Shinkin Central Bank

Annual Report2014

Shinkin Central Bank,
the Central Bank for
Shinkin Banks
As the central financial institution of shinkin banks,
Shinkin Central Bank (referred to as SCB hereafter)
has occupied a well-established position in Japan’s
financial industry, with shinkin banks having a totalof ¥128 trillion (equivalent to $1,244 billion) in
funds.

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

Operational Policies

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

2. 	Stable fund-raising from shinkin banks as well as diversificationof funding sources

3. 	Upgrading market operation and developing financial services
4. 	Actively pursuing new business in conformity with changes infinancial circumstances

5.	Contributing to regional development and revitalization hand inhand with shinkin banks

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

7. Nurturing professionals and creating an attractive workplace
8. Enhancing public trust in the SCB

Corporate Data (as of March 31, 2014)
Name:
Establishment:
Number of Employees:
Domestic Network:
Overseas Network:
Total Assets:
Total Funds:
Paid-in Capital:(Preferred Shares):
Capital Adequacy Ratio(Consolidated):
Number of Member Shinkin Banks:Long-term Credit Ratings:

Shinkin Central Bank (SCB)
June 1, 1950
1,183
14
5
¥31,390 billion ($304 billion)¥29,978 billion ($291 billion)¥490 billion ($4,769 million)¥90 billion ($883 million)

37.86%267
A1 (Moody’s)
A+ (S&P)
A+ (R&I)
AA (JCR)		(As of July 31, 2014)
Note: ‌The number of employees includes full-time Directors and Auditor. The
number of Overseas Network includes Shinkin International, Ltd., a subsidiaryin London. The amounts of total assets and total funds are the averagebalances for the year ended March 31, 2014.

Shinkin Central Bank Annual Report 2014

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

Shinkin Central Bank
For the years ended March 31,

2014Millions of U.S. Dollars

2013

2012

2014

2013

$

$

2012

For the Fiscal Year280,971 ¥383,948

Total Expenses

232,305

344,559

334,957

Net Income (Loss)

35,39632,024

Net Business Profit (Loss)

43,251¥¥

370,260

2,729

4,080

$ 4,503

2,256

3,661

4,073

29,007

343

340

352

45,92745,451

420

488

552

¥30,939,429¥30,184,837¥30,049,035$300,557$320,774$365,471

Loans and Bills Discounted

5,975,832

5,460,155

5,374,685

58,051

58,02565,369Securities

18,450,501

19,681,236

20,624,250

179,235

209,152

250,842

Total Liabilities

29,684,307

28,956,639

28,975,645

288,365

307,721352,416

Deposits

23,689,313

22,012,166

21,609,051

230,127

223,923

262,819

Debentures

3,168,110

3,548,380

3,965,870

30,77637,70848,234

1,255,122

1,228,197

1,073,389

12,192

13,052

13,055

Total Income

At the Year-end
Total Assets

Net Assets

U.S. dollar amounts are converted for convenience only, at ¥82.22, 94.10 and 102.94 per dollar, the prevailing rate on March 31, 2012, 2013 and 2014 respectively.
Total assets and total funds amounted to ¥31,390 billion ($304 billion) and ¥29,978 billion ($291billion) of the average balance at the year ended March 31, 2014.

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 ················· 15

The SCB Is a Powerful Financial Institution in Japan,

Risk Management ·········································· 16

Which Is Listed on the Tokyo Stock Exchange ········ 4Corporate Social Responsibility (CSR) Activities ···· 19Management Issues and Strategies ······················· 6What Are Shinkin Banks? ································ 20

Efforts Aimed at Recovery from the Great East Japan

Preferred Shares ··········································· 22

Earthquake···················································· 8

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

Overseas Network ········································· 9Organization / SCB Group ······························· 82

Business Overview ········································ 10International Directory ··································· 83

Capital Adequacy ·········································· 11This material contains certain forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, andactual results may materially differ from those contained in the forward-looking statements as a result of various factors.
U.S. dollar amounts are converted for convenience only, at ¥102.94 per dollar, the prevailing rate on March 31, 2014.

1

Message from the President and CEO

Shinkin Central Bank, or the SCB, serves as thecentral bank for Japan’s 267 shinkin banks—regional financial institutions located throughout the country that specialize in operations
with small and medium-sized enterprises.
Since its establishment in 1950, the SCB
has provided a wide range of financial services
in order to expand the potential of the shinkinbank industry as a whole.
Earnings Performance in Fiscal 2013
During fiscal 2013 (ended March 2014), we
continued with our efforts to diversify revenue
streams, and maintain a highly stable portfolio.
We continually optimized our portfolio in
response to changes in the market environment, and in accordance with the principle ofdiversified investment, worked to build andexpand a portfolio with new sources of earnings. As a result, on a non-consolidated basis,
we achieved earnings mostly in line with initial
forecasts, with net income increasing ¥3.3 billion year on year to ¥35.3 billion.
Current Status of the Management
Plan and Disaster Recovery Assistance
Fiscal 2013 was the initial year for the SCB’s
current medium-term management plan, “SCB
Medium-Term Action Program 2013.” We
designated this first term as a “year to take a
new step forward with shinkin banks for thesustained development of regional areas,” and2

implemented priority measures in three Core
Plans and two Support Plans. Specifically, tobetter support shinkin banks with resolution ofregional and SME financing issues, we focusedon the three main measures of “Strengthen
support for SMEs,” “Strengthen support forretail financing,” and “Strengthen support forcommunity revitalization.” Based on thesemeasures, we took steps to expand the functionality and services provided to shinkinbanks, including broadening the various typesof support for the life stages of SMEs, expanding and strengthening structures to support
overseas expansion of shinkin bank clients,
and developing and offering products for thelife events of individuals. We also provided
consulting for community revitalization jointlywith shinkin banks, and pursued measures toorganize shinkin banks facing similar issues for
specific business fields, such as tourism or hot
spring resorts.
Additionally, to support recovery efforts
from the Great East Japan Earthquake, SCB
offered the “Shinkin Great East Japan Earthquake Children’s Support Fixed-Term Deposit
II” as a set including a donation to a fund supporting education for children orphaned by
the disaster, and provided assistance for thebusiness revitalization of shinkin bank customers in disaster areas through the “Shinkin no
Kizuna” reconstruction support fund. We
also continued with measures utilizing networks both within and outside the industry to
expand sales channels, and support volunteer
activities in disaster areas.
Future Business Strategies
SCB has designated fiscal 2014, the second
year of the medium-term management plan, asa “year to advance further ahead with shinkinbanks for the future of regional areas.” Basedon our relationship with shinkin banks, and thestrongest network in the shinkin bank industry,
we will steadily implement the various measures in the medium-term management plan,and continue with efforts to support recovery
from the Great East Japan Earthquake.

Strengthening Internal Management
Systems
The SCB will continue our efforts to carry out
thorough compliance, strengthen corporate
governance, and contribute to society, so as
to become a distinguished financial institution
well respected in the society.
Recognizing our crucial responsibilities as
the central bank of the shinkin bank industry,
we will strive with the utmost commitment
to facilitate the continued development of theindustry and thus contribute to development
throughout Japan.
I would like to take this opportunity
to express my sincere gratitude to all ourshareholders and other stakeholders for theircontinued understanding and support.
July 2014

Mitsuo Tanabe
President and Chief Executive Officer

Shinkin Central Bank Annual Report 2014

Corporate Management and Auditors(As of July 31, 2014)

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

President and Chief Executive Officer
Mitsuo Tanabe

Directors

Koji Omae

Deputy President

Yasuhiko Hori
Norihiro Takano

Chairman of the Board of Directors

Katsuo Akiyama

Atsushi Kudo
Hiroshi Sudo

Senior Managing Director
Hiroyuki Shibata

Naoya Okajima
Keisuke Izutsu

Managing Directors

Director and Executive Adviser

Mikio Ichiyanagi
Akira Ito
Hajime Hioki

Kimio Yamaguchi

Mitsuo Tanabe
Directors (Part-Time)

President and Chief Executive Officer

Shinji Sugiyama
Toshihisa Sato
Ichiro Nanakubo

Kei Itani
Tetsuji Hara
Kazuhiko Jinbo
Koji Sato
Shinichi Minowa
Kenichiro Mimuro
Yukio Kashima
Toshiyuki Masuda
Seiji Hino
Hiroyuki Hashimoto
Hiroshi Tsuboi
Akihiro Hasui
Hidetaka Nakamura
Tadatoshi Inaba

Katsuo Akiyama

Auditor

Hiroyuki Shibata

Osamu Taniguchi

Senior Managing Director

Deputy President

Auditors (Part-Time)
Shinji Tanamura
Masatoshi Takahashi
Masamichi Narita
Akio Okuyama

3The SCB Is a Powerful Financial Institution in Japan,
Which Is Listed on the Tokyo Stock Exchange
The SCB operates as a financial institution with the dual role of central bank forshinkin banks and an independent financial institution.
Founded in 1950, the SCB is the central bank for shinkin banks (See “What Are Shinkin Banks?”
on page 20), operating as a cooperative financial institution whose membership consists of all
shinkin banks nationwide.
The SCB plays the dual role of a central bank for shinkin banks and an independent financial institution. The SCB’s total funds mainly comprising deposits from shinkin banks and funds
acquired through the issuance of debentures had an average outstanding balance during the fiscal
year ended March 31, 2014, of ¥29,978 billion (equivalent to $291 billion), and total assets averaged¥31,390 billion (equivalent to $304 billion). The SCB is one of Japan’s leading financial institutions.

Overseas Networks and Correspondent Banks of the SCB(Number of banks with correspondent agreements by head branch; as of March 31, 2014)

The number of our overseas correspondent banks amounts to 243, with main branches covering
50 countries worldwide, as of the end of March 2014.
Shinkin International Ltd. (London)
New York Representative Office

Europe78 banksAsia
104 banks

Middle East
4 banks

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

Africa3 banks

Latin America
11 banks

Oceania
8 banks

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

The SCB Is the Central Bank of the Shinkin Bank Sector
The SCB’s funds are raised mostly through deposits mainly from shinkin banks and the issuance ofdebentures. The SCB invests these funds in securities and lends them out as loans, and uses theresulting profits to support the activities of shinkin banks.
Total assets: around ¥30 trillion (equivalent to $300 billion)
Domestic network: 14
Overseas network: 5
Number of employees: 1,183
Number of member shinkin banks: 267

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

ShinkinBank

Number of banks: 267
Total assets: ¥138,560 billion (equivalent to $1,346 billion)
Number of branches: 7,451
Number of employees: 112,525
Number of members: 9,282,698(As of March 31, 2014)

4

Roles
Central Bank for Shinkin Banks(1) S upplementing the Operational
Capabilities of Shinkin Banks
Japan’s 267 shinkin banks nationwide play a keyrole in supporting regional economies by lending to local organizations and SMEs. With total
deposits held by shinkin banks reaching ¥128
trillion (equivalent to $1,244 billion), shinkinbanks occupy a very important position within
Japan’s overall financial sector.
As the central financial institution forthe shinkin bank sector, the SCB is promptly
responding to changes in the operating environment of shinkin banks. Such changes include
increasingly sophisticated and diverse customer
needs, intensified competition with other typesof institutions, and demands for very stringent
management control systems. Specifically, the
SCB provides support for shinkin banks’ financial services utilizing shinkin banks’ network,
activities in support of regional development
and the management of small and mediumsized businesses, and over-the-counter sales ofinvestment trust fund products. Furthermore,
the SCB provides support in such areas as assetliability management (ALM) and marketablesecurities portfolio analysis to assist shinkinbanks in raising profitability and strengthening
risk management systems.
Just as the Bank of Japan acts as a clearing house for domestic exchange transactions
between banks, the SCB performs the role ofa clearing house for shinkin banks, and for theyear ended March 31, 2014, the SCB settled
domestic exchange transactions with a substantial total value of ¥229 trillion (equivalent
to $2,229 billion). Moreover, the SCB acts as
the intermediary in settlement of utility bills
handled by shinkin banks.
The SCB also plays the role of supporting
other operations of shinkin banks. In addition to
supplementing international operations such as
foreign exchange operations, the SCB has been
supplementing the lending operations of shinkinbanks, by commissioning shinkin banks to lend
to local small and medium-sized businesses andbusiness owners who are their customers.
In this way, the SCB is further reinforcing
its capabilities to support shinkin banks in areasin which it is either difficult or inefficient forshinkin banks to provide services as individual
institutions.

Shinkin Central Bank Annual Report 2014(2) Enhancing the Creditworthiness of the
Shinkin Bank Sector
The SCB acts as a “consultant” or a “homedoctor” for the shinkin bank sector as part ofits measures to proactively support the management of shinkin banks. Shinkin banks playtheir part by operating such schemes as the“Shinkin Bank Management Reinforcement
System” and the “Shinkin Bank Mutual Funding Support System.” The SCB works to maintain and enhance the creditworthiness of theshinkin bank sector through such activities as
management analysis, management consulting
and capital reinforcement for shinkin banks.
In recent decades, Japanese financial institutions have experienced several major crises,
including the collapse of the country’s asset
bubble in the 1990s, and more recently the
global financial crisis triggered by the Lehman
Brothers bankruptcy. However, amid such
unsettling periods for the financial system, the
SCB’s financial functions have played a crucialrole in maintaining confidence in the shinkinbank sector and contributed to the stability ofregional economies.

Independent Financial Institution(1) Institutional Investor
Looking at the average balance for the year
ended March 31, 2014, the SCB maintained
assets under management of ¥31,114 billion(equivalent to $302 billion). Of this total, the
SCB invested ¥18,590 billion (equivalent to$180 billion) in securities, in the form of government bonds, municipal bonds, corporate
bonds and foreign securities and ¥6,304 billion (equivalent to $61 billion) in short-termmoney markets.
The SCB manages a vast amount of money
in both domestic and international markets,
holding an important position in the financial
industry as one of Japan’s leading institutional
investors.
(2) Comprehensive Financial Services Supplier
The SCB conducts deposit-taking and lending
operations—the core functions of a financial
institution—issues debentures, and conducts
foreign exchange operations.
It also undertakes such auxiliary operations
as underwriting public bonds, handling private

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

Shinkin bank management reinforcement system

Management analysis system

SCBManagement advisory system

Shinkinbanks

Capital reinforcement system

Management analysis system

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

Management advisory system

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

Capital reinforcement system

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

5Management Issues and Strategies
The Shinkin Central Bank has formulated “SCB Medium-Term Action Program 2013,” a three-year medium-term management plan covering the period from fiscal 2013 to fiscal 2015.
We designated fiscal 2013, the first year of the plan, as a “year to take a new step forward with shinkin banks for the sustained development of regional areas,” and implemented priority measures in three Core Plans and two Support Plans.
During fiscal 2013 we focused particularly on Core Plan 1: Support shinkin bank efforts to resolve issues related to regional and SME financing. We concentrated on the three main aspects of “Strengthen support for SMEs,” “Strengthen support forretail financing,” and “Strengthen support for community revitalization,” and mainly implemented the following initiatives tomeet the diversifying needs of shinkin banks.

Overview of the New Medium-Term Management PlanSCB Medium-Term Action Program 2013
Working with shinkin banks for the sustainable development of regional areas
Core Plan 1:
Support shinkin bankefforts to resolve issues
related to regional and
SME financing

Support Plan 1:
Actively utilize industry
networks

Support Plan 2:
Human resources development
and establishment of robust
organizational frameworks

Core Plan 2:

Core Plan 3:

Assist in ensuring
management stability forshinkin banks

Enhance the financial andearnings stability of SCB

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

Net income: ¥35 billion

Outlier ratio: No more than 20%

6

Nonperforming-loan ratio:
Less than 1%

Shinkin Central Bank Annual Report 2014

Strengthen Support for SMEs

・Support for entrepreneurship, management
improvement, and business continuity
In April 2013, the SCB restructured the
Shinkin Business Solution Division into the
SME Business Solution Division, with the aimof enhancing its structures for supporting theefforts of shinkin banks for each life stage ofSMEs, including entrepreneurship, management improvement, and business continuity.
In addition, to support the associated consulting for SMEs, in May 2014 we began offering
the “Life Stage Support Program,” comprising theestablishment of the new “Shinkin no Tsubasa”
fund, and business alliances with external specialized agencies.

