In the fiscal year ended March 31, 2016, the amount of impairment losses on securities was ¥1 million ($0 million) (all wereclassified under stocks).
In the fiscal year ended March 31, 2015, the amount of impairment losses on securities was ¥249 million (all impairment losses wereincurred on other securities).

2. Money Held in Trust(1) Money Held in Trust for Trading Purposes
As of March 31, 2016
Millions of Yen
Unrealized Gains (Losses)
Recognized as Income

Carrying Value
Money Held in Trust for
Trading Purposes

Carrying Value
Money Held in Trust for
Trading Purposes－

72,826

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

646

As of March 31, 2015
Millions of Yen
Carrying Value
Money Held in Trust for
Trading Purposes

132,774

Unrealized Gains (Losses)
Recognized as Income36(2) Held-to-Maturity Money Held in Trust
Not applicable.
(3) Other Money Held in Trusts (Money Held in Trust other than Held for Trading Purposes or Held-to-Maturity) Not applicable.

583. Net Unrealized Gains on Other Securities and Other Money Held in Trust
Components of Net Unrealized Gains on Other Securities in the consolidated balance sheets are as follows:
As of March 31, 2016
Millions of Millions of Yen
U.S. Dollars
Other Securities

662,391

5,877

－

－

Net Unrealized Gains

662,391

5,877

Deferred Tax Liabilities

184,447

1,636

Net Unrealized Gains(Prior to Equity Method Adjustment)

477,944

4,241

Non-controlling interests’ Portion－－

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

477,944

4,241

Other Money Held in Trust

Net Unrealized Gains

Note: Unrealized Gains on foreign currency translations of foreign currency-denominated other securities where there is significant
difficulty in determining fair value are included in “Other Securities” under “Net Unrealized Gains”.
As of March 31, 2015
Millions of Yen
Other Securities
Other Money Held in Trust

609,393－

Net Unrealized Gains

609,393

Deferred Tax Liabilities

169,303

Net Unrealized Gains(Prior to Equity Method Adjustment)

440,090

Non-controlling interests’ Portion－

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

Net Unrealized Gains

440,090

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

5927. Derivatives:
1. Derivative transactions to which hedge accounting is not applied
The following summarizes the contract values or the contracted principal equivalents, fair values, net unrealized gains (losses) and thevaluation methods of the fair values of the Bank’s derivative transactions that do not qualify for hedge accounting as of the consolidatedbalance sheet date, which are classified by types of financial instruments. Please note that the contract values in themselves do not reflect themarket risk associated with the Bank’s Derivative Transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2016
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:


Sold

－

－

－

－



Bought－－－－Interest Rate Options:


Sold

－

－

－

－



Bought

－

－

－

－

Sold

－

－

－

－

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

8,687,142

7,544,229

243,719

243,719

Variable Rate Receivable/Fixed Rate Payable

8,671,290

6,610,474(178,283)(178,283)

Variable Rate Receivable/Variable Rate Payable

195,330

195,330

55

55

Fixed Rate Receivable/Fixed Rate Payable

20,000－－－Over the Counter Transactions
Interest Rate Forwards:Interest Rate Swaps:

Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Others:Sold3,411,600

2,211,600(67,968)(26,217)

Bought3,314,000

2,210,900(10,027)(32,326)(12,504)

6,947

Total

60

Millions of U.S. Dollars
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:


Sold

－

－

－

－



Bought－－－－Interest Rate Options:


Sold

－

－

－

－



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

Sold

－

－

－

－



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

77,08866,946

2,162

2,162

Variable Rate Receivable/Fixed Rate Payable

76,94858,660(1,582)(1,582)

Variable Rate Receivable/Variable Rate Payable

1,733

1,733

0

0

177

－

－

－

Interest Rate Swaps:


Fixed Rate Receivable/ Fixed Rate Payable
Interest Rate Options:



Sold

－

－

－

－



Bought－－－－Others:Sold30,274

19,625

(603)

(232)



Bought29,408

19,619

(88)

(286)

(110)

61

Total

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

61

As of March 31, 2015
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:


Sold

－

－

－

－



Bought－－－－Interest Rate Options:


Sold

－

－

－

－



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

Sold

－

－

－

－



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

9,648,211

8,339,757

154,881

154,881

Variable Rate Receivable/Fixed Rate Payable

9,586,236

7,355,887(103,717)(103,717)

Variable Rate Receivable/Variable Rate Payable

44,20024,2008

8

Fixed Rate Receivable / Fixed Rate Payable

30,00020,000－－Interest Rate Swaps:

Interest Rate Options:


Sold

－

－

－

－



Bought－－－－Others:Sold

3,948,400

2,580,000(58,453)(7,766)

Bought3,956,750

2,737,300(6,045)(30,306)(13,325)

13,099Total

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

62(2) Currency-Related Transactions
As of March 31, 2016
Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Net Unrealized
Gains (Losses)

Fair Value

Exchange-Traded Transactions









Currency Futures:









   Sold

－

－

－

－

   Bought

－

－

－

－

  Currency Options:









   Sold

－

－

－

－

   Bought

－

－

－

－





16,754

13,848(22)(22)

   Sold

104,510

2,423

750

750

   Bought

86,306

2,377

(357)

(357)

   Sold

－

－

－

－

   Bought

－

－

－

－

   Sold

－

－

－

－

   Bought

－

－

－

－

369

369

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

Total

63

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

Total Contract
Value
Exchange-Traded Transactions



Currency Futures:

Net Unrealized
Gains (Losses)

Fair Value













   Sold

－

－

－

－

   Bought

－

－

－

－

  Currency Options:









   Sold

－

－

－

－

   Bought

－

－

－

－





148

122

(0)

(0)

   Sold

927

21

6

6

   Bought

765

21

(3)

(3)

   Sold

－

－

－

－

   Bought

－

－

－

－

   Sold

－

－

－

－

   Bought

－

－

－

－

3

3

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

Total

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

64

As of March 31, 2015
Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)

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

Net Unrealized
Gains (Losses)

Fair Value










   Sold

－

－

－

－

   Bought

－

－

－

－

  Currency Options:









   Sold

－

－

－

－

   Bought

－

－

－

－





29,268

9,756

(367)

(367)

   Sold

63,339342(1,268)(1,268)   Bought

74,315

324

1,027

1,027

   Sold

－

－

－

－

   Bought

－

－

－

－

   Sold

－

－

－

－

   Bought

－

－

－

－

(607)

(607)

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

Total

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

65(4) Bond-Related Transactions
As of March 31, 2016
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:Sold59,382

－

(78)

(78)



Bought

1,516

－

(3)

(3)

Bond Futures Options:


Sold

－

－

－

－



Bought

3,000

－

11

3

Over the Counter Transactions
Bond Options:


Sold

－

－

－

－



Bought

1,000

－

0

(1)

Sold

－

－

－

－

Bought

－

－

－

－

(70)

(80)

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Others:
Total

Millions of U.S. Dollars
Total
Contract
Value
Exchange-Traded Transactions
Bond Futures:


Sold

526

－

(0)

(0)



Bought

13

－

(0)

(0)

Sold

－

－

－

－

Bought

26

－

0

0

Sold

－

－

－

－

Bought

8

－

0

(0)

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

Others:


Sold

－

－

－

－



Bought

－

－

－

－

(0)

(0)

Total

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

66

As of March 31, 2015
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:



Sold

7,080

－

13

13

Bought

736

－

(0)

(0)

Bond Futures Options:


Sold

－

－

－

－



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

Sold

－

－

－

－



Bought

2,000

－

6

(0)

－

－

Others:


Sold

－

－



Bought

－

－

Total

－

－

19

12

Notes:
1. Transactions mentioned above are valued at fair value, and Net Unrealized Gains (Losses) are accounted for in the consolidated
statements of income.
2. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Osaka Exchange, Inc.
Over the counter transactions are valued using calculation models for option prices, etc.
(5) Commodity-Related Derivative Transactions
Not applicable.

(6) Credit Derivative Transactions
Not applicable.