・Support for overseas expansion
The SCB has been pursuing business allianceswith local Asian banks in order to enhance its
structures to support the overseas businessexpansion of shinkin bank customers. During fiscal 2013, we concluded tie-ups with the
Bank for Investment and Development of Vietnam (BIDV), and the Bank of East Asia (BEA).
To provide shinkin banks and shinkin bankcustomers with local information and opportunities for mutual exchange, in partnership withallied banks we held seminars for local companies, as well as “Shinkin Conferences” in Hong
Kong, Shanghai, and Bangkok.
To support the overseas business operations of shinkin banks and shinkin bank customers, in April 2014 we concluded a memorandumon business alliance with Nippon Export andInvestment Insurance (NEXI).
Strengthen Support for Retail
FinancingIn April 2013, SCB established the Retail
Business Solution Division with the aim ofstrengthening its structure for supporting
retail financing through shinkin banks, suchas operations for individual loans and client
assets, as well as developing and offering products for individual life events.
In April 2014, SCB began offering the“Shinkin Family Support Fixed-Term Deposit,”
which combines a fixed-term deposit sold byshinkin banks with services offered by benefit
program companies, and health-related services from medical firms.

Strengthen Support for Community
Revitalization
The SCB, with the aim of strengthening its
structure for supporting the community revitalization initiatives of shinkin banks, in April
2013 restructured the Regional Business
Department of the Shinkin Business Solution
Division into the Regional Innovation Support
Office, and moved the offices to the ResearchInstitute.
To assist with the revitalization of the local
areas that comprise the business base forshinkin banks, in cooperation with shinkinbanks we provided consulting on how to revitalize shopping districts and hot spring areas.
We also held information exchange meetings
on community revitalization in order to promote the sharing of data and expertise amongshinkin banks facing similar issues for specificbusiness fields, such as tourism or hot spring
resorts.
Formulation of the“SCB PRINCIPLE OF ACTION”
The key to whether or not the SCB will be able
to realize the policies set out in the mediumterm management plan is human resources.
One of the action program’s support plans
aims to “develop human resources—people
who take pride in working for a central financial
institution and have a high level of professional
expertise.” To cultivate pride and ambition
among the SCB’s directors and employees as
members of the central financial institution forshinkin banks, we formulated the “SCB PRINCIPLE OF ACTION.” All SCB directors andemployees are expected to strongly heed theprinciples as our unified fundamental guidelines for decision-making and behavior during
the conduct of business operations.

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

7

Efforts Aimed at Recovery
from the Great East Japan Earthquake
Support for Recovery from the Great
East Japan Earthquake
The shinkin bank industry has been providing
ongoing and coordinated support for shinkinbank customers in disaster areas since immediately following the March 2011 earthquake
and tsunami.
Three years have passed since the disaster,and positive news stories regarding recovery
efforts are appearing regularly, such as therecent full resumption of train services on theseverely damaged Sanriku Railway. However,many people still live as refugees, and in fact
the region is only halfway along the road torecovery. In the midst of these efforts, thetrust and expectation placed in shinkin banks,with their strong roots in the community, andwhich continue to provide essential financing
to businesses and residents, is growing among
the local population.
The measures introduced in this section are part of the concerted effort by theshinkin bank industry, including the National
Association of Shinkin Banks (Zenshinkyo)
and related organizations, to support recovery by fully utilizing the nationwide shinkinbank network.
Of note, in April 2013 the SCB strengthened its support structure for disasterareas by moving its Disaster Recovery &Reconstruction Support Office from Tokyo
to Sendai, the core city in the Tohoku region.
We will continue to work as an industry toachieve true recovery for the disaster areas.
Participation in the “New Tohoku
Partnership Promotion Committee”
The SCB is providing ongoing reconstruction
support utilizing its industry network, andin December 2013 joined the New Tohoku

Partnership Promotion Committee* established by the Reconstruction Agency.
* The New Tohoku Partnership Promotion Committee
was established to allow companies and other organizations developing business in the disaster areas toshare and exchange information on recovery support
measures, further alliances among them, and achievesustainable business vitality in the Tohoku region.

Financial Products to Support DisasterAreas
The SCB has been offering financial products
to support disaster victims since fiscal 2011.
In fiscal 2013, we offered the “Shinkin Great
East Japan Earthquake Children’s Support
Fixed-Term Deposit II” at all shinkin banks
nationwide. We received subscriptions
amounting to ¥98.6 billion, of which 0.25%(¥246.5 million) was donated to support theeducation of orphaned children in Iwate,
Miyagi and Fukushima prefectures.
From June 2011 to July 2012, in collaboration with our subsidiary Shinkin AssetManagement Co., Ltd., we offered the “Shinkin
Reconstruction Assistance Scholarship Fund”(nicknamed “Children’s Future”), an over-thecounter investment trust in which a portionof the trust fee (0.225% of total net assets)
is donated to disaster orphans for a five-year
period. A total of about ¥27 million has been
donated to date.
Volunteer Activities of Shinkin Bank
Employees in Disaster Areas
As part of its aid for recovery from the Great
East Japan Earthquake, SCB has since fiscal
2011 been providing support for volunteer
activities to shinkin banks and related organizations nationwide. More than 1,500 execu-

tives and employees have participated to date.
Support for Shinkin Banks in Disaster
Areas through the Financial Functions
Strengthening Act
In November 2011, a new mutual support
system for the industry was establishedbased on the Act on Special Measures forStreng thening Financial Functions (the“Financial Functions Strengthening Act”). Thissystem allows shinkin banks in the disasterareas to provide smooth financial intermediary functions over the long term, in order tosupport recovery and reconstruction.
In February 2012, four shinkin banks
that had been heavy damaged in the disasterwere provided with ¥63.0 billion in capitalincreases (of which, ¥54.7 billion was capital
participation by the government), based on
the special law.
The SCB is providing ongoing support
to these four shinkin banks, including sending personnel, and assisting with advice andmonitoring for shinkin bank policies, in order
to allow these banks to maintain a strong
financial intermediary function, and steadily
implement strategies to benefits reconstruction of disaster areas.
Status of the “Shinkin no Kizuna”
Reconstruction Support Fund
The “Shinkin no Kizuna” reconstruction support fund was established in December 2011
to support business revival for shinkin bankcustomers. At the end of the March 2014, a
total of ¥1.9 billion had been committed forinvestment in 37 businesses in disaster areas.

Shinkin executives and employees conducting
volunteer activities in disaster areas

8

Shinkin Central Bank Annual Report 2014

Overseas Network
The SCB has overseas offices in New York,
Hong Kong, Shanghai, Bangkok and London.
These offices facilitate the SCB’s support
for shinkin banks by actively gathering andanalyzing information on local economies,
financial markets, investment environments,
and consumer markets.
Furthermore, representative offices also
accept trainees or visitors/missions fromvarious shinkin banks to assist the humanresource development program.
New York Representative OfficeEver since Overseas Economic Institute of
Shinkin Central Bank opened its New York
office in November 1983, the New York
Representative Office conducts researchon U.S. markets and assists its Head Office
to explore new investment opportunities.
Taking advantage of its location in the centerof the global financial activities, the New
York Representative Office identifies thelatest trends in the financial markets andobtains vital information for the SCB’s treasury operations.
As a common U.S. infrastructure for theshinkin bank industry, the New York officeprovides shinkin banks with information on
the fast-changing U.S. economy and financial
market, offering a wide range of support.
Hong Kong Representative OfficeEver since Shinkin Central Bank establisheda Hong Kong business office in November
1994, the Hong Kong Representative Officehas been continuously suppor ting theactivities of shinkin bank customers in Asian
countries, particularly in the South China
region, by providing information about theservices of the local banks, legal systems, tax
systems, employment, etc. The Hong Kong
Representative Office is providing shinkinbanks and their customers with the information relating to economic and financial
situations, and the investment environment
in Asian countries.
Shanghai Representative OfficeSince its inception in September 2004, theShanghai Representative Office has been
providing a variety of information relating
to economic and financial conditions, theinvestment and loan environment, and thelaws, taxation and employment of each region.
The Shanghai Representative Office also has
been offering detailed advice and a variety ofof support to shinkin bank customers moving
into China and those planning such a move inthe future.
Bangkok Representative Office
The Bangkok Representative Office, openedin October 2012, provides shinkin bank customers expanding or planning to expand to
Thailand, Vietnam, and Indonesia with information on the economic and financial conditions in those three countries, as well as theinvestment and financing environment, andthe current status of local laws, taxes, andemployment. The office also offers advice
and various types of support.
Shinkin International Ltd. (London)
Shinkin International Ltd., a wholly owned
subsidiary of the SCB, was established in
London in 1990 as an overseas office forsecurities business in order to expand investment opportunities for the shinkin banksector.
The company arranges Eurobonds in astrong relationship with issuing bodies andoffers these securities to the shinkin banksector in close cooperation with Shinkin
Securities Co. Ltd., another subsidiary of the
SCB. The company also serves its customers’
secondary market trading needs and provides
necessary information about the market.
Supporting the Overseas Expansionof Shinkin Bank Customers

Business Alliances with Asian Banks

As globalization of the international economy
advances, the SCB anticipates that SMEs—
customers of shinkin banks—will increasingly
look to expand overseas and engage in trading activities, particularly centered on China
and other countries in Asia.
For this reason, the SCB provides
support to shinkin bank customers thatare undertaking overseas expansion, specifically through SCB offices in such locations as Hong Kong, Shanghai and Bangkok.
Furthermore, from 2010 to 2012, the SCB
formed business alliance with four banks
in Asia. In addition, the SCB entered into abusiness alliance in April 2013 with the Joint
Stock Commercial Bank for Investment andDevelopment of Vietnam (Hanoi, Vietnam),then in November 2013 with The Bank ofEast Asia (Hong Kong). These relationships
are part of the SCB’s policy of strengthening

its support infrastructure for shinkin bankcustomers undertaking overseas businessexpansion.

Support for the Expansion of Overseas
Channels

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

Expansion into Asia by Shinkin Bank Customers
South Korea: 86
China: 1,365

Hong Kong: 126
Taiwan: 78

Thailand: 422
Vietnam: 226

Philippines: 79

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

Malaysia: 68
Singapore: 30
Indonesia: 156
Source: Tenth Survey on the Overseas Business of Shinkin Bank Customers (2013).

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
Reviewing the SCB’s operating results for fiscal
2013, operating income decreased by ¥103 billion (equivalent to $1,003 million) or 26.8% to¥280 billion (equivalent to $2,726 million). This
result was mainly attributable to a decline in gainon sales of government and other bonds. Meanwhile, operating expenses decreased by ¥110
billion (equivalent to $1,075 million) or 32.3% to¥231 billion (equivalent to $2,253 million). This
result was mainly attributable to a decrease infinancing costs centered on interest on deposits
and debentures, as well as a decline in financial
derivative expenses.
As a result, ordinary income increased by ¥7billion (equivalent to $72 million) from the previous fiscal year to a profit of ¥48 billion (equivalent
to $472 million). Net income increased by ¥3 billion (equivalent to $32 million) from the previous
fiscal year to a net profit of ¥35 billion(equivalent
to $343 million).
Funding
During fiscal 2013, the total amount of funding¥29,147 billion (equivalent to $283,154 million)at the end of the fiscal year, which was almost
the same amount in fiscal year 2012. Deposits received during the fiscal year amounted to¥23,684 billion (equivalent to $230,075 million).
This result was mainly attributable to increases in
fixed-term deposits from shinkin banks.
The SCB issued ¥628 billion (equivalent to$6,101 million) worth of debentures during the
fiscal year. The outstanding amount of debentures decreased by ¥380 billion (equivalent to$3,694 million) or 10.7% to ¥3,168 billion (equivalent to $30,776 million).
Asset Management
The amount of assets under management in fiscal 2013 increased by ¥699 billion (equivalent to$6,799 million) or 2.3% to ¥30,688 billion (equivalent to $298,117 million).
Owing to a decrease in government bonds,
the outstanding amount of invested securities decreased by ¥1,230 billion (equivalent to$11,955 million), or 6.2%, during the fiscal year, to¥18,450 billion (equivalent to $179,235 million) at
the end of the fiscal year.

Owing to an increase by national or governmental agencies and organizations, loans and bills
discounted increased by ¥515 billion (equivalent
to $5,009 million) or 9.4% during the fiscal year
to ¥5,975 billion (equivalent to $58,051 million)at the end of the fiscal year.
The outstanding amount of short-termmoney market assets increased by ¥1,699 billion (equivalent to $16,505 million), or 39.8%,
during the fiscal year, to ¥5,966 billion (equivalent to $57,965 million). This primarily reflected
increases in current deposits in the Bank of Japan.

Breakdown4.0%
of Funding¥651 Billion(As of March 31, 2014)

7.9%¥2,290 Billion
10.9%¥3,168 Billion
19.7%¥3,238 Billion
0.0%¥5.21.3%
Billion¥214 Billion
9.5%¥1,558 Billion

5.1%¥835 Billion81.2%¥23,684 Billion
59.5%¥9,767 Billion

4.0%

Securities
As of March 31, 2014, the outstanding amountof securities was ¥18,450 billion (equivalent to$179,235 million). Government bonds, corporate
bonds and other domestic securities accountedfor ¥14,762 billion (equivalent to $143,409 million) while foreign securities accounted for¥3,687 billion (equivalent to $35,826 million). In
foreign securities, the SCB mainly invests in safe
assets which include government-secured financial institution bonds and government-agency
bonds in major developed countries.
In order to advance its diversified investment
portfolio, the SCB also invests risk assets suchas stocks & investment trust funds not subject
to interest risk, and takes steps to optimize its
portfolio in response to shifts in the financing andinvestment environment.
Loans and Bills Discounted
The SCB has conducted a variety of loan businesses. As of March 31, 2014, the outstanding
amount of loans and bills discounted was ¥5,975
billion (equivalent to $58,051 million). Out of thetotal loans and bills discounted, agency loans toshinkin bank customers (small and medium-sizedbusinesses) through shinkin banks accounted for¥266 billion (equivalent to $2,587 million), while
direct loans to parties such as national or governmental agencies and organizations, regional
public corporations and charitable organizations accounted for ¥3,212 billion (equivalent to$31,202 million). Direct loans to business corporations accounted for ¥2,006 billion (equivalent
to $19,494 million).

Deposits
Government
Bonds
Negotiable
Deposits
Municipal Bonds
Debentures
Corporate
Bonds
Borrowed Money
Securities
Investment Trusts
Foreign Securities
OthersBreakdown¥651
of Asset
Management
Billion(As of March 31, 2014)
0.4% ¥132 Billion

19.5%¥5,966 Billion

0.5% ¥162 Billion
19.5%¥5,975 Billion

Short-Term Market
Operation
60.1%¥18,450 Billion

Securities
Loans and Bills
Discounted
Trading Assets
Money Held in Trust

Breakdown of Securities(As of March 31, 2014)

1.3%¥244 Billion
20.0%¥3,687 Billion
2.4%¥434 Billion

62.2%¥11,475 Billion

19.7%¥3,238 Billion
13.1%

5.1%
¥835 Billion¥2,423 Billion
1.3%¥214 Billion

1.0%
59.5%
¥184 Billion¥9,767 Billion

9.5%¥1,558 Billion

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

Breakdown4.0%
of Loans and Bills
Foreign Securities¥651 Billion
Discounted (As of March 31, 2014)Others
8.2%¥490 Billion

National andGovernmental
Agencies andOrganizations

4.4%¥266 Billion

33.6%¥2,006 Billion

46.3%¥2,765 Billion

Regional Public
Corporations
and Charitable
Organizations
and Others
Business
Corporations

7.5%¥446 Billion

Agency Loans
OthersOrdinary Income and Net Income (Non-Consolidated)

10

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

FY2009FY2010FY2011FY2012FY2013

Ordinary Income (Loss)

17,186

36,66235,575

41,16348,651Net Income (Loss)

28,36527,38729,00732,02435,396

Shinkin Central Bank Annual Report 2014

Capital Adequacy
OutlineThe SCB’s equity capital, as defined underregulations concerning capital adequacy ratios,
mainly comprises common shares from member shinkin banks, preferred shares issued inpublic that supplement common shares, andinternal reserves accumulated by the SCB todate. As per the application of transitional
measures based on new domestic Japanesestandards, equity capital also includes fixedperiod and perpetual subordinated loans.

Consolidated Capital Adequacy Ratio
The SCB’s consolidated capital adequacy ratio
at March 31, 2014, was 37.86%.
Equity capital, the numerator for calculating the capital adequacy ratio, amounted to¥1,692 billion (equivalent to $16,443 million).
Risk assets, the denominator for calculating the capital adequacy ratio, amounted to¥4,469 billion (equivalent to $43,420 million).

Measures to Enhance Capital Adequacy
Based on the recognition that increasing
equity capital is the most important way tosecure the sound management of financial institutions, the SCB has raised capital in phases
while working to accumulate internal reserves. In June 2009 the SCB raised ¥200 billion (equivalent to $1,942 million) in commonshares from the shinkin bank sector in orderto improve equity capital quality by increasingcore capital, and thus strengthen the SCB’s
financial constitution, and to stably carry out
functions as the central financial institution of
the shinkin bank sector.

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

Capital Adequacy Ratio (Domestic Standard)

Consolidated
Non-Consolidated

Capital Adequacy Ratio
Amount of Capital
Amount of Risk-weighted Assets
Capital Adequacy Ratio(%, billions of yen)
FY2009
28.17
1,312
4,659
28.06

FY2010
31.76
1,344
4,233
31.78

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

Note: Figures for FY2009 through FY2012 are based on the previous standard, while figures for FY2013 are based on the new standard.

11Asset Quality
Risk-Monitored Loans

The amount of risk-monitored loans as ofthe end of March 2014 was ¥125 million(equivalent to $1 million) for loans tobankrupt borrowers, ¥8,734 million(equivalent to $84 million) for delinquentloans, ¥86 million (equivalent to $0.8 million)

for loans past due three months or more, and¥28,926 million (equivalent to $280 million)
for restructured loans. Total risk-monitoredloans decreased by ¥724 million (equivalent
to $7 million) to ¥37,873 million (equivalent
to $367 million) during the fiscal year.

Risk-Monitored Loans (Non-Consolidated)(Million yen, %)End of March
2013
404
9,418
165
28,60938,597Loans to Bankrupt Borrowers
Delinquent Loans
Loans Past Due Three Months or More
Restructured Loans
Total Risk-Monitored Loans (A)The ratio of total risk-monitored loans
to total loans remained as low as 0.63%, andthe soundness of the SCB’s loan assets
remained high.

Partial direct write-offs

End of March
2014
125
8,734
86
28,92637,873

Increase or
decrease
(279)
(684)
(79)
317
(724)

1,206

951

(255)

5,460,155
0.70

5,975,832
0.63

515,677(0.07)End of March
2013
404
9,418
165
28,60938,597

End of March
2014
125
8,734
86
28,92637,873

Total Loans (B)Ratio of Total Risk-Monitored Loans to Total Loans (%) (A/B)

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

Increase or
decrease
(279)
(684)
(79)
317
(724)

1,206

951

(255)

5,460,170

5,975,834
0.63

515,664(0.07)

0.70

Asset Assessment under the Financial
Reconstruction Law

As of the end of March, 2014, bankrupt andquasi-bankrupt assets amounted to ¥758
million (equivalent to $7 million), doubtful
assets were ¥8,102 million (equivalent to $78
million), and substandard assets were ¥29,012
million (equivalent to $281 million).
Accordingly, the total amount of bad
debts under the Financial Reconstruction
Law decreased by ¥724 million (equivalent to$7 million) to ¥37,873 million (equivalent to$367 million).

The coverage ratio of bad debts (the totalof claims deemed collectible with collateraland guarantees and the allowance for possible
loan losses divided by total bad debts) was
73.51%.
Bankrupt and quasi-bankrupt assets arerecorded for the remaining amount after
deducting the amounts deemed collectible
with collateral and guarantees, while doubtful
assets are recorded for the loss-expectedamount of the remaining amount after

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

Asset Assessment under the Financial Reconstruction Law (FRL) (Non-Consolidated) (Million yen, %)Bankrupt and Quasi-Bankrupt Assets
Doubtful Assets
Substandard Assets
Total Claims under the FRL (A)Normal Claims
Partial direct write-offs
Total Loans (B)Ratio of Total Claims under the FRL to Total Loans (%) (A/B)
Total Coverage Amounts on Disclosed Claims under the FRL (C)Coverage Ratio (%) (C/A)

12

End of March
2013
1,102
8,721
28,774
38,597
5,476,377

End of March
2014
758
8,102
29,01237,8736,030,135

Increase or
decrease
(344)
(619)
238
(724)
553,758

1,206

951

(255)

5,514,975
0.69

6,068,008
0.62

553,033(0.07)

23,293

27,842
73.51

4,549
13.16

60.35

Shinkin Central Bank Annual Report 2014

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

Capital Adequacy Ratio (%)(As of September 30, 2013)

NPL Ratio (%)(As of September 30, 2013)35.52%
2.77%

1.68%

16.98%
12.95%

Long-Term Credit Rating(As of July 31, 2014)

0.64%
SCB

City Banks Regional Banks

37.86%SCBCity Banks Regional Banks

0.63%(As of March 31, 2014)

A1

A+

A+

AA

Moody’s

S&P

R&I

JCR

(As of March 31, 2014)

Notes	1. City Banks: Average of 5 Banks
2. Regional Banks: Average of 64 Banks
Source Bank disclosure documents

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

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

The SCB promotes streamlining of management through continuous
drastic restructuring.

Funds per Employee

Ratio of Expenses (%)(Millions of U.S. dollars)(As of September 30, 2013)(As of September 30, 2013)

0.98%

235
0.80%

37
SCB

17

City Banks Regional Banks

0.09%
SCB

City Banks Regional Banks$220Million

0.09%(As of March 31, 2014)(As of March 31, 2014)

Notes	1. Total funds = Deposits+CDs+Debentures
2. U S dollar amounts are conver ted forconvenience only, at ¥97.68 and ¥102.94 perdollar, the prevailing rate on September 30,
2013 and March 31, 2014, respectively.
Source Japanese Bankers Association

Note

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 the SCB
implements various operational strategies.
The SCB’s goal is to gain the trust of all the
SCB’s stakeholders by demonstrating thestrong commitment to establishing a rigorous
corporate governance system and to becomea distinguished f inancial institution wellrespected in society.
Institutional Structure
General Assembly of Representatives (General
Meeting)
The SCB is a cooperative financial institution
consisting of 267 shinkin banks nationwide(as of March 31, 2014) as its members andinvestors. The General Assembly of Representatives is equivalent to the general meetingof shareholders in a joint-stock company, andis held annually to elect directors and resolve
important issues.

Board of Directors
The SCB’s Board of Directors, 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 13 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 of the total
number of board members must be executive officers of shinkin banks. As such, parttime directors are selected from among thepresidents or board chairs of shinkin banksfrom each region 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 thepart-time directors ensures a supervisionand safeguard function with a high degreeof objectivity and transparency in business
operations.
Auditors
The SCB’s auditors, comparable to the corporate auditors of a joint-stock company, audit
the execution of the duties by the directors.
The SCB selects one full-time auditor, twopart-time auditors from among the presidents
or board chairs of shinkin banks, and twopart-time auditors who are not executives of
SCB or shinkin banks (non-member auditors),
equivalent to outside auditors as defined by
the Companies Act. Non-member auditors are
selected from among persons who meet therequirements stipulated in Article 32-5 of the
Shinkin Bank Act. There are no stipulations ofstandards or guidelines regarding independence
for the selection of non-member auditors. The
SCB is confident that non-member auditors
are able to utilize their professional knowledge
and experience to conduct audits from an

14

independent perspective.
One of the non-member auditors is acertified accountant with a wealth of knowledge and experience regarding finance andaccounting.
There are no particularly notable conflictsof interest between the SCB and non-member
auditors.
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 Represent atives. However, a general meetingfor preferred shareholders may be held toprotect their property rights under the Law
Concerning Preferred Shares of Cooperative
Financial Institutions.
Support System for Part-Time Directors andPart-Time Auditors
The G e ner al Af f air s Division provide s
information and other support for part-time
directors, and staff exclusively assisting theauditors provide the same for part-time auditors to facilitate timely and precise decision
making by part-time directors and auditors.
Checks on the Execution of Business
Operations
Execution of Business Operations
At the SCB, the Board of Directors makes
decisions on important business operations.
Based on those decisions, the President
presides over the SCB’s business operations
and the Deputy President and other full-time
directors assist the President.
In addition, the SCB has established the
Executive Committee to deliberate and makedecisions on important managerial matters,
including ones to be resolved by the Boardof Directors and ones to be reported to theBoard of Directors.
The SCB has also established various
committees of the Executive Committee tofacilitate robust discussions on all aspectsof its business operations. To ensure that
deliberations and resolutions are carried out
on a cross-organizational basis, each committee comprises several directors and generalmanagers of divisions.

Supervision and Checks
At the SCB, the Board of Directors supervises the execution by the directors. Morethan half of the Board of Directors are
executive officers of shinkin banks, thereby
ensuring that the Board of Directors fulfills its
check functions.
Audits by Auditors
At the SCB, to facilitate audits of the directors’ execution of duties, the auditors attend
meetings of the Board of Directors and otherimportant meetings. The auditors also receive
reports from directors regarding their execu-

tion of duties and inspect the minutes of the
Executive Committee and other important
documents. In addition, the auditors conduct
regular meetings with the independent auditors to exchange opinions and information.
Exclusive staffs are assigned to assist theauditors in the execution of their duties so as
to facilitate the timely and precise executionof duties by the auditors.
The Internal Audit System
The SCB is building an internal audit systemthat aims at the realization of efficient andeffective business operations by utilizing theInternal Audit Division that is independent
from operational divisions and branches. The
Internal Audit Division examines and assesses
the legal and regulatory compliance status,
risk management status and operations
management status of each division, branch
and affiliated company of the SCB to makesure that they are functioning appropriately
and effectively. Where deemed necessary,
the Internal Audit Division issues guidance toundertake corrective measures.
In addition, each division and branch is
required to undertake their own internal
inspections for prevention and early detectionof administrative errors.
The Use of Outside Specialists
The SCB utilizes the expertise of outside
specialists, including independent auditors,
attorneys and tax accountants. To effectively
handle more sophisticated and diversified
operational requirements, the SCB consultswith and receives advice from such specialists
on a regular basis and as the need arises.
Appropriate Disclosure of Corporate
Information
The SCB’s preferred shares are listed on theTokyo Stock Exchange. The SCB strives tomaintain appropriate disclosure of corporate
information, pursuant to the Financial Instruments and Exchange Law, other related laws
and the Securities Listing Regulations of theTokyo Stock Exchange. The SCB also strives
to maintain transparency in its management
through appropriate disclosure.
Improving Internal Control Systems
The SCB regards compliance as basic premiseof all business activities. The SCB continues tostrengthen and operate the internal control
systems, based upon policy to maintain reliability of financial reporting, to manage risks
flexibly and effectively in response to thosecharacteristics, and to implement internal
audit by utilizing the Internal Audit Division,
which is independent from the operational
divisions and branches.

Shinkin Central Bank Annual Report 2014

Strengthening the Compliance System
The SCB views compliance as one of thehighest-priority management agendas. In linewith this stance, the SCB is carrying out themeasures outlined below as it strives tofurther strengthen its compliance system.
Compliance System
1. The SCB has formulated the Shinkin
Centr al B ank Code of E thics, which
stipulates the ethical rules and behavior
standards that must be upheld by all the
SCB directors and employees.
2. In order to improve customer protection
and satisfaction, the SCB formulates
Customer Protection Control Policy.
3. The SCB formulates an annual Compliance
Progr am , which lays out it s specif ic
compliance plan for each fiscal year.
4. To clarify the rules to be followed by directors and employees, the SCB has compiled a Compliance Manual as a practicalcompliance handbook.
5. A compliance supervisory division andcompliance related divisions are establishedand their respective roles are clarified.
A compliance supervisor, personnel responsible for compliance and personnel deputy
responsible for compliance are appointed atevery division and branch of the SCB.
6. In order to deliberate compliance issues,customer protection issues and serious
accidents, the SCB has established 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 list of audit items used by the Internal
Audit Division includes compliance-related
items, and internal audits include investigation on whether or not the compliancesystem is functioning adequately.
9. In cases of compliance violation, reports fromthe heads of concerned divisions or branches
are promptly called for and appropriate
actions are taken to prevent recurrence.
10. The SCB operates a hotline system to facilitate reporting of compliance breaches
by directors or employees. The SCB also
has in place strict measures to protect
whistle-blowers.
11. Pursuant to the Law on Sales of Financial
Products, the SCB has formulated andmade public its Financial Products Solicitation Policy. To ensure that solicitation iscarried out fairly, important points regarding a product must be explained to thecustomer at the time of sale.

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

Compliance System Overview
Customers
Division or branch

Corporate
lawyerAuditors

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

Deputy head ofcomplianceadministration

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

Supervisor of compliance

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

Compliance hotline

Employees

Gene

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

Risk Management Committee

Directors (full time)

Executive Committee
Board of Directors

15

Risk Management
Learning from the experience of the financial crisis, the SCB is exhaustively implementing more highly detailed and thoroughrisk management by pursuing more sophisticated integrated risk management, market risk management, credit risk management and other measures while also advancing predictor and interim management for credit control.
Basic Policy on Risk Management
In the wake of the global financial crisis, financial
institutions face significant changes in economic
and financial market conditions and otheraspects of their operating environment. To
respond promptly and appropriately to thesechanges, financial institutions require very finely
tuned risk management.
The SCB believes that its future depends onrisk management and that a strong risk management system is a prerequisite for maintaining
sound management and securing adequate profits.
The SCB classifies “risk” into two broad
categories—risk that must be controlled andrisk that must be absolutely minimized—andmanages these risks accordingly. The types ofrisk that must be controlled are market risk,
liquidity risk and credit risk. The type of riskthat must be minimized is operational risk.
Risk is managed by divisions which are independent from divisions involved in business
operations. The Risk Management Division
coordinates management of differing risks toprovide comprehensive risk management.
The SCB has also established five crossorganizational bodies—the Risk Management
Committee, ALM Committee, and Credit Committee, —to manage risk from a Bank-wide
perspective. These committees deliberate andmake decisions on specific issues relating to theirrespective risk management functions based on
the policies determined by the Board of Directors and the Executive Committee.
To ensure the effectiveness of its risk management systems, the SCB has also establishedthe Internal Audit Division—a body independent from its risk management systems—tomonitor the SCB’s risk management activities.
Integrated Risk Management
To manage risk in a comprehensive manner,
the SCB employs the integrated risk management method to cope with quantifiable risk.
Integrated risk management is a way tomanage its diverse risks by calculating themwith uniform criteria such as the Value-at-Risk(VaR) method and comparing their aggregated value to the institution’s overall financial
strength (i.e., capital adequacy).
For market risk and credit risk, the SCB
calculates Value-at-Risk. For the calculationof operational risk capital requirements, theSCB employs the basic indicator approach
proposed under regulations concerning capital adequacy ratios.
The SCB defines capital under its integrated risk management system and allocatesrisk limit amounts for operational risk andother types of risk (note). Separately, theSCB estimates losses under various stressscenarios as part of its efforts to monitor
potential impacts on capital.
The quantitative risk limits and reserveamounts for each fiscal year are determinedby the Executive Committee after deliberationby the Risk Management Committee. The Risk
Management Division, which oversees integrated risk management, measures the amountof risk exposure both during and at the end ofeach month to ensure that quantitative limits
for each type of risk are not exceeded. The
Risk Management Division provides reports
on risk status to senior management andrelated divisions through the Risk Management
Committee.
Note: W ith regard to subsidiaries within the SCB’s
scope of consolidation, the SCB monitors risk
exposure at each subsidiary and allocates capitalcommensurate with the amount of risk. These
allocations provide for risk taking by subsidiaries.

Risk Categories and Definitions

Risk categories
Market Risk

Risks That Must
Be Controlled

Risks That Must
Be Minimized

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

Liquidity Risk

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

Credit Risk

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

Operational Risk

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

Administrative Risk

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

Information
Technology Risk

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

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

16

Shinkin Central Bank Annual Report 2014

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

Executive Committee

Risk Management
Committee

ALM
Committee

Divisions responsible forthe overall management of operational risk

Division responsible for integrated
risk management

Division responsible for market risk
management

Risk Management Division

Risk Management Division

Risk Management Division

Division responsible for administrativerisk management

Divisions responsible for capital
adequacy

Divisions responsible for liquidity risk
management

Operations Division

Risk Management Division(Assessment)

Division responsible for information
technology risk management

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

Divisions responsible for the
management of other operational risk

Risk Management Division

Systems Division

Financial Management Division

Divisions stipulated by Risk
Management Division

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

Matters for discussion

Risk Management Committee
ALM Committee
Decisions

Decisions

Reports, etc.