672. Derivative transactions to which hedge accounting is applied
The following summarizes the contract values or the contracted principal equivalents, fair values and the valuation methods of the Bank’s
derivative transactions that qualify for hedge accounting as of the consolidated balance sheet date, which are classified by types of financial
instruments. Please note that the contract values in themselves do not reflect the market risk associated with the Bank’s Derivative
Transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2016
Method for Hedge
Accounting
Basic Treatment



Items

Total Contract
Value

Fixed Rate Receivable/Variable Rate Payable

80,00080,0003,615

Variable Rate Receivable/Fixed Rate Payable

5,140,953

4,075,245(232,972)－－－

Exceptional
Treatments forInterest Rate
Swaps

Interest Rate Swaps



Total

Fixed Rate Receivable/Variable Rate Payable

540,000

180,000

2,400

Variable Rate Receivable/Fixed Rate Payable

1,016,539

1,016,539(95,555)

Method for Hedge
Accounting

Fair Value

Interest Rate Swaps

Variable Rate Receivable/Variable Rate Payable

Basic Treatment

Millions of Yen
Contract Value(Over 1 Year until
Settlement or Expiry)(322,512)

Items

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

Total Contract
Value

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

709

709

32

Variable Rate Receivable/Fixed Rate Payable

45,62036,163(2,067)－－－

Fixed Rate Receivable/Variable Rate Payable

4,791

1,597

21

Variable Rate Receivable/Fixed Rate Payable

9,020

9,020

Variable Rate Receivable/Variable Rate Payable

Exceptional
Treatments forInterest Rate
Swaps

Interest Rate Swaps



Total

(847)
(2,861)

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

68

As of March 31, 2015
Method for Hedge
Accounting
Basic Treatment

Items

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

Total Contract
Value

Fair Value

Interest Rate Swaps



Fixed Rate Receivable/Variable Rate Payable

120,000

80,000

4,796

Variable Rate Receivable/Fixed Rate Payable

5,795,775

5,071,745(174,149)

Variable Rate Receivable/Variable Rate Payable

113,930－(1,425)

Fixed Rate Receivable/Variable Rate Payable

820,000

540,000

4,244

Variable Rate Receivable/Fixed Rate Payable

979,306

979,306

Exceptional
Treatments forInterest Rate
Swaps

Interest Rate Swaps



Total

(74,142)(240,676)

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted, Other
Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Loans and Bills Discounted, Held-to-Maturity Debt
Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 24, February 13, 2002 “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in
Banking Industry”.
4. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions are valued using discounted present value or calculation models for option prices, etc.
(2) Currency-Related Transactions
As of March 31, 2016


Method for Hedge
Accounting
Basic Treatment

Millions of Yen
Items

Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

508,788309,470973

454,625－

10,403－－－Forward Foreign Exchange Contracts:
㻌 Sold㻌㻌 Bought㻌



Total





Method for Hedge
Accounting
Basic Treatment

11,377

Millions of U.S.Dollars
Items

Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

4,514

2,746

8

㻌 Sold㻌

4,034

－

92



㻌 Bought㻌

－

－

－



Total





100

Forward Foreign Exchange Contracts:

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

As of March 31, 2015


Method for Hedge
Accounting
Basic Treatment

Millions of Yen
Items

Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

419,012263,397(901)

806,775

－

1,903

－

－

－

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



Total

1,002

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

(4) Bond-Related Transactions
Not applicable.

28. Related Party Transactions:
For the Fiscal Year Ended March 31, 2016
There were no significant related-party transactions.
For the Fiscal Year Ended March 31, 2015
There were no significant related-party transactions.

7029. Segment Information:
(1) Description of Reportable Segments
The Group classifies the businesses of the Bank and its consolidated subsidiaries as individual business segments. Among those businesssegments, the business of the Bank is deemed as the reportable segment.
The Bank, as an individual financial institution, provides such financial services as deposits, debentures, lending, market fundmanagement, trading operations and clearing. 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, the Bank strives to maintain an orderly financial system within the shinkin bank industry.
(2) Method of Calculating Amounts by Reportable Segment
The accounting methods of the reportable segment are the same as those described in the “Significant Accounting Policies”. Reportablesegment profit is based on profit attributable to owners of parent.
(3) Amounts by Reportable Segment
For the Fiscal Year Ended March 31, 2016
(Millions of Yen) 

Reportable segment

 

Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

Income External customers

267,048

35,186302,234(80)

302,154

2,627

2,268

4,895

(4,895)－

Total

269,675

37,454

307,130(4,975)

302,154

Segment profit

40,8752,942

43,818(1,037)42,781

Segment assets

34,887,645

280,959

35,168,605(75,699)

35,092,905

Segment liabilities

33,274,483

193,591

33,468,074(8,138)33,459,936

 Depreciation

3,910

5,074

8,984

(0)

8,984

 Interest Income

204,650370

205,021(148)

204,873

 Interest Expenses

127,242

110

127,353(21)

127,331

 Income Taxes

15,002

1,633

16,635 (4)16,631

Increase in Tangible andIntangible Fixed Assets

4,865

1,728

6,594

－

6,594

 Inter-segment

Other items

71

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

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

Income External customers

2,369

312

2,682

(0)

2,681

23

20

43

(43)

－

2,393

332

2,725

(44)

2,681

Segment profit

362

26

388

(9)

379

Segment assets

309,589

2,493

312,082(671)

311,410Segment liabilities

295,274

1,717

296,992(72)

296,920

 Depreciation

34

45

79

(0)

79

 Interest Income

1,816

3

1,819

(1)

1,818

 Interest Expenses

1,129

0

1,130

(0)

1,129

 Income Taxes

133

14

147

(0)

147

43

15

58

－

58

 Inter-segment
Total

Other items



Increase in Tangible andIntangible Fixed Assets

Notes:
1. The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, asset management, consumer credit
guarantees, investment and M&A advisory operations, and data processing outsourcing.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥1,037 million ($9 million) comprises reduction of ¥643 million ($5 million) on
profit attributable to non-controlling interests and ¥393 million ($3 million) on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥75,699 million ($671 million) comprises reduction of ¥53,114 million ($471
millions) on eliminations relating to capital consolidation and ¥22,584 million ($200 million) on inter-segment elimination, etc.
(iii) Reduction of ¥8,138 million ($72 millions) on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv) The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the Consolidated Statement of Income.

72For the Fiscal Year Ended March 31, 2015
(Millions of Yen) 

Reportable segment

 

Shinkin Central Bank
business

Other

Total

Amount presented
in the consolidated
financial statements

Adjustment

Income External customers

275,92132,076

307,997(103)

307,894

2,314

2,147

4,462

(4,462)－

Total

278,236

34,224

312,460(4,565)

307,894

Segment profit

60,817

2,916

63,734(1,037)

62,696

Segment assets

33,269,249

320,182

33,589,431(73,357)

33,516,073

Segment liabilities

31,861,297

235,304

32,096,601(14,284)

32,082,317

 Depreciation

4,025

4,417

8,443

(0)

8,442

 Interest Income

219,379464

219,844(80)

219,763

 Interest Expenses

130,710151

130,862(20)

130,841

 Income Taxes

20,187

1,375

21,562  

20

21,583

5,181

4,354

9,536

－

9,536

 Inter-segment

Other items

Increase in Tangible andIntangible Fixed Assets

Notes:
1. The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, asset management, consumer credit
guarantees, venture capital and M&A intermediary, and data processing outsourcing.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥1,037 million comprises reduction of ¥586 million on profit attributable tonon-controlling interests and addition of ¥451 million on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥73,357 million comprises reduction of ¥53,114 million on eliminations relating tocapital consolidation and ¥20,242 million on inter-segment elimination, etc.
(iii) Reduction of ¥14,284 million on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv) The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the Consolidated Statement of Income.

(Related Information)
For the Fiscal Year Ended March 31, 2016
1. Information by service(Millions of Yen)
Income from externalcustomers

Securities investment
operations
210,601

Lending operations

Other

23,783

Total
67,731

302,116(Millions of U.S. Dollars)
Income from externalcustomers

Securities investment
operations
1,868

Lending operations
211

Other

Total
601

2,680

73

2. Information by geographic region(1) Income                                 Japan
United States
Europe179,169
28,41012,505

Other82,031                             Japan
United States
Europe
1,589
252
110

Other

(Millions of Yen)
Total
302,116(Millions of U.S. Dollars)
Total
727
2,680

Note:
Income from derivative transactions and Trading income is included in Other.
(2) Tangible fixed assets
The Group’s tangible fixed assets located in Japan account for over 90% of the tangible fixed assets presented in the Consolidated
Balance Sheet. Consequently, this information is omitted.