Divisions responsible formarket risk management

CreditCommittee

Matters for discussion

Market divisions

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

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

Mutual checks

Mutual checks

Mutual checks

Administrative control divisions

Market Risk Management
To maintain an accurate understanding ofmarket risk and rigorously manage this risk,
the SCB has issued a market risk management
policy. Furthermore, divisions responsible formarket risk management are clearly separated
from divisions involved in market operations,providing a risk management structure inwhich internal checks are maintained throughthe independent functions.
The SCB has established the ALM Committee as the body responsible for deliberating
and making decisions on matters relating tomarket risk management. The ALM Committee comprises senior management and headsof divisions related to market risk. Based onrisk status information—obtained via reports
from divisions responsible for managing market risk and other sources—the ALM Committee deliberates widely and expeditiously onpolicy relating to fund-raising and management
as well as proposed market transactions.
For banking operations and trading activities, the divisions responsible for managing
market risk quantify and manage market risk
by VaR within the limit set by the Executive
Committee. In addition, market risk is further
divided into several categories, with risk quantities monitored by category.
Note: M arket risk includes interest rate risk and such
equity-related risk as stock price fluctuation risk.

Liquidity Risk Management
As the central financial institution for shinkinbanks, the SCB maintains a rigorous system
for managing liquidity risk to respond to
the needs of shinkin banks for daily working
capital and emergency funds.
To maintain an accurate understanding of
liquidity risk and rigorously manage this risk,
the SCB has formulated a liquidity risk management policy. Divisions responsible for liquidity
risk management are clearly separated fromdivisions involved in cash management andmarket operations, allowing internal checks
to be maintained through the independentfunctions. In addition, the ALM Committee
deliberates and makes decisions on mattersrelating to liquidity risk management.
Methods used for managing liquidity risk
include the daily setting and monitoring ofrisk limit amounts relating to the gap between
cash receipts and payments. This is carriedout for individual currencies and periods. In

17the event that a significant liquidity risk arises,
the SCB has preparations to respond rapidly,
including the securing of funding sources.
Credit Risk Management
To maintain an accurate understanding ofcredit risk and rigorously manage this risk, the
SCB has formulated a credit risk management
policy. Furthermore, the SCB has formulated
a Credit Policy, which sets out the SCB’s
fundamental philosophy. The SCB requires
strict adherence to the Credit Policy on thepart of all directors and employees involvedin credit operations. The SCB conducts ongoing internal communications emphasizing
the importance of sound ethics in all behavior
and decision making.
At the SCB, divisions responsible for
credit control, credit assessment and asset
assessment are clearly separated from divisions
involved in client services. In this way, we arebuilding a structure in which internal checks
are maintained through the independentfunctions given to each part of the system.
The SCB has established the Credit Committee as the body responsible for deliberating and making decisions on matters relatingto credit risk management. The Credit Committee is comprised of senior management
and general managers of related divisions. The
Credit Committee deliberates widely andthoroughly on credit transactions that exceed
a designated amount.
The Executive Committee deliberates on,
and makes decisions regarding, the results ofself-assessment of assets and matters relating
to self-assessment of asset write-offs and asset
reserve provisions.
Divisions responsible for credit control
manage the credit risk for each borrower
relating to loans and market trading activities.
An overall credit limit is set for each borrower
according to the credit rating of the borrower.
Credit ratings are based on quantitative
criteria set by evaluating the borrower’s
financial statements and qualitative criteria
set by evaluating the borrower’s competitive
strength within the particular industry it operates in. Based on these assessments of credit
strength, each borrower is given a credit
rating on the SCB’s 10-step scale. The credit
ratings given to borrowers are reviewed
regularly and flexibly revised as necessary.
Divisions responsible for credit control
analyze the SCB’s overall credit por tfolio

18

according to credit rating, industry, country
and other criteria. These analyses are used tomonitor the diversification of credit risk as well
as changes in portfolio credit risk. Furthermore,credit risk is quantified and managed within therisk limit set by the Executive Committee.
The credit risk amount is measured using
VaR as well as the Monte Carlo simulation
method.
The Credit Planning & Supervision Division—responsible for credit assessment—
accurately monitors each borrower’s financial
condition, the purposes for which funds areused and repayment resources. In addition toappropriate assessment and post-transaction
management, the Credit Planning & Supervision Division continually checks whether theclient service division is conducting appropriate credit control, and provides guidanceas necessary. In the case of any problem on
the side of borrowers, the Credit Planning& Supervision Division rapidly makes assessments of the borrower’s management situationand provides supervision. Where necessary,an action is taken to recover the loan.
The Credit Planning & Supervision Division is also responsible for asset assessment.
The division undertakes and manages operations relating to asset self-assessments, andthe calculation of asset write-offs and asset
reserve provisions.
Note: C redit risk includes such risk as counterpar ty
risk for derivative transactions and securitizationtransaction risk.

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

Committee, comprising senior management
and heads of related divisions, deliberates
and makes decisions on comprehensive
methods for managing operational risk,
including administrative risk and systems risk.
To calculate its operational risk capitalre q uire me n t s , t he SC B u se s t he b a sic
indicator approach proposed under regulations concerning capital adequacy ratios.
Administrative Risk Management
The Operations Division oversees administrative risk management and administrative
instruction. In addition to developing andmaintaining the administrative processing
system and administrative rules and undertaking reviews of administrative procedures,the Operations Division conducts administrative instruction programs for divisions
involved in administrative processing. With
this system, the SCB appropriately manages
administrative risk.
Furthermore, the SCB is undertaking a
range of measures to ensure accurate andefficient administrative processing. These
include further automation of administrative
processing, training programs tailored for eachstaff and management level, and programs toencourage staff to submit proposals to improveadministrative processes. The SCB also controls the entire process of administrative risk
management from the identification of risk to
the implementation of corrective measures.
Information Technology Risk Management
T h e Sy s t e m s D i v i s io n t a ke s c h a r ge o f
information technology risk management. It
provides control and guidance to divisions
involved in system development, operation
and utilization.
In the event of a system failure that
seriously affects the execution of business
operations, a Bank-wide response is triggered
based on crisis management procedures(contingency plan). The SCB also conducts
crisis response drills periodically based on
system-failure crisis scenarios.
To prevent damage caused by system
failure, the SCB has issued a security policy
and undertakes internal communications
programs to ensure that all directors andemployees have a thorough understanding of
the SCB’s security policy.

Shinkin Central Bank Annual Report 2014

Corporate Social Responsibility (CSR) Activities
The SCB aims to be a financial institution highly valued throughout society.
Activities as a Regional Financial Institution
Since the SCB’s funds are principally deposits
received from many local shinkin banks, we
believe that it is ideal to contribute to thesocial and economic development of local
communities with its funds.
For this reason, in cooperation withshinkin banks, the SCB actively provides
financing to local governments, public interest corporations, and locally based businessenterprises.
Fur thermore , in collabor ation withshinkin banks, the SCB contributes to thedevelopment and revitalization of local communities with a very extensive variety ofactivities, including syndicated loans, private
finance initiatives (PFI), support for the improvement of SME managements, regional
industry research, and the implementation of
local contribution programs.
Activities Implemented through theProvision of Financial Products
Charitable Trusts
Shinkin Trust Bank Ltd., a wholly owned
subsidiary of the SCB, sets up and manages
charitable trusts on behalf of individuals andcompanies in order to contribute to activities
for the public good, such as environmental
conservation, scholarships, academic researchand subsidies for social welfare.

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

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

Shinkin Bank Contributions to Local
Society
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 bank 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 17th Shinkin Bank Social Contribution Award elicited submissions for 514 social
contribution initiatives in a wide range of areas, from 152 shinkin banks and three relatedorganizations, between November 2013 andJanuary 2014. 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 seven shinkin banks, with individual prizes
conferred on two persons and one group as
good examples for shinkin bank employees.

Metrolink Nihonbashi

Shinkin Bank Social
Contribution Award

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

19

What Are Shinkin Banks?
Shinkin banks are cooperative financial institutions. Their membership is composed of local
residents and small and medium-sized companies. Shinkin banks’ distinctive characteristics
are (1) they are close and convenient, (2) they
offer fine-tuned and personalized services and(3) they have a strong relationship of mutual
trust with their customers and communities.
Cooperative financial institutions are organizations that operate under the fundamental
principle of mutual support.
Shinkin banks limit their lending, in principle, to members. However, their functions arealmost the same as those of commercial banks,
and they also deal with many people who are
not members, accepting deposits, providing
exchange services, accepting various payments
including those for public utilities, and engaging in over-the-counter sales of public bonds,
investment trust funds, and insurance.
Shinkin banks not only provide deposit, lending and exchange services, but also offer a diverse
range of services to customers and other members of the local community in such areas assupport for management improvement and enterprise renewal, business succession support, business start-up support and local-area revitalization.
Outline of Shinkin Banks
Japan’s 267 shinkin banks form an extensive
network with approximately 7,500 locations inevery corner of the country, from Hokkaido in
the north to Kyushu and Okinawa in the south.
Shinkin banks dedicate themselves to providing
high-quality services to local residents, as financial institutions that are deeply rooted in theirrespective regions and contribute to regional
development.
Total deposits outstanding at 267 shinkinbanks as of March 31, 2014, reached approximately ¥128 trillion (equivalent to $1,244 billion), which ranks 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.

Deposits Outstanding by
Bank Segment (As of March 31, 2014)(Billions of U.S. Dollars)

City Banks$2,837

Regional Banks

2,287

Shinkin Banks

1,244

Agricultural Cooperatives

888

Second-tier Regional Banks

597

Credit Cooperatives

181

Labor Credit Associations

174

Notes

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

20

Shinkin bank services
Management improvement / enterprise renewal

Co-financing

Succession support / M&A

Product and service expansion

Overseas expansion

Personal lending businessBusiness start-up

Local-area revitalization

Shinkinbank

Shinkinbankcustomers

Nationwide Network of Shinkin Banks

Hokuriku (17 banks)
Kinki (29 banks)

Hokkaido (23 banks)

Chugoku (21 banks)
Tohoku (27 banks)

Kyushu (28 banks)

Kanto (49 banks)

Tokyo (23 banks)
Tokai (39 banks)

Okinawa (1 bank)

Shikoku (10 banks)

Deposit Outstandingat Shinkin Banks

Loan and Bills Discounted
Outstanding at Shinkin Banks(Trillions of Yen / Billions of U.S.Dollars)(Trillions of Yen / Billions of U.S.Dollars)

117,3<1,261>

2010

119,7
<1,440>

2011

122,5
<1,490>

2012

124,8
<1,327>

2013

128,0
<1,244>2014

Note
Items in angular brackets are U.S. dollar amounts.
	U.S. dollar amounts are converted for convenience
only at ¥93.05, ¥83.15, ¥82.22, ¥94.10 and¥102.94 per dollar, the prevailing rate on March
31, 2010, 2011, 2012, 2013 and 2014 respectively.
Source SCB

64,1
<689>

63,7
<766>

63,7
<775>

63,6
<676>

2010

2011

2012

2013

64,4
<626>

2014

Note
Items in angular brackets are U.S. dollar amounts.
	U.S. dollar amounts are converted for convenience
only at ¥93.05, ¥83.15, ¥82.22, ¥94.10 and¥102.94 per dollar, the prevailing rate on March
31, 2010, 2011, 2012, 2013 and 2014 respectively.
Source SCB

Shinkin Central Bank Annual Report 2014

Capital Adequacy Ratio of Shinkin Banks
12.67%

12.85%

The capital adequacy ratio of shinkin banks
as of the end of March 2014 increased by 0.12
percentage point over the previous fiscal
period to 13.16% (preliminary figure).
The capital adequacy ratio of shinkin banks
maintains a standard which is by no means inferior even compared to other business categories, and is outperforming the standardsof other domestic regional banks (11.26%) or
second-tier regional banks (10.18%).

13.16%

13.04%

12.34%

2010

2011

2012

2013

2014
(Preliminary Figure)

Source SCB

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

Nonperforming-Loan Ratioof Shinkin Banks (%)(as of March, 31, 2014)16.81%
6.80%

13.16%

ShinkinBanks

11.26%

City Banks(Preliminary Figure)10.18%

Regional Second-tierBanks Regional Banks

6.27%

2010

6.84%
6.45%

6.44%

2011

2012

2013

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

2014(Preliminary Figure)(Domestic)

Source SCB

Reference:
The Difference between Shinkin Banks and Commercial Banks
Category

Shinkin Banks

Commercial Banks

Legal Foundation

Shinkin Bank Act

Banking Act

Organization

Cooperative organizationFor-profit joint stock
corporations

Membership Qualifications• Those who have an address or location inNone

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

21

Preferred Shares
the Tokyo Stock Exchange through a securities company. Credit transactions are also
possible for preferred shares just as they arefor stocks.

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.

Dividends of Preferred Shares
The SCB’s basic policy is to pay stabledividends while securing sound management,enhancing internal reserves, and boostingearnings power.
The SCB’s preferred shares pay a dividend
to the holders at the end of March of every
fiscal year. As the rule of interim dividends is
not provided at the Law Concerning Preferred
Shares of Cooperative Financial Institutions,
the SCB does not pay interim dividends.
Dividends of preferred shares are comprised of preferred dividends and participating
dividends. Preferred dividends are paid before
any dividends are paid to common stock holders (shinkin banks). Participating dividends arepaid from retained earnings after preferred
dividends. They may vary depending on profits
of the SCB.
The SCB’s preferred shares have the same
treatment as stocks in the taxation system, andthey are given the same preferential treatment
concerning tax as stocks.
For fiscal 2013, a dividend for preferredshare was ¥6,500 (equivalent to $63) per

Listing of Preferred Shares
The SCB has issued preferred shares since fiscal 1995, and the preferred shares were listedon the Tokyo Stock Exchange on December
22, 2000 (Securities Identification Code 8421)
for the first time in Japan. The SCB’s preferredshares are marketable securities that are very
similar to preferred stocks, and basically apply
the same listing criteria and disclosure ruleswith them.
Trading of Preferred Shares
Like listed stocks, the SCB’s preferred sharescan be traded anytime during trading hours ofComposition of Preferred Shares (March 31, 2014)
・Number of Investors (Total 18,785)
Foreign Institutions
and Others
32(0.2%)
Financial Institutions
214(1.1%)

Securities Companies
7(0.0%)

Price(closing price,
in yen)First Day of Listing (December 22, 2000) 200,500

Other Corporations
40,358(5.7%)

Foreign Institutions
and Others
2,733(0.4%)

Highest Price (March 15, 2006)

311,500

Lowest Price (April 14, 2009)

102,400

Closing Price (July 31, 2014)

201,900

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

Individuals
115,298(16.3%)
Individuals
18,315(97.5%)

22

Price of Preferred Shares

・Number of Subscription (Total 708,222)
Securities Companies
6,684(0.9%)

Other Corporations
217(1.2%)

share, which comprised a preferred dividend of¥3,000 (equivalent to $29) and a participating
dividend of ¥3,500 (equivalent to $34). For
fiscal 2014, a dividend for preferred share is
expected to remain ¥6,500 (equivalent to $63)
per share.

Financial Institutions
543,149(76.7%)

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
79 Independent Auditor’s Report
80 Non-Consolidated Balance Sheet
81 Non-Consolidated Statement of Income

23Five-Year
Summary(Consolidated)
Five-Year Summary(Consolidated)(Millions of yen)
FY2009FY2010FY2011FY2012FY2013

Total Income

392,849

361,820395,277

408,917308,171

Total Expenses

373,135

322,361

357,662

367,469

255,548

Net Income

29,20627,88729,80532,862

37,612－35,97063,791

171,545

48,004

Net Assets

1,020,800

1,043,267

1,092,354

1,249,229

1,276,826

Total Assets

28,575,669

31,502,697

30,248,492

30,410,702

31,184,564

Net Assets per Share (yen)214,698.35

219,425.69

229,768.12

263,016.93

268,795.17

Net Income per Share (yen)6,425.11

5,471.96

5,879.26

6,528.60

7,537.36

13,37014,603

14,603

16,603

16,603

Common Shares

8,767

10,00010,00012,00012,000Preferred Shares

4,603

4,603

4,603

4,603

4,603

Comprehensive Income

Dividends

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 25,
2002 “Accounting Standards for Earnings Per Share” and ASBJ Guidance No. 4, September 25, 2002 “Guidance on
Accounting Standards for Earnings Per Share”.
3. Net income per share is obtained by dividing the value obtained by deducting preferred dividends from current profit. This
calculation complies with ASBJ statement No. 2, September 25, 2002 “Accounting Standards for Earnings Per Share” andASBJ Guidance No. 4, September 25, 2002 “Guidance on Accounting Standards for Earnings Per Share”.
4. From fiscal 2010, the Bank has adopted the Accounting Standard for Presentation of Comprehensive Income (ASBJ
Statement No.25; June 30, 2010).