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

IncomeName of customer
The Government of Japan

Income71,912(Millions of Yen)
Related segment
Shinkin Central Bank business

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

For the Fiscal Year Ended March 31, 2015
1. Information by service(Millions of Yen)Securities investment
operations

Lending operations

211,483

27,652

Income from externalcustomers

Other

2. Information by geographic region(1) Income                                 Japan
United States
Europe179,728
24,15918,483

Total
68,758307,894

85,523(Millions of Yen)
Total
307,894

Other

Note: Income from derivative transactions and Trading income is included in Other.
(2) Tangible fixed assets
The Group’s tangible fixed assets located in Japan account for over 90% of the tangible fixed assets presented in the Consolidated
Balance Sheet. Consequently, this information is omitted.
3. Information by principal customer
Name of customer
The Government of Japan74

Income77,758(Millions of Yen)
Related segment
Shinkin Central Bank business(Information related to Impairment losses of Fixed Assets by Reportable Segment)
For the Fiscal Year Ended March 31, 2016
Not applicable.
For the Fiscal Year Ended March 31, 2015
(Millions of Yen)Impairment losses

Reportable segment
Shinkin Central Bank business
64

Other

Total
－

64

Note: The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, asset management, consumer
credit guarantees, venture capital and M&A intermediary, and data processing outsourcing.
(Information related to Amortization of Goodwill and Balance of Unamortized Goodwill by Reportable Segment)
Not applicable.
(Information related to Accrual of Income from Negative Goodwill by Reportable Segment)
Not applicable.

30. Amounts per Share:
Yen
2016

U.S. Dollars
2016

2015

Net Assets per Share

301,512.71

301,997.98

2,675.59

Net Income per Share

7,115.71

12,865.13

63.14

－

－

－

Net Income per Share after Adjustment for Common
Share equivalents
Notes:
1. The basis for calculation of net assets per share is as follows:
2016

2016

2015

Millions of U.S.
dollars
Millions of U.S.
dollars
Millions of U.S.
dollars
Millions of U.S.
dollars
Millions of U.S.
dollars
Millions of U.S.
dollars
Millions of U.S.
dollars

Total Net Assets

Millions of Yen

1,632,969

1,433,756

Amount Deducted from Total Net Assets

Millions of Yen

213,380

11,883

Non-controlling interests

Millions of Yen

9,743

9,758

Preferred Dividends

Millions of Yen

2,124

2,124

1,512

－

200,000－

1,419,588

1,421,873

4,708,222

4,708,222－－

4,000,000

4,000,000－－

708,222708,222－－

Dividend attributable to specific
Millions of Yen
common shares
Distribution of residual assets
Millions of Yen
attributable to specific common shares
Net Assets at Fiscal Year-end Used toMillions of Yen
Calculate Net Assets per Share
Number of Share Units at Fiscal Year-end
Unit
Used to Calculate Net Assets per Share
Number of General Common
Unit
Share Units
Number of Preferred
Unit
Share Units

14,490
1,893
86
18
13
1,774
12,597* 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.

752. The basis for calculation of net income per share is as follows:
2016

2016

2015

Millions of Yen

42,781

62,696

Millions 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

18

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

18

Millions of Yen

40,656

60,571Millions of U.S.
dollars360

Average Number of Share Units for the
fiscal year

Unit

5,713,686

4,708,222－－

Average Number of General Common
Share Units

Unit

4,000,000

4,000,000－－

Average Number of Specific Common
Share Units

Unit

1,005,464－－－

Average Number of Preferred
Share UnitsUnit

708,222708,222－－

Profit attributable to owners of parent

Preferred Dividend
Net Income Used to Calculate
Net Income per share379* When calculating net income per share, of dividends attributable to preferred securities, dividends attributable to preferred shares are
deducted from income attributable to owners of parent whereas participating dividends are not deducted from income attributable toowners of parent.
3. Net income per Share after adjustment for Common share equivalents is not listed as there are no dilutive securities.

31.

76

Subsequent Events:
Not applicable.

77

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

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

78

2016

2015

9,106,821
339,088
14,999101,033
174,689
240,91172,826
17,839,405
6,763,822
13,80099,10069,9698,292
88,564(45,682)
34,887,645

6,854,374
510,601
49,98785,418229,858
160,130
132,774
19,132,160
5,885,739
9,178
79,741
69,773
4,543
108,691(43,723)
33,269,249

80,813
3,009
133
896
1,550
2,137
646
158,305
60,021
122
879
620
73
785
(405)
309,589

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
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

27,236,823
3,055,520
111,022829,320
48,39763,804
1,409,435
256
299,242
1,356
80
18,696381
105,473
6,109
88,56433,274,483

25,571,093
3,007,780
99,260935,320
382,108
73,944
1,281,700
264
263,554
1,235
80
18,049358
111,750
6,106
108,691
31,861,297

241,696
27,114
985
7,359
429
566
12,507
2
2,655
12
0
165
3
935
54
785
295,274

Total Net Assets
Total Liabilities and Net Assets

1,613,161
34,887,645

1,407,951
33,269,249

14,315309,5892016

Non-Consolidated Statement of Income
Non-Consolidated Statement of Income
Millions of
U.S. Dollars

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

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

2015

2016

2016

204,650
23,783
9,506
1,064
20
8
169,408859
8,055
12,05438,3146,600
269,675

219,379
27,652
7,454
1,107
58
180
181,504
1,422
7,774
18,18523,266
9,630
278,236

1,816
211
84
9
0
0
1,503
7
71
106
339
58
2,393

127,242
44,595
10,57910,864
657
239
4,470
53,663
2,171
7,021
48,001
27,382
4,148
213,797

130,710
48,545
13,938
11,129695
97
2,216
52,240
1,845
6,223
238
29,366
26,418
4,273
197,230

1,129
395
93
96
5
2
39
476
19
62
425
242
36
1,897

55,87881,005495

15,259(257)
15,00240,875

17,6862,501
20,18760,817

135
(2)
133
362

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

Yen
2016

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

6,782.15
3,000.00
1,500.00
6,500.00

U.S. Dollars
2015

12,466.12
3,500.00
7,000.00

2016

60.18
26.62
13.31
57.68

79

Organization (As of July 31, 2016)
General Meeting of Members
Corporate Auditors
Board of Directors
Chairman of the Board of Directors (part-time)
President and Chief Executive Officer
Deputy Presidents
Senior Managing Director
Managing Directors
Directors

Chief Secretary
Internal Audit Division
General Affairs Division
Legal & Compliance Office
Personnel Division
Strategic Planning Division
Investor & Public Relations Office
Trust Business Project Division
Financial Management Division
Risk Management Division
Credit Planning & Supervision Division
Business Promotion Division
Disaster Recovery & Reconstruction
Support Office*SME Business Solution Division
Shinkin Networks Promotion OfficeInternational Business Solution DivisionInternational Operations Center
Retail Business Solution DivisionCorporate Business Division I
Corporate Business Division II
Osaka Corporate Business DivisionTokyo Business Division
Kanto Business Division I
Kanto Business Division II
Hokkaido Branch
Tohoku Branch(Disaster Recovery & Reconstruction Support office)*

Hokuriku Branch
Shizuoka Branch
Nagoya Branch
Osaka Branch

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

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

The SCB GroupThe SCB Group
Trust
banking

Shinkin
Trust Bank
■

■
■

80

Trust businessSpecial money trust
Securities
investment trust
Negotiablesecurities trust
Money debentures
trust
Designated gift
trust
Public interest trust
Land trust
Banking¥10bn in capital(100% ownership)