Shinkin Central Bank

24

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1

Consolidated Balance Sheet
Consolidated Balance Sheet
Millions of
U.S. Dollars(Note 1)
2014

Millions of Yen
Shinkin Central Bank As of March 31,
AssetsCash and Due from Banks (Note 2 (2), 9, 24)
Bills Bought and Call Loans (Note 24)
Receivables under Resale Agreements (Note 24)
Receivables under Securities Borrowing Transactions (Note 24)
Monetary Debts Purchased (Note 24)
Trading Assets (Note 3, 9, 24, 25)
Money Held in Trust (Note 24, 25)
Securities (Note 4, 7, 9, 24, 25)Loans and Bills Discounted (Note 5, 6, 9, 24)
Foreign Exchanges Assets
Other Assets (Note 9)
Tangible Fixed Assets (Note 8, 14, 23)
Intangible Fixed Assets (Note 23)
Deferred Tax Assets (Note 21)
Customers’ Liabilities for Acceptances and Guarantees
Reserve for Possible Loan Losses
Reserve for Investment Losses
Total Assets

Liabilities and Net Assets
Liabilities
Deposits (Note 24)
Debentures (Note 12, 24)
Trading Liabilities (Note 10, 24)
Borrowed Money (Note 9, 11, 24)
Bills Sold and Call Money (Note 9, 24)
Payables under Repurchase Agreements (Note 9, 24)
Payables under Securities Lending Transactions (Note 9, 24)
Foreign Exchanges Liabilities
Other Liabilities (Note 13)
Reserve for Employee Bonuses
Reserve for Directors' Bonuses
Reserve for Employee Retirement Benefits (Note 22)
Net Defined Benefit Liability (Note 22)
Reserve for Directors' Retirement Allowances
Reserve under Specific Law
Deferred Tax Liabilities (Note 21)
Deferred Tax Liabilities for Land Revaluation (Note 14)
Acceptances and Guarantees
Total Liabilities

Net Assets
Common Shares and Preferred Shares (Note 20)
Capital Surplus
Retained Earnings
Total Shareholders' Equity
Net Unrealized Gains on Other Securities (Note 21, 25)
Net Deferred Gains(Losses) on Hedging Instruments (Note 21, 26)
Land Revaluation Excess (Note 14)
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans (Note 22)
Total Accumulated Other Comprehensive Income
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of these financial statements.

2014

2013

4,938,807
578,351
86,980173,390
269,583
237,261
132,854
18,418,791
5,975,834
5,212
137,41373,92915,537
3,896
176,908(40,183)(5)
31,184,564

3,117,393
636,264
80,985
187,023
330,758
475,025
182,901
19,647,850
5,460,170
4,413
105,724
74,66918,003
1,863
117,054(29,346)(52)
30,410,702

47,977
5,618
844
1,684
2,618
2,304
1,290
178,927
58,051
50
1,334
718
150
37
1,718
(390)
(0)
302,939

23,677,799
3,161,810
158,537
937,320
408,067
35,437
966,659558
282,706
1,593
78

22,000,309
3,537,350
148,338
811,890559,088

230,01530,715
1,540
9,105
3,964
344
9,390
5
2,746
15
0

-

-

1,637,068
187
269,541
1,508
77
22,452-

28,414508
165,2306,106
176,908
29,907,738

551
1
49,9236,129
117,054
29,161,473

276
4
0
633
59
1,718
290,535

490,998
100,678
450,930
1,042,607
286,413(69,436)
13,441(1,865)(3,489)225,064
9,154
1,276,826
31,184,564

490,998
100,678
429,841
1,021,518
298,822(90,092)
13,532(3,313)218,948
8,763
1,249,229
30,410,702

4,769
978
4,380
10,128
2,782
(674)
130
(18)
(33)
2,186
88
12,403302,93925

Consolidated Statement of Income
Consolidated Statement of Income
Millions of
U.S. Dollars(Note 1)
2014

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
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 18)
Total Expenses

Income before Income Taxes and Minority Interests
Income Taxes (Note 21):
Current
Deferred
Total Income Taxes
Income before Minority Interests
Minority Interests in Net Income
Net Income

Net Income per Share (Note 29)
Dividend Declared per Share (Common Shares)
Dividend Declared per Share (Preferred Shares)
The accompanying notes are an integral part of these financial statements.

26

2013

2014
230,006
33,258
6,495
891
104
367
186,990
1,898
34,287
15,462
21,355
7,060
308,171

240,936
39,605
4,069
1,280
77
430
192,930
2,541
31,443
11,969121,520
3,046
408,917

2,234
323
63
8
1
3
1,816
18
333
150
207
68
2,993

141,383
53,32023,540
9,701
696
1
2,621
51,502
11,301
224
45,58444,89012,164
255,548

162,183
65,00735,061
11,033966
64,337
45,77010,622
635
138,465
45,256
10,305367,469

1,373
517
228
94
6
0
25
500
109
2
442
436
118
2,482

52,622

41,448511

3,282
11,021
14,30438,318706
37,612

1,006
7,180
8,186
33,261399
32,862

31
107
138
372
6
365

2013
6,528.60
3,000.00
6,500.00

U.S. Dollars
2014
73.22
29.14
63.14

Yen
2014
7,537.36
3,000.00
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,
Income before Minority Interests
Other Comprehensive Income (Note 19)
Net Unrealized Gains on Other Securities
Net Deferred Gains (Losses) on Hedging Instruments
Land Revaluation Excess
Foreign Currency Translation Adjustments
Comprehensive Income
Comprehensive Income attributable to owners of the parent
Comprehensive Income attributable to minority interests

2014
38,318
9,685(12,408)
20,656(10)
1,448
48,00447,297706

2013
33,261
138,283
141,971(4,535)(2)849
171,545
171,146
399

Millions of
U.S. Dollars(Note 1)
2014
372
94
(120)
200
(0)
14
466
459
6

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 31,2014

Millions of Yen
Shareholders' Equity

Common Shares and Preferred
SharesBalance at Beginning of Year

Capital Surplus

490,998

Retained Earnings

100,678

Total Shareholders’ Equity

429,841

1,021,518

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

Net Income

37,612

37,61279

79

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--

21,08821,088490,998

100,678

450,930

1,042,607

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

298,822(90,092)

Land
Revaluation
ExcessForeign
Currency
Translation
Adjustments

13,532

Total
Remeasurements Accumulatedof Defined
Other
Benefit Plans Comprehensive
Income(3,313)-218,948

Minority
Interests

Total Net
Assets

8,763

1,249,229

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

Net Income

37,612

The revarsal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year79
(12,408)

20,656

(90)

1,448

(3,489)

6,116

391

6,508

Total Fluctuation Amount during the Fiscal Year

(12,408)

20,656

(90)

1,448

(3,489)

6,116

391

27,596

Balance at End of Year

286,413(69,436)

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

9,154

1,276,826

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

Capital Surplus

4,769

Retained Earnings

978Total Shareholders’ Equity

4,175

9,923

Surplus Dividends

(161)

(161)

Net Income

365

365

0

0

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

-

-

204

204

4,769

978

4,380

10,128

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

2,902

(875)

Land
Revaluation
Excess131

Foreign
Currency
Translation
Adjustments

(32)

Total
Remeasurements Accumulatedof Defined
Other
Benefit Plans Comprehensive
Income-2,126

Minority
Interests

Total Net
Assets85

12,135

Fluctuation Amount during the Fiscal Year
Surplus Dividends(161)

Net Income

365

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

0
(120)

200

(0)

14

(33)

59

3

63

Total Fluctuation Amount during the Fiscal Year

(120)

200

(0)

14

(33)

59

3

268

Balance at End of Year

2,782

(674)

130

(18)

(33)

2,186

88

12,403

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

28

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Shinkin Central Bank For the year ended March 31,2013

Millions of Yen
Shareholders' Equity

Common Shares and Preferred
SharesBalance at Beginning of Year

Capital Surplus

490,998

Retained Earnings

100,678

Total Shareholders’ Equity

410,6211,002,298

Surplus Dividends(14,603)(14,603)

Net Income

32,86232,862960

960

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--

19,22019,220490,998

100,678

429,841

1,021,518

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

156,850(85,557)

Land
Revaluation
Excess

14,495

Foreign
Currency
Translation
Adjustments(4,163)Total
Remeasurements Accumulatedof Defined
Other
Benefit Plans Comprehensive
Income-81,625

Minority
Interests

8,430

Total Net
Assets

1,092,354

Fluctuation Amount during the Fiscal Year
Surplus Dividends(14,603)

Net Income

32,862

The revarsal of Land Revaluation Excess
Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year960
141,971(4,535)

Total Fluctuation Amount during the Fiscal Year141,971(4,535)

Balance at End of Year

298,822(90,092)

(962)

849

-

137,322332

137,655

(962)

849

-

137,322332

156,875

13,532(3,313)-218,948

8,763

1,249,229

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

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

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

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

30

2013

2014

(Note 1)
2014

10,836
(46)
84
1
600
(42)
(230,006)
141,383
14,890716(326,395)(9)
237,764
10,198(19,038)(515,664)
1,677,489(375,540)(37,050)(96,021)51,918
13,632(115,583)(670,409)
61,174
(799)
371
(107)
338,837(198,296)
17,82754,376(1,046)53,33041,448
9,129
1,813
1,277
(25)
32
8
842
21
(240,936)
162,183(97,298)(1,452)(372,743)(38)(11,562)
12,31523,179(85,469)
404,431(416,610)
5,240(16,419)
20,608(115,493)
61,34931,451
62,158(1,286)24(113)
362,836(236,719)
133,363(262,453)(1,646)(264,099)

105
(0)
0
0
5
(0)
(2,234)1,373
144
6(3,170)
(0)
2,309
99
(184)
(5,009)16,295(3,648)
(359)
(932)
504
132
(1,122)(6,512)
594
(7)
3
(1)
3,291
(1,926)
173
528
(10)
518

(5,062,421)
2,838,619
3,706,085(51,000)
100,000(3,773)(2,648)793
1,525,654(8,190,402)
4,435,726
5,167,006(41,707)
40,000(5,001)(3,690)154
1,402,083(49,178)
27,57536,002
(495)
971
(36)
(25)
7
14,820

162,480

216,200(201,960)(14,603)
(66)
(430)

1,578

(16,603)(66)
145,8090
1,724,794
1,387,726
3,112,521

1
1,137,554
250,171
1,387,726

0
16,755
13,48030,23652,622
9,033

511
87

(161)
(0)
1,416

Notes to Consolidated Financial Statements
1.

Basis of Presentation:
The accompanying consolidated financial statements have been
prepared from the accounts maintained by Shinkin Central Bank (the“Bank”) and its consolidated subsidiaries in accordance withaccounting principles and practices generally accepted in Japan thatare different in certain respects from the application and disclosure
requirements of International Financial Reporting Standards.
Certain items presented in the consolidated financial statements
have been reclassified for the convenience of readers outside Japan.
The amounts in Japanese yen are presented in millions of yen by
rounding down figures. As a result, the totals in yen shown in the
consolidated financial statements do not necessarily agree with thesums of the individual account balances.
U.S. dollar amounts represent the arithmetical results oftranslating original Japanese yen amounts of the respective accountbalances to U.S. dollars on a basis of ¥102.94 to U.S.$1, theexchange rate prevailing as of March 31, 2014. 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, 2014
listed below:
Ownership
Location
Name
Percentage
The Shinkin Banks Information
System Center Co., Ltd.
Tokyo
50.7%
Shinkin International Ltd.
London100%
Shinkin Central Business Co., Ltd.
Tokyo
100%
Shinkin Asset Management Co., Ltd.
Tokyo
100%
Shinkin Trust Bank, Ltd.
Tokyo
100%
Shinkin Securities Co., Ltd.
Tokyo
100%
Shinkin Capital Co., Ltd.
Tokyo
100%
Shinkin Guarantee Co., Ltd.
Tokyo
100%
Unconsolidated subsidiaries
Shinkin Capital No. 2 Limited Liability Investment Partnership
Shinkin no Kizuna Limited Liability Investment Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because their total assets, ordinary income, net income(amount based on the equity method), 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 position 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
and affiliates is as follows:
Non-consolidated equity-method subsidiaries:
N/A
Affiliated equity-method companies:
N/A
Unconsolidated subsidiaries that are not accounted for by theequity method:
Shinkin Capital No. 2 Limited Liability Investment Partnership
Shinkin no Kizuna Limited Liability Investment Partnership
Unconsolidated subsidiaries that are not accounted for by theequity method are excluded from the scope of equity method because
their effect on the accompanying consolidated financial statements, interms of net income (amount based on the equity method) andretained earnings (amount based on the equity method), would not bematerial.
Affiliated companies to which the equity method is not applied
due to immateriality:
Aozora Loan Services Co., Ltd.
(2) Cash and Cash Equivalents
In the consolidated 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, 2014 and 2013 is as follows:
Millions ofMillions of Yen
U.S. dollars
2014
2013
2014
Cash and Due fromBanks

4,938,807

3,117,393

47,977

Due from Banks(Excluding Duefrom Central Bank )(1,826,286)(1,729,667)(17,741)

Cash and Cash
Equivalents

3,112,521

1,387,726

30,236(3) Trading Assets & Liabilities
Transactions for “Trading Purposes” (for purposes of seeking
to capture gains arising from short-term changes in interest rates,
currency exchange rates or market prices of financial instruments andother market related indices or from gaps among markets) are
included in “Trading Assets” and “Trading Liabilities” on the
consolidated balance 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.
(4) Financial Instruments(i) Securities
The Bank and its consolidated subsidiaries classify securities
into three categories: held-to-maturity debt securities, investments in

31

affiliates 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 overthe month preceding the balance sheet date and others are stated atfair value based on quoted market prices and other applicable
information at the balance sheet date (and the cost of securities soldis mainly determined using the weighted-average method). Other
securities where there is significant difficulty in determining fairvalue are stated 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
described in the Japanese Institute of Certified Public Accountants(JICPA) Industry Audit Committee Report No. 24 “Accounting and
Auditing Treatment of Accounting Standards for Financial
Instruments in Banking Industry” to transactions to hedge againstinterest rate risk arising from the financial assets and liabilities.
Effectiveness of a fair value hedge is assessed for each of theidentified group of hedged items such as loans and deposits, andcorresponding group of hedging instruments such as interest rate
swaps with the same maturity bucket. Effectiveness of a cash flow
hedge is assessed based on the correlation between an interest raterisk factor of the hedged items and that of the hedging instruments.
For certain asset and liabilities, the exceptional treatment forinterest rate swaps is applied.
(b) Hedge of Foreign Exchange Fluctuation Risk
The deferred method of hedge accounting is applied totransactions to hedge against foreign exchange fluctuation risks
associated with monetary assets and liabilities denominated inforeign currencies in accordance with the regulations set forth in
JICPA Industry Audit Committee Report No. 25 “Accounting and
Auditing Treatment of Accounting Standards for Foreign Currency
Transactions in the Banking Industry”.
To minimize foreign exchange fluctuation risk on monetary
assets and liabilities, the Bank has engaged in currency swaps,
foreign exchange swaps, and similar transactions. Effectiveness ofthese transactions in the hedging of foreign exchange risks ofmonetary assets and liabilities denominated in foreign currencies isassessed through comparison of the foreign currency position of thehedged monetary assets and liabilities and that of the hedging
instruments.
The Bank has also applied fair value hedge accounting to theforeign exchange risk of other securities in foreign currency (otherthan bonds) when the hedged foreign currency securities are
specified prior to the commencement of transactions, and there exists
spot and forward liabilities exceeding the acquisition costs of theforeign currency securities designated as hedged items on a foreign
currency basis.

32(c) Internal Derivative Transactions
Internal derivative transactions between trading accounts andother accounts, which are designated as hedges, are not eliminatedand related gains and losses are recognized in the consolidated
statement of income or deferred under hedge accounting because theinternal interest rate swaps and currency swaps transactions, etc.
designated as hedging instruments are conducted in a manner without
any subjection and are appropriately covered by third party
transactions conducted in accordance with the standard articulated by
JICPA Industry Audit Committee Reports No. 24 and No. 25.
(5) Tangible Fixed Assets (excluding Leased Assets)
Tangible fixed assets of the Bank are depreciated by the
declining balance method, except for buildings acquired on or after
April 1, 1998 (excluding facilities installed in buildings), which are
depreciated by the straight-line method.
The estimated useful lives of major items are as follows:
Buildings ................. 5 to 50 years
Others ...................... 3 to 20 years
Tangible fixed assets of consolidated subsidiaries are, in
principle, depreciated using the declining balance method, based on
their estimated useful lives.
(6) Intangible Fixed Assets (excluding Leased Assets)
Intangible fixed assets are amortized by the straight-line
method. The costs of software for internal use are amortized by thestraight-line method, mainly over a 5 year period (the estimateduseful life of the software).
(7) Leased Assets
Leased assets of Tangible Fixed Assets and Intangible Fixed
Assets related to finance leases that do not transfer ownership are
depreciated using the straight-line method with estimated useful lives
equal to lease terms, and zero residual values.
(8) Deferred Debenture Charges
Debenture charges are expensed in the fiscal year of issuance.
(9) Reserve for Possible Loan Losses
Reserve for possible loan losses of the Bank is provided inaccordance with the Bank’s predetermined internal rules forwrite-offs and provisions as follows:
The reserve for loans to borrowers who are classified as
substantially bankrupt or who are bankrupt in the legal sense isprovided at 100% of the amount remaining after write-offs anddeduction of expected collection from the disposal of collateral andthe execution of guarantees. In addition, a reserve is provided forloans to borrowers who, although not actually bankrupt in the legal
sense, are experiencing serious financial difficulties and whose
failure is imminent. In such cases, the reserve is provided at theamount deemed necessary based on the borrower’s capability of
repayment after deduction of expected collection from the disposal ofcollateral and the execution of guarantees.
The Bank calculates the reserve by the cash flow estimate
method to those borrowers who owe the debts classified as Loans toProbably Bankrupt Borrowers and Restructured Loans by the Bank,
whose total credit exceeds a certain amount and also the cash flow
related to collection of the principal and interests from whom can be
estimated. The cash flow estimate method is to determine the gap
between the amounts calculated by discounting the cash flow by thecontracted interest rate prior to relaxation of terms and conditions ofloans and their book values.

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 ¥951 million ($9 million) as of March 31, 2014 and ¥1,206
million as of March 31, 2013.
Reserve for possible loan losses of the consolidated subsidiaries
for general claims is provided as the amounts deemed necessary
based on the default rate calculated from actual default during acertain period in the past, and for doubtful claims as the amounts
deemed uncollectible based on the assessment of each claim.
(10) Reserve for Investment Losses
Reserve for Investment Losses is allocated in an amountconsidered necessary to provide against possible future losses frominvestments, taking into consideration the financial position of thecompany issuing the securities and other factors.
(11) Reserve for Employee Bonuses
Reserve for Employee Bonuses is set aside to pay employee
bonuses with respect to the portion of estimated bonus payments toemployees that correspond to this fiscal year.
(12) Reserve for Directors’ Bonuses
Reserve for Directors’ Bonuses is set aside to pay directors andcorporate auditors bonuses with respect to the portion of estimatedbonus payments to directors and corporate auditors that correspond to
this fiscal year.
(13) Reserve for 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.
(14) Reserve under Specific Law
This reserve amount is calculated pursuant to Article 46-5,
Paragraph 1 of the Financial Instruments and Exchange Act andArticle 175 of the Cabinet Office Ordinance on Financial Instruments
Business to indemnify any losses incurred from accidents in the
conduct of market derivative transactions on behalf of clients.
(15) Employees’ Retirement Benefits
The retirement benefit obligation for employees is attributed toeach period by the straight-line method. Also, 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
over a certain number of years (10 years) within the averageremaining service period of current employees at the time the cost isincurred.
Actuarial differences:
Actuarial differences are amortized from the following year,
using the straight-line method over a certain number of years (10years) 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.
(16) Translation of Foreign Currencies
Foreign currency-denominated assets and liabilities aretranslated into Japanese yen at exchange rates prevailing at the end of
the fiscal year. Foreign currency-denominated assets and liabilities of
consolidated subsidiaries are translated into Japanese yen at exchange
rates prevailing at the end of the fiscal year.
(17) Leases
Finance leases for the Bank and its domestic consolidated
subsidiaries that do not transfer ownership and contracted for before
the fiscal year beginning April 1, 2008 are accounted for as operatingleases.
(18) Consumption Tax
Consumption tax and local consumption tax incurred by the
Bank and its domestic consolidated subsidiaries are excluded fromtransaction amounts. However, consumption tax and local
consumption tax paid on purchases of tangible fixed assets andintangible fixed assets, which are not deductible as a tax credit, arecharged to income at the end of the fiscal year.
(19) Amortization of Goodwill
Goodwill is fully amortized in the fiscal year incurred.
(20) Changes in Accounting Policies
The Bank adopted “Accounting Standard for Retirement
Benefits” (Accounting Standards Board of Japan (ASBJ) Statement
No. 26, May 17, 2012) and “Guidance on Accounting Standard for
Retirement Benefit” (ASBJ Guidance No. 25, May 17, 2012) (except
for certain provisions described in the main clause of Section 35 of
the standard and in the main clause of Section 67 of the guidance) asof the end of the fiscal year ended March 31, 2014. These accounting
standards require entities to apply a revised method for recording theretirement benefit obligation, after deducting pension plan assets, as aliability for retirement benefits. In addition, unrecognized actuarial
differences and unrecognized prior service costs are recorded as aliability for retirement benefits. Concerning the application of the
Accounting Standard for Retirement Benefits, based on theprovisional treatment set out in Clause 37 of the standard, the effectsof such changes in the current fiscal year have been recorded inretirement benefits liability adjustments through accumulated othercomprehensive income.
As a result, at the end of the fiscal year, the Bank recognized¥28,414 million ($276 million) of Net Defined Benefit Liability, and¥3,489 million ($33 million) decrease in Accumulated Other
Comprehensive Income.
The effect on per share information is stated in the relevant partof these notes.
(21) Issued but not yet Adopted Accounting Standards
Accounting Standard for Retirement Benefits (May 17, 2012)(i) Summary
From the perspective of making improvements to financial
reporting and based on international trends, this accounting standard
provides guidance for the accounting for the amortization of33

unrecognized actuarial differences and unrecognized prior service
costs, and the calculation and presentation of retirement benefit
obligations and service costs.
(ii) Scheduled date of adoption
Revisions to the calculation methods for the retirement
benefit obligation and service costs are scheduled to be adopted fromthe beginning of the fiscal year ending March 31, 2015.
(iii) Impact of adopting this standard
The impact of adopting this standard is immaterial.

3.

Trading Assets:
The details of Trading Assets as of March 31, 2014 and 2013
are as follows:
Millions ofMillions of Yen
U.S. Dollars
2014

2014

2013

75,16678,878730

Trading Bonds-Related
Financial Derivatives

－

2

－

Derivatives of Securities
related to Trading
Transactions

－

13

－

Trading-Related
Financial Derivatives

48,10752,377467

Other Trading Assets

113,987343,754

1,107

Total

237,261

475,025

2,304

Trading AccountSecurities

4.

Securities:
The details of Securities as of March 31, 2014 and 2013 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2014
2013
2014
Japanese Government
111,617
11,489,925 12,264,427
Bonds
Municipal Government
Bonds

185,304

221,085

1,800

Short-term Corporate
Bonds

14,99614,998145

2,408,050

1,975,692

23,392

Stocks46,441

43,498451

Others4,274,073

5,128,148

41,520Total

18,418,791 19,647,850

178,927

Corporate Bonds

Notes:
1. Stocks include investments in affiliated companies totaling ¥189
million ($1 million) as of March 31, 2014 and 2013.
2. Others include common shares and investment in unconsolidated
subsidiaries totaling ¥5,147 million ($50 million) as of March 31,
2014 and ¥5,973 million as of March 31, 2013. Others also include
preferred shares issued by Shinkin Banks which were contributedin accordance with the Shinkin Bank Management Reinforcement
System. The amount was ¥237,190 million ($2,304 million) as ofMarch 31, 2014 and ¥246,245 million as of March 31, 2013,
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
2014

2013

2014

Loans to Bankrupt
Borrowers

125

404

1

Delinquent Loans

8,734

9,418

84

86

165

0

Restructured Loans

28,92628,609281

Total

37,87338,597367

Loans Past Due Three
Months or More

The above amounts are the amounts before exclusion ofreserves for possible loan losses.
Loans to Bankrupt Borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Article 96-1-3 or 4of the 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 ¥49,400 million ($479 million) as of March 31, 2014and ¥101,800 million as of March 31, 2013, respectively. Of theseamounts, ¥22,600 million ($219 million) as of March 31, 2014, and¥25,000 million as of March 31, 2013, respectively, were provided to
Shinkin Banks in accordance with the Shinkin Bank Management
Reinforcement System.
Bills Discounted are accounted for as financial transactions inaccordance with JICPA Industry Audit Committee Report No.24“Accounting and Auditing Treatment of Accounting Standards for
Financial Instruments in Banking Industry”. The face value of bills of
lading amounted to ¥215 million ($2 million) as of March 31, 2014and ¥250 million as of March 31, 2013, 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), the amount of theparticipation principal is accounted for as a loan to the original debtor,
and this amounted to ¥66,044 million ($641 million) as of March 31,
2014 and ¥88,299 million as of March 31, 2013.

6.

Commitments to Overdrafts and Loans:
Commitments related to overdrafts and loans represent
agreements to extend overdrafts or loans up to a pre-agreed amount at
the customer’s request as long as there is no violation of theconditions stipulated in commitment agreements.
The amount of unused commitment lines does not necessarily
have a significant effect on the future cash flows of the Bank because
most of these commitment lines are terminated without being
exercised. Most of these agreements have provisions which stipulatethat the Bank may not extend the loan or may decrease thecommitment when there are certain changes in the financial
conditions, certain issues relating to collateral and other reasons. The
Bank limits the commitment line to an amount below the amount of
the related customer’s time deposit. The Bank periodically checks thefinancial condition of its customers based on its internal rules andperforms certain actions to secure loans or revises the contracts, asnecessary.
The amounts of unused commitment lines under suchagreements are ¥17,848,727 million ($173,389 million) as of March
31, 2014 and ¥17,572,383 million as of March 31, 2013, 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 ¥17,764,762 million ($172,573 million) as of March 31,
2014 and ¥17,503,679 million as of March 31, 2013, 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 ¥123,308 million ($1,197 million) as of March 31, 2014 and¥117,536 million as of March 31, 2013.
Of cash-collateralized securities borrowings, those freely
disposable for sale or re-collateralized, and pledged as collateralamounted to ¥729 million ($7 million) as of March 31, 2014 and¥5,398 million as of March 31, 2013. Those held by the Bank
without being disposed of as of March 31, 2014 amounted to¥248,905 million ($2,417 million) and as of March 31, 2013
amounted to ¥392,858 million.
8.

Tangible Fixed Assets:
Millions of Yen
2014
2013

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
2014

82,381

84,992

800

1,764

1,764

17

（－)

（－)

（－)

35

9.

Assets Pledged as Collateral and Associated Liabilities:
Assets pledged as collateral for the fiscal years ended March 31,
2014 and 2013 are as follows:
Millions of U.S.
Millions of Yen
Dollars
2014
2013
2014

Assets Pledged as Collateral
Cash and Due from Banks

0

0

0

23,59343,424229

2,887,707 4,048,354

28,052Loans and Bills Discounted 2,439,166 1,682,828

23,695

Total

51,976

Trading Assets
Securities

5,350,466 5,774,607

Liabilities associated with
Assets Pledged as Collateral
Borrowed Money

123,500

113,500

1,199

Bills Sold and Call Money

213,300

260,000

2,072

Payables under Repurchase
Agreements

35,437－344

Payables under Securities
Lending Transactions

965,928 1,631,653

9,383

Cash and Due from Banks of ¥11 million as of March 31, 2013,
Trading Assets of ¥705 million ($6 million) as of March 31, 2014and ¥720 million as of March 31, 2013 and Securities in the amountof ¥989,487 million ($9,612 million) as of March 31, 2014 and¥1,296,146 million as of March 31, 2013, respectively, were secured
as collateral for exchange settlement transactions, etc. or futures or as
substitute for margin money in futures transactions, etc.
Other Assets included margin money. The amount was ¥291
million ($2 million) as of March 31, 2014, and ¥264 million as ofMarch 31, 2013. Other Assets also included guarantee money
amounting to ¥379 million ($3 million) as of March 31, 2014, and¥356 million as of March 31, 2013, respectively.
10. Trading Liabilities:
The details of Trading Liabilities as of March 31, 2014 and2013 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2014
2013
2014
Trading Bonds Sold

68,83660,324

668

22

－

0

Trading-Related Financial
Derivatives

89,67788,013871

Total

158,537

148,338

1,540

Derivatives of Securities
related to Trading Transactions

36

11. Borrowed Money and Lease Obligations:
Balance as ofApril 1, 2013
(Millions of Yen)

Balance as ofMarch 31, 2014
(Millions of Yen)

Balance as ofMarch 31, 2014
(Millions of U.S.
Dollars)

Borrowings

811,890937,320

9,105

1.18

Borrowed Money

811,890937,320

9,105

1.18

Lease Obligations Due for Repayment
within One Year

2,149

1,367

13

2.28

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

4,859

4,085

39

2.12

Category

Average
Interest Rate (%)

Maturity－Jun. 2014～
No maturity－
Apr. 2015～
May. 2020

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 2 years,
Over 3 years,
Over 4 years,
Over 1 year,
One year or lessup to 2 years
up to 3 years
up to 4 years
up to 5 years
10,000113,500－－－
Borrowed Money
1,367
1,186
1,209
1,028
482
Lease Obligations
Millions of U.S. Dollars
Over 1 year,
Over 2 years,
Over 3 years,
Over 4 years,
One year or lessup to 2 years
up to 3 years
up to 4 years
up to 5 years
97
1,102
－
－
－
Borrowed Money
11
11
9
4
13
Lease Obligations
3. Borrowed Money includes subordinated borrowings of ¥813,820 million ($7,905 million) as of March 31, 2014 and ¥651,340 million as ofMarch 31, 2013.
12. Debentures:

IssuerThe Bank

Name of Issue

No.221-292
5-yearInterest-bearing
debentures

Issuance Date

Apr. 2008～
Mar. 2014

Total

－

Balance as of Balance as of Balance as ofApril 1,March 31,
March 31,
2013
2014
2014
(Millions of (Millions of (Millions of
Yen)
Yen)
U.S. Dollars)
3,537,350

3,161,810

30,715

3,537,350

3,161,810

30,715Interest
Rate (%)

Collateral

Redemption
Date

0.20～
1.50

－

Apr. 2013～
Mar. 2019

－

－

－

Note:
The redemption schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
One year or less
798,960

Over 1 year,
up to 2 years
580,720

Over 2 years,
up to 3 years
578,660

Over 3 years,
up to 4 years
577,760

Over 4 years,
up to 5 years
625,710

Over 3 years,
up to 4 years
5,612Over 4 years,
up to 5 years
6,078

Millions of U.S. Dollars
One year or less
7,761

Over 1 year,
up to 2 years
5,641Over 2 years,
up to 3 years
5,621

37

13. Asset Retirement Obligations:
The details of Asset Retirement Obligations were omitted
because the amount was one-hundredth or less of the total balance of
Liabilities and Net Assets as of April 1, 2013 and as of March 31, 2014,
respectively.