Asset
management

Personal loan
guarantees

Investment and
M&A advisory

Data processing
consignment

Consigned
clerical work

Shinkin AssetManagement

Shinkin
Guarantee

Shinkin
CapitalThe Shinkin Banks
Information
System Center

Shinkin
ChukinBusiness

Securities

Shinkin
Securities■

Dealing■

Brokerage■

Underwriting

ShinkinInternational
■

■

■

■

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

Underwriting new
bonds and agency
business in theeuro market
Dealing andbrokering forexisting euro
bonds
Foreign securities
investment andconsulting£30mn in capital(100% ownership)
London local
securities entity

■

■

■

Management
services fordiscretionary
investment contract
assets■Management
services forinvestment trust
assets¥200mn in capital(100% ownership)

Debt guarantee
business(guarantees for
unsecuredpersonal loans
provided byshinkin banks)■

Investment banking

■

■

M&A
brokering

Data processing
consignment(handles SCB
administrative work)■

Softwaredevelopment■

Computing■

Promissory
note exchange■

Branch,dormitory, andother property
management■¥70mn in capital(100% ownership)■■■¥1.0bn in capital(99.1% stakewith Shinkin
Trust Bank at 0.8%);¥0.8bn capitalreserve

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

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

Shinkin Central Bank,
the Central Bank for
Shinkin Banks

International Directory (As of July 31, 2016)
Deputy President(in charge of Treasury Operations)Katsuo Akiyama
Senior Managing Director(in charge of Treasury/
Credit & Alternative Investment)
Hajime Hioki

As the central financial institution in Japan forthe cooperative regional financial institutions,known as shinkin banks, the Shinkin Central Bank
(hereinafter the SCB) occupies a well-establishedposition in Japan’s financial industry. Shinkin banks
currently hold funds totaling some ¥134 trillion(around US$1,195 billion).

Managing Director(in charge of Treasury Business)
Norihiro Takano
Managing Director(in charge of Strategic Planning/
International Business Solution/Overseas Offices)
Hiroshi Sudo
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
Director: Yuuji Takahashi
International Business Solution Division(including International Operations Center/
Correspondent Banking)Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
General Manager: Makoto Asahi
International Operations Center
Address: 8-1, Kyoubashi 3-chome,
Chuo-ku, Tokyo 104-0031
Telephone: +81-3-5250-1700
Facsimile: +81-3-5250-1780
SWIFT: ZENB JPJT
General Manager: Hideo Okada

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

Operational Policies

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

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

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

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

7. Nurture professionals and create an attractive workplace.
8. Enhance public trust in the SCB.

Corporate Data (as of March 31, 2016)
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, 2016)

Shinkin Central Bank (SCB)
June 1, 1950
1,199
14
5
¥34,644 billion ($307 billion)¥33,099 billion ($293 billion)¥690 billion ($6,131 million)¥90 billion ($807 million)

41.10%265
A1 (Moody’s)
A (S&P)
A+ (R&I)
AA (JCR)		* ‌The number of employees includes full-time Directors and Corporate Auditors.
Our overseas network includes Shinkin International Ltd., a subsidiary in London.
The total assets and total funds are the average balances for the year ended March
31, 2016.

Corporate Business Promotion Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7665
Facsimile: +81-3-3278-7045
General Manager: Naoki Hemmi
Treasury Business Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7642
Facsimile: +81-3-3278-7040
SWIFT: ZENB JPJT
General Manager: Kengo Kaji
Treasury Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7660
Facsimile: +81-3-3278-7043
SWIFT: ZENB JPJT
General Manager: Kenji Tanaka
Credit & Alternative Investment Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7664
Facsimile: +81-3-3278-7044
General Manager: Daigo Morishita

Treasury Operations Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7666
Facsimile: +81-3-3278-7046
SWIFT: ZENB JPJT
General Manager: Tomoaki Nishimura

New York

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

LondonOverseas 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: Tomohiro Kishi

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

Hokkaido(Sapporo)

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: Koichi Kawashima

Tohoku(Sendai)

Hokuriku(Kanazawa)
Chugoku(Hiroshima)

Okayama Kobe
Osaka
Shikoku(Takamatsu)

FukuokaMinami-Kyushu(Kumamoto)Head Office

NagoyaShizuokaHead Office
BranchOffice/subsidiary

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

81

Shinkin Central Bank

Annual Report 2016

Shinkin Central Bank

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

Printed in Japan

Annual Report

Shinkin Central Bank

2016