16. Trading Income:The details of Trading Income for the fiscal years ended March 31,
2014 and 2013 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2014

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 the revaluation of the land, net of deferred tax, was recorded as“Land Revaluation Excess” under Net Assets.
Date of Revaluation: March 31, 1999
Revaluation method in accordance with Article 3-3 of Law 34:
Revaluations were made based on the method, determined by
the Commissioner of the National Tax Administration, which
formed the basis for calculating land value taxes (prescribed by
the Land Value Tax Law), as set forth in Article 2-4 of theOrder for Enforcement of the Act on Revaluation of Land
(Government Ordinance No. 119, dated March 31, 1998), withappropriate adjustments.
The difference between the total fair value at the end of thisfiscal year and the total post-revaluation book value of land thatis used for business and has been revalued pursuant to Article 10of Law 34.: ¥ 5,257 million ($51 million) as of March 31, 2014,and ¥ 6,495 million as of March 31, 2013.
15. Fees and Commissions:
The details of Fees and Commissions for the fiscal years ended
March 31, 2014 and 2013 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2014
2013
2014
Deposit, Fixed Income
661
500
6
Securities and Lending
405

421

3

Securities Related Business

7,075

6,024

68

Agency Business

2,278

2,170

22

Guarantee Business

5,691

4,659

55

Trustee Business

17,645

17,132

171

528

534

5

34,28731,443333

Exchange

226

132

2

Others

11,074

10,490107

Expenses on Fees andCommissions Businesses

11,301

10,622

109

Exchange Business

OthersIncome on Fees andCommissions Businesses

38

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

2013

2014

737

566

7

14,48010,981

140

244

421

2

15,462

11,969150

17. Trading Losses:
The details of Trading Losses for the fiscal years ended March 31,
2014 and 2013 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2014
2013
2014
Expenses from
635
2
224
Trading-Related Securities
Total

224

635

18. Other Expenses:
Other Expenses include Losses on sale of stocks and othersecurities, Losses on devaluation of stocks and other securities,
Investment loss on money trusts, and Impairment Losses on Fixed
Assets.
(1) Securities
The amount of Losses on sale of stocks and other securities was¥168 million ($1 million) and ¥5,919 million for the fiscal years ended
March 31, 2014 and 2013, respectively. The amount of Losses ondevaluation of stocks and other securities was ¥407 million for the
fiscal years ended March 31, 2013, respectively. Investment loss onmoney trusts was ¥716 million ($6 million) for the fiscal years ended
March 31, 2014, respectively.
(2) Impairment Losses on Fixed Assets:
Each business location such as branch office or company housing
is the smallest unit of asset group. Also, the assets used in the head
office and facilities for employee welfare and recreation are treated as
the corporate assets since they do not produce any cash flows by
themselves. Each consolidated subsidiary is treated as a single unit for
the asset grouping.
Branch offices and other assets that are designated to betransferred or disposed due to deterioration or other factors areindividually treated as idle assets. The carrying amount is reduced to
the recoverable amount and the reduction amount is recorded as
impairment losses as below.
The recoverable amount used for measurement of impairment
losses is the net selling value and this is derived from the purchase priceand others obtained from real estate agents.

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2

For the fiscal year ended March 31, 2014
Not applicable.
For the fiscal year ended March 31, 2013
Principal Use

Category

Millions of
Yen

Ichigaya Annex(Tokyo Prefecture)

Idle assets

Buildings

205

Fukuoka Branch(Fukuoka Prefecture)

Idle assets

Land and buildings

516

Minami-Kyushu Branch(Kumamoto Prefecture)

Idle assets

Land and buildings

621

Employee housing

Idle assets

Land and buildings

470

Location

Total

1,813

19. Consolidated Statement of Comprehensive Income:For the fiscal year ended March 31, 2014 and 2013
Reclassification adjustment amount and tax effect amount related to Other Comprehensive Income
Millions ofMillions of Yen
U.S. Dollars
2014

2013

2014

Net Unrealized Gains on Other Securities:
The Amount Arising during the Period(34,386)

288,363

Reclassification Adjustment Amount

17,908(93,303)

173

Prior to Tax Effect Adjustment(16,477)

195,059(160)

Tax Effect Amount

(334)

4,069

(53,088)39(12,408)

141,971(120)

The Amount Arising during the Period(20,708)(170,024)(201)

Reclassification Adjustment Amount

49,280163,736

478
277

Net Unrealized Gains on Other Securities
Net Deferred Gains (Losses) on Hedging Instruments :Prior to Tax Effect Adjustment

28,571(6,287)Tax Effect Amount(7,915)

1,752

(76)

Net Deferred Gains (Losses) on Hedging Instruments

20,656(4,535)

200

－

－
－

Land Revaluation Excess:
The Amount Arising during the Period
Reclassification Adjustment Amount

－

－

－

－

Prior to Tax Effect Adjustment－－

Tax Effect Amount

(10)

(2)

(0)

Land Revaluation Excess

(10)

(2)

(0)

The Amount Arising during the Period

1,448
－

－

14

Reclassification Adjustment Amount

－

849

－

－

－

－
－

Foreign Currency Translation Adjustments

1,448

849

14

Other Comprehensive Income

9,685

138,283

94

Foreign Currency Translation Adjustments:

Prior to Tax Effect Adjustment
Tax Effect Amount－

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39

20. 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, 2014
April 1, 2013 (Thousand
Year (Thousand Units)
Year (Thousand Units)(Thousand Units)
Units)
Shares Outstanding
General Common Shares

4,000

Preferred Shares (Type-A)

708

Total

－

－

4,708

－

－

－

Treasury Shares
General Common Shares－

Preferred Shares (Type-A)
Total

－

4,000

－

708

－

4,708

－

－

－

－

－

－

－

－

－

(2) Dividends
Dividends paid during the fiscal year ended March 31, 2014
Resolution

Class of share

Total Dividend
Amount (Million Yen)

Amount Per Share(Yen)

Record Date

Effective Date

Common shares

12,0003,000

Mar 31, 2013

Jun 21, 2013

Preferred shares

4,603

6,500

Mar 31, 2013

Jun 21, 2013

Annual General Meeting of
Shareholders, June 21, 2013

In the case of dividends for which the record date falls in the fiscal year ended March 31, 2014, the effective date of the dividend falls in
the following fiscal year:
Resolution

Class of share

Total Dividend
Amount (Million Yen)

Resource ofDividends

Amount Per Share(Yen)

Record Date

Effective Date

Common shares

12,000Retained Earnings

3,000

Mar 31, 2014

Jun 20, 2014

Preferred shares

4,603

Retained Earnings

6,500

Mar 31, 2014

Jun 20, 2014

Annual General Meeting of
Shareholders, June 20, 201440

21. Income Taxes:(1) Breakdown of Deferred Tax Assets and Liabilities is as follows:
Millions ofMillions of Yen
U.S. Dollars
2014

2013

2014

2,857

3,169

27

5,518

2,886

53

－

6,342

－

Net Defined Benefit Liability

8,480

－

82

Write-Downs for Securities

4,675

6,995

45

Net Deferred Losses on
Hedging Instruments

26,89534,810261

Tax Loss Carryforwards

5,006

16,86448

Others

1,817

1,934

17

Valuation Allowances(8,438)(8,797)(81)

Total Deferred Tax Assets

46,81264,205454(107,755) (111,830)(1,046)

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

for Partial Amendment of the Income Tax Act, etc. (Act No. 10,2014) and the Local Corporation Tax Act (Act No. 11, 2014), theSpecial Reconstruction Corporation Tax was abolished for fiscal
years commencing on or after April 1, 2014. In addition, for fiscal
years commencing on or after October 1, 2014, Local Corporation
Tax has been newly established.
Based on these changes, the effective statutory tax rate used to
calculate deferred tax assets and deferred tax liabilities in relation totemporary differences that are expected to be settled for fiscal years
commencing on or after April 1, 2014 is changed.
The impact of these changes in statutory tax rates is immaterial.

Deferred Tax Liabilities:
Net Unrealized Gains on Other
Securities
Others

(390)

(434)

(3)

Total Deferred Tax Liabilities(108,146) (112,265)(1,050)Net Deferred
Tax Liabilities(61,334)(595)(48,059)(2) Reconciliation between the effective statutory tax rate and theactual effective tax rate for the fiscal years ended March 31, 2014
and 2013:
2014

2013

29.65 %

29.65 %

Change in valuation allowances(0.58%)(9.97%)

Dividends received, not taxable(3.02%)(3.89%)

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

0.34 %－

Others

0.79 %

3.96 %

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

27.18 %

19.75 %

Statutory effective tax rate
(Adjustments)(3) Revision of amounts of deferred tax assets and deferred tax
liabilities due to changes in the corporate tax rate
Accompanying the promulgation on March 31, 2014, of the Act4122. Retirement Benefit Plans:
For the fiscal year ended March 31, 2014
(1) Retirement Benefit Scheme
The Bank and some of its consolidated domestic subsidiaries
have a defined benefit plan that offers lump-sum payments uponretirement and contributes to the Employees’ Pension Fund for all
Shinkin Banks nationwide.
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, 2014 is as follows:(i) Reconciliation of beginning- and end-of-period balance ofRetirement Benefit Obligation
Millions ofMillions of Yen
U.S. Dollars
2014

2014

Retirement Benefit Obligation at
Beginning of Period

46,428451

Service Cost

2,158

20

Interest Cost

6506(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
2014
38,812377

Pension Plan Assets(19,706)(191)

19,106

185

9,307

90

28,414276

Millions of Yen

Millions of
U.S. Dollars

2014

2014

Unfunded Plan Retirement Benefit
Obligation
Net Amount of Liabilities andAssets Presented on theConsolidated Balance Sheets

Net Defined Benefit Liability
Actuarial Difference Incurred

264

2014

Funded Plan Retirement Benefit
Obligation

28,414－276

28,414276

2Net Defined Benefit Asset

Retirement Benefits Paid

(1,381)

(13)

－

－

Prior Service Cost

－

Other

－

Net Amount of Liabilities andAssetsPresented
ontheConsolidated Balance Sheets－(iv) Breakdown of Retirement Benefit Expense
Retirement Benefit Obligation at
End of Period

467

48,120(ii) Reconciliation of beginning- and end-of-period balance ofPension Plan Assets
Millions ofMillions of Yen
U.S. Dollars
2014
Balance of Pension Plan Assets at
Beginning of Period
Expected Return on Pension
Plan Assets

18,369

178

642

6

Actuarial Difference Incurred

30

0Contributions by the Employer
and Employees

1,476

14

Retirement Benefits Paid

(813)

(7)

－

－

19,706191

Other
Balance of Pension Plan Assets at
End of Period

42

2014

Millions of Yen

Millions of
U.S. Dollars

2014

2014

Service Cost

2,158

20

Interest Cost

650

6

(642)

(6)

736

7

Amortization of Prior Service Cost

(257)

(2)

Other

(548)

(5)

Retirement Benefit Expenses
Related to Defined Benefit Plan

2,096

20

Expected Return on Pension Plan
AssetsAmortization of Actuarial
Differences

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) comprised the following.
Millions ofMillions of Yen
U.S. Dollars
2014
Unrecognized Actuarial
Differences

2014
9

0

5,352

51

Other

－

－

Total

5,361

52

Unrecognized Prior Service Cost(vi) Pension Plan Assets(a) The ratios by main asset categories in total pension plan assets are
as follows:
2014
Bonds

75 %

Stocks19 %Cash and Deposits

4%

Other

2%

Total

100 %

(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 andthe current and future expected rate of return on the diverse range ofassets that makes up the pension assets.
(vii) Underlying actuarial assumptions
Main underlying actuarial assumptions as of March 31,
2014, were as follows:
2014
Discount Rate
Expected Long-term Rate of Return on
Pension Plan Assets

For the fiscal year ended March 31, 2013
(1) Retirement Benefit Scheme
The Bank and some of its consolidated domestic subsidiaries
have a defined benefit plan that offers lump-sum payments uponretirement and contributes to the Employees’ Pension Fund for all
Shinkin Banks nationwide.
(2) Reserve for Employee Retirement Benefits as of March 31, 2013is analyzed as follows:
Millions of Yen
2013
Projected Benefit Obligations (A)(46,428)

Plan Assets (B)18,369Unfunded Retirement Benefits
Obligations (C) = (A) + (B)(28,059)

Unrecognized Actuarial
Differences (D)5,855

Unrecognized Prior Service
Costs (E)(248)

Net Amounts Reported in theConsolidated Balance Sheet(F) = (C) + (D) + (E)(22,452)

Prepaid Pension Costs (G)Reserve for Employee Retirement
Benefits (F) – (G)－(22,452)

Notes:
1. The above projected benefit obligations included the governmental
welfare program.
2. The above projected benefit obligations on the lump-sum paymentof retirement benefits included amounts measured by consolidated
subsidiaries under the non-actuarial method.

1.1～1.5 %3.5%43

(3) The breakdown of Pension Expenses for the fiscal years ended
March 31, 2013 is as follows:
Millions of Yen
2013
Service Costs

1,350

Interest Costs

806

Expected Return on Plan Assets(252)

Amortization of Prior Service Costs(519)

Amortization of Actuarial
Differences
Others (e.g., Extraordinary Retirement Benefits
Paid Out of the Scope of the Retirement Benefit
Scheme)"Significant

917(2) Finance leases that do not transfer ownership accounted for inaccordance with the ordinary lease transaction method
Data omitted due to immateriality.

－

2. Operating Leases

2,302

Notes:
1. The amounts paid by employees to the Employees’ Pension Fundare excluded from Service Cost.
2. The retirement benefit costs on the lump-sum payment of
retirement benefit for consolidated subsidiaries are included inService Cost.
(4) Assumptions used in the calculation of the above information
were as follows:2013
1.1～1.5 %Expected Rate of Return on Plan Assets

1.5 %Method of Attributing the Projected Benefits to Periods ofServices:
Straight-line basis
Amortization of Unrecognized Prior Service Costs:
10 years (Unrecognized prior service costs are amortized, using
the straight-line method within the average remaining service
years of the current employees)
Amortization of Unrecognized Actuarial Differences
10 years (Unrecognized actuarial differences are amortizedfrom the following fiscal year, using the straight-line method
within the average remaining service years of the current
employees)
Note:
The rate of retirement, the mortality rate and the rate of increase in
future compensation levels used in calculating the retirement benefit
obligations on the Employees’ Pension Fund are identical to thefigures used in the formula for the calculation of the Employees’
Pension Fund itself.

44

the

Future lease payments related to noncancelable operatingleases: Not applicable

Net Pension Expenses

Discount Rate

23. 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
Accounting Policies".

24. Financial Instruments:
1. Matters concerning financial instruments(1) Policies on financial instruments
Shinkin Central Bank Group (the “Group”) works to ensure
the stable procurement of funds through the acceptance of deposits
mainly from its Shinkin Bank members and through the issuance ofdebentures. Additionally, the Group takes steps to diversify its
funding methods by procuring funds from short-term money
markets depending on market conditions.
Procured funds are invested in short-term money market
instruments, marketable securities, and loans.
Moreover, the Group uses derivative transactions for the
purpose of risk-hedging in ALM (asset liability management)
activities and engages in short-term trading of securities andderivatives.
To appropriately manage the various risks that result fromthese financial instruments, the Group engages in ALM activities
including the above-mentioned derivative transactions. For its
trading activities the Group establishes risk limit and loss limit
amounts and engages in transactions within the scopes of these risk
limits, and in this way works to preserve a sound management andto ensure stable earnings.
(2) Types and related risks of financial instruments
Financial assets held by the Group consist mainly of shortterm funds, securities, and loans assets.
Short-term funds are invested in the call loan and euro-yen
deposits.
These investments are exposed to market risks such as thecounterparty credit risk, interest rate risk, and foreign currency risk.
Securities portfolios of the Group consist of domestic
securities including Japanese government, corporate bonds andothers as well as foreign securities such as government,
government-guaranteed, and government related institutional bonds
issued in the major industrialized countries. In addition, forinvestment diversification the Group also invests in equity securities
and investment funds.
These investments are exposed to market risks such as theindividual issuers’ credit risk, interest rate risk, price fluctuation risk,
and foreign currency risk, as well as market liquidity risk.
Loans assets consist of direct loans to low-risk borrowers
including Shinkin Banks, central and local governments, public
service corporations, high-quality 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 denominated deposits, most ofwhich are deposits from Shinkin Bank members.
These deposits are exposed to market risks such as interest
rate risk and foreign currency risk, as well as liquidity risk.
As a debenture issuer, the Group issues 5-year interest-bearing
debentures each month.
These debentures are exposed to interest rate risk and liquidity
risk.

Furthermore, the Group engages in derivative transactions.
Specifically, the Group trades interest rate derivatives (interest
swaps, interest futures, and interest options), currency derivatives(foreign currency forwards 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 market risks by mitigating (i)interest rate risk through interest rate swaps and (ii) foreign
currency risk of foreign denominated assets throughforeign-denominated funds procurement, currency swaps, and forex
swaps.
Hedge accounting is applied to risk hedges through ALM
activities including the use of derivatives. As for the hedge
accounting, hedged items, hedging methods, policies, and methodsof hedge effectiveness assessment, etc. are described in the“Significant Accounting Policies.”(3) Risk management frameworks for financial instruments
The basic policies for risk management of the Bank arebroadly distinguished between “risks to be minimized” and “risks to
be controlled”. Credit risk, market risks, and liquidity risks fall into
the latter category. Both categorized risks are managed by risk
management divisions that are independent of the market divisions.
For the comprehensive management of these risks, Risk
Management Division has been established.
<Integrated risk management>
For the integrated management of risks, the Bank has
introduced integrated risk management for quantifiable risks.
Integrated risk management is a risk management method bymeasuring various risks using a uniform risk measure such as Valueat Risk (VaR), aggregating the measurements, and comparing theaggregated amounts with the strength of the Bank’s capital. The
Bank measures credit risks and market risks using VaR
methodology, and monitors on a daily basis to prevent risk limits
from being breached.
These risk limit amounts are reviewed each fiscal year by the
Risk Management Committee and determined at the Executive
committee. The values of risk, on the other hand, are measured at
the middle and end of each month by the Risk Management
Division, which takes steps to prevent any of the various risk limits
from being breached and, through a Risk Management Committee,
reports regularly to the management and relevant divisions.
The values of risk managed at consolidated subsidiaries areaggregated and managed through the integrated risk management
framework.
(i) Credit risk management
For the accurate identification and strict management of credit
risk, the Bank has established credit risk management policies.
Moreover, the Bank has created a structure in which divisions
responsible for credit control, credit management and credit
assessment are clearly segregated from divisions involved in client
services, with mutually independent tasks to ensure effective
internal checking functions.
The Credit Committee has been established as an organ for

45

reviewing and determining matters related to credit risk
management. The Credit Committee is comprised of senior
management and general managers of related divisions anddeliberates on credit transactions that exceed a designated amount.
The Executive Committee deliberates on the results of asset
self-assessments, asset write-offs and asset reserve provisions.
Divisions responsible for credit control manage the credit riskfor each borrower relating to loans and market trading activities. An
overall credit limit is set for each borrower according to the credit
rating of the borrower. They analyze the Bank’s overall credit
portfolio according to credit rating, industry, country and othercriteria. These analyses are used to monitor the diversification of
credit risk as well as changes in portfolio credit risk. Additionally,
divisions responsible for credit control quantify credit risk in VaR
methodology using Monte Carlo simulation methods and manage
credit risks based on the limits set at the Executive Committee.
Divisions responsible for credit management accurately
monitor each borrower’s financial condition, the purposes for whichfunds are used and repayment resources. In addition to appropriate
assessment and post-transaction management, they continuallycheck whether the client service division is conducting appropriate
credit control, and provides guidance as necessary.
Divisions responsible for credit assessment undertake andmanage operations relating to asset self-assessments, and thecalculation of asset write-offs and asset reserve provisions.
Credit risks of consolidated subsidiaries are by individual
borrower added to the credit risk of the Bank and monitored.
(ii) Market risk management
To maintain an accurate understanding of market risk andrigorously manage this risk, the Bank has issued a market risk
management policy. Furthermore, divisions responsible for market
risk management are clearly separated from divisions involved inmarket operations, providing a risk management structure in whichinternal checks are maintained through independent functions.
The Bank has established the ALM Committee as the body
responsible for deliberating and making decisions on mattersrelating to market risk management. The ALM Committee iscomprised of senior management and heads of divisions related tomarket risk. Based on risk status information—obtained via reports
from divisions responsible for market risk management and othersources—the ALM Committee reviews broadly and in a timely
manner ALM related policies and market transactions for the Bank’s
fund-raising and management as well as the usage of hedging
transactions involving derivatives such as interest rate swaps.
Divisions responsible for market risk management quantify
and manage market risk by VaR within the limit set by the
Executive Committee. In addition, market risk is 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

46

management, in addition to the above monitoring system. In thisway, market risks including those that cannot be captured throughVaR methods alone are managed.
Moreover, for trading operations, clear regulations are in placeconcerning the trading instruments and trading management
methods, enabling appropriate trading operations by setting a
specific loss limit amount.
Market risks of consolidated subsidiaries are not directly
added to the values of market risk of the parent operations but aremanaged separately under integrated risk management.
<Quantitative information on market risk>(a) Financial instruments held for trading purposes
The Bank uses VaR analysis for quantifying market risk of
trading securities held within securities and interest-rate andforeign-exchange instruments held for trading purposes withinderivative transactions. The VaR model is based on the delta method
and uses a 99.0% confidence interval, a holding period of fivebusiness days and an observation period of one year. In addition,with regard to market risk related to trading operations at
consolidated subsidiaries, which is managed separately within the
integrated risk management framework, the Bank uses a market
risk-equivalent amount under the regulations on banks’ capital ratio.
The market risk amount (estimated loss amount) of the Bank’s
trading operations was ¥558 million ($5 million) as of March 31,
2014 and ¥247 million as March 31, 2013 and the market risk
amount (estimated loss amount) of the trading operations of theBank’s consolidated subsidiaries was ¥1,027 million ($9 million) as
of March 31, 2014 and ¥1,382 million as March 31, 2013.
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, 2014, theactual loss amount exceeded the VaR model on two occasions, andthe Bank believes that the measurement model it uses has anadequate level of accuracy to capture market risk. However, it
should be noted that VaR measures the amount of market risk atcertain probability levels statistically calculated based on historicalmarket fluctuation. Hence, there may be cases where market risk
cannot be captured in situations where market conditions change
unprecedentedly.
(b) Financial instruments other than those held for trading
purposes
The Bank uses VaR analysis for quantifying market risk ofdue from banks, securities not held for trading purposes, loans andbills discounted, deposits, debentures, receivables under securities
borrowing transactions and, within derivative transactions,interest-rate and foreign-exchange instruments not held for trading
purposes. The VaR model is based on the delta method and uses a
99.0% confidence interval, a holding period of one year and an
observation period of five years. In addition, with regard to market
risk at consolidated subsidiaries related to operations other than
trading operations, which is managed separately within the
integrated risk management framework, such risk is calculated inaccordance with methods used by the Bank.
The Group’s market risk amount (estimated loss amount)
other than for trading purposes was ¥235,098 million ($2,283
million) as of March 31, 2014 and ¥357,370 million as March 31,
2013. The Bank conducts back testing to compare VaR calculated

using the model with actual loss amounts. However, it should be
noted that VaR measures the amount of market risk at certain
probability levels statistically calculated based on historical market
fluctuation. Hence, there may be cases where market risk cannot be
captured in situations where market conditions change
unprecedentedly.
(iii) Liquidity risk management related to fund-raising
For the accurate identification and strict management ofliquidity risk, the Bank has established liquidity risk management
policies. Divisions responsible for liquidity risk management areclearly separated from divisions involved in cash management andmarket operations, allowing internal checks to be maintained
through the independent functions. In addition, the ALM Committee
deliberates and makes decisions on matters relating to liquidity risk
management.
Methods used for managing liquidity risk include the daily
setting and monitoring of risk limit amounts relating to the gap
between cash receipts and payments. This is carried out forindividual currencies and periods. In the event that a significant
liquidity risk arises, the Bank has preparations to respond rapidly,
including the securing of funding sources.
The liquidity risk management frameworks created by the
Bank include subsidiaries as well, by providing overdraft facilities
for consolidated subsidiaries with operations involving fundmovements in relatively large amounts.
(4) Supplementary explanation concerning the fair values offinancial instruments
Fair values of financial instruments, in addition to values
based on market prices, also include values based on reasonableestimates if market prices are unavailable. Since value estimates are
predicated on certain assumptions, values may vary if theunderlying assumptions change.

47

2. Matters concerning fair value and others of financial instruments
Carrying values stated on the consolidated balance sheet, fair value and differences between them are as follows. Unlisted stocks andsimilar items with significant difficulty in determining fair value are not included in the table below. (See Note 2.)
Immaterial items have been omitted.
As of March 31, 2014
Millions of Yen
Carrying Value

Fair Value(1) Cash and Due from Banks

4,938,807

4,938,807(2) Bills Bought and Call Loans

578,351

578,351

Difference－－－(3) Receivables under Resale Agreements

86,98086,980(4) Receivables under Securities Borrowing Transactions

173,390

173,390－(5) Monetary Debts Purchased (※1)

269,564

269,561(3)

Trading Securities

189,153

189,153－(7) Money Held in Trust

132,854

132,854－

114,968(6) Trading Assets(8) Securities
Held-to-Maturity Debt Securities

2,117,999

2,232,967

Other Securities

16,050,519

16,050,519(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (※1)

5,975,834(35,509)5,940,325

5,994,535

54,210Total Assets

30,477,947

30,647,123

169,175(1) Deposits

23,677,799

23,688,362

10,563(2) Debentures

3,161,810

3,176,809

14,99968,836

68,836－(4) Borrowed Money

937,320

960,779

23,459(5) Bills Sold and Call Money408,067

408,067－(3) Trading Liabilities
Trading Bonds Sold－

(6) Payables under Repurchase Agreements

35,43735,437(7) Payables under Securities Lending Transactions

966,659

966,659－

29,255,929

29,304,952

49,022

Total Liabilities

To which Hedge Accounting was not applied(11,063)(11,063)－

To which Hedge Accounting was applied(160,852)(210,150)(49,297)(171,916)(221,214)(49,297)

Derivatives (※2)

Total Derivatives

48－

Millions of U.S. Dollars
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

47,97747,977(2) Bills Bought and Call Loans

5,618

5,618

－
－
－

844

844

(4) Receivables under Securities Borrowing Transactions

1,684

1,684

－

(5) Monetary Debts Purchased (※1)

2,618

2,618

(0)

Trading Securities

1,837

1,837

－

(7) Money Held in Trust

1,290

1,290

－

Held-to-Maturity Debt Securities

20,575

21,691

1,116

Other Securities

155,921

155,921－57,70658,233526

Total Assets

296,074

297,7181,643(1) Deposits

230,015230,118102(2) Debentures

30,71530,860145(3) Receivables under Resale Agreements(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (※1)

58,051
(344)

668

668

－

(4) Borrowed Money

9,105

9,333

227

(5) Bills Sold and Call Money

3,964

3,964

344

344

－

(3) Trading Liabilities
Trading Bonds Sold

(6) Payables under Repurchase Agreements(7) Payables under Securities Lending Transactions
Total Liabilities

9,390

9,390

－

284,203

284,679

476

(107)

(107)

－

(1,562)(2,041)(478)(1,670)(2,148)(478)

Derivatives (※2)
To which Hedge Accounting was not applied
To which Hedge Accounting was applied
Total Derivatives－※1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Debts Purchased are immaterial and have therefore been deducted directly from the carrying value.
※2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.

49

As of March 31, 2013
Millions of Yen
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

3,117,393

3,117,393(2) Bills Bought and Call Loans

636,264

636,264－－－(3) Receivables under Resale Agreements

80,98580,985(4) Receivables under Securities Borrowing Transactions

187,023

187,023－(5) Monetary Debts Purchased (※1)

330,737

330,700(37)

Trading Securities

422,633

422,633－(7) Money Held in Trust

182,901

182,901－

Held-to-Maturity Debt Securities

3,263,221

3,391,635

128,413

Other Securities

16,125,875

16,125,875－

5,435,654

5,489,280

53,625

Total Assets

29,782,690

29,964,692

182,002(1) Deposits

22,000,309

22,013,154

12,845(2) Debentures

3,537,350

3,567,065

29,715(6) Trading Assets(8) Securities(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (※1)

5,460,170(24,516)

60,32460,324－(4) Borrowed Money

811,890

836,586

24,696(5) Bills Sold and Call Money559,088－

559,088－－(3) Trading Liabilities
Trading Bonds Sold－

(7) Payables under Securities Lending Transactions

1,637,068

1,637,068－

Total Liabilities

28,606,031

28,673,288

67,256(8,227)(8,227)－(148,178)(202,779)(54,601)(156,405)(211,007)(54,601)(6) Payables under Repurchase Agreements

Derivatives (※2)
To which Hedge Accounting was not applied
To which Hedge Accounting was applied
Total Derivatives※1. General and specific reserves for possible loan losses of Loans and Bills Discounted have been deducted. Loss reserves for Monetary
Debts Purchased are immaterial and have therefore been deducted directly from the carrying value.
※2. Derivative transactions stated in trading assets and liabilities, and other assets and liabilities are shown as a single amount.
For net claims and obligations derived from derivative transactions, net amounts are stated. Sums that represent net obligations areshown in parenthesis.
Note1: Calculation method of fair value for financial instruments
Assets(1) Cash and Due from Banks
For deposits without maturities, since fair value approximates carrying value, carrying value is used as fair value. For deposits withmaturities, present value is calculated by discounting based on the interest rate that would conceivably be applied to newly made deposits. For
term deposits with short contractual 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.

50

(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
the exchanges in the case of listed equity shares and at market prices in the case of bonds.
(8) Securities
Stocks are valued at the price quoted by the exchanges. Investment trusts are valued at the announced standard price. Bonds are valued at
the quoted market prices and price calculated on the basis of rational estimation, etc.
For Floating-Rate Japanese Government Bonds, since the Bank believes that current market prices may not accurately reflect the bonds’
fair value, the Bank used a valuation technique at the end of the fiscal year that management believes provides a reasonable estimate of thebonds’ fair value. Fair value based on management’s reasonable estimates was calculated using the discounted cash flow approach and others,with the primary price variables including government bond yields and swaption volatility and others.
For overseas Collateralized Loan Obligations (CLOs) and certain other securitized products, fair value has been determined using avaluation technique that management believes provides a reasonable estimate of the securities’ fair value at the end of the fiscal year. Fair value
based on management’s reasonable estimates was 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, categorizedby type of loan and internal credit rating, fair value is determined by discounting loans to present value using the interest rate that would
conceivably be applied in case of a newly made loan of the same principal and interest total. For loans with short contractual maturities, sincefair value approximates carrying value, carrying value is used as fair value.
With regard to loans to 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,
fair value is calculated by discounting future cash flows to present value. The discount rate is the interest rate that would be applicable to newly
made deposits. For term deposits with short contractual maturities and term deposits with variable interest rates, since fair value approximatescarrying 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 theinterest rate that would conceivably be applied in case of a newly made loan of the same principal and interest total.
In instances with short contractual maturities, since fair value approximates carrying value, the carrying value is used as fair value.
(5) Bills Sold and Call Money, (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
Derivative transactions consist of interest-rate-related transactions (interest rate futures, interest rate options, interest rate swaps, etc.),
currency-related transactions (currency futures, currency swaps, etc.), and bond-related transactions (bond futures, bond future options, etc.),
and are stated at exchange-traded transaction prices, discounted present value, and amounts calculated using option pricing models, etc.

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

Category

Millions of Yen

Millions of Yen

Millions of U.S. Dollars

2014

2013

2014

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

242,784

251,664

2,358

7,487

7,089

72

250,272

258,753

2,431※1. Unlisted stocks, etc. means unlisted common shares and preferred shares held by the Bank. Since unlisted stocks, etc. have no market prices
and therefore are with significant difficulty in determining fair value, unlisted stocks, etc. are not included in fair value disclosure
information.
※2. Investment in investment partnerships is not included in fair value disclosure information given that investment partnership assets include
items such as unlisted stocks, etc., which are with significant difficulty in determining fair value.
Note 3: Amounts of monetary claims and securities with maturities scheduled for redemption after the consolidated balance sheet date
As of March 31, 2014
Millions of Yen
Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

5,573
－
－

2,000
－
－

173,390－

23,588－－3,714

49,778

9,701

Within 1 year

52

Over 7 years,
within 10 years－－－

Over 10 years－－

16,276

8,899

181,096－－－

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)

4,899,763
578,351
86,980235,272
205,700－－
28,443
1,651,629
625,000
49,20415,000451,4223,715,739

377,611
360,300－－
15,4004,423,027
2,886,500
67,286－
695,742881,687

723,788
701,400200－－
2,370,871
1,597,000
39,068－484,912648,617

194,431
91,600200－－
1,891,401
1,355,000
6,753－
306,004
335,018

129,971
9,700－－－
3,028,927
2,126,000
19,896－357,688
231,299475,425
435,000－－－
957,080759,000－－
19,324
157,552

Total

11,344,842

5,737,679

3,776,566

2,439,127

3,399,097

1,771,154－－

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

Over 3 years,
within 5 years

Over 5 years,
within 7 years

54
－
－

19
－
－

1,684

－

229
－
－

36

483

94

Within 1 year

Over 7 years,
within 10 years－－－

Over 10 years

－

－

158

86

1,759

－
－
－

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)

47,598
5,618
844

2,285
1,998
－
－
276
16,044
6,071
477
145
4,385
36,096

3,668
3,500
－
－
149
42,96728,040
653
－
6,758
8,565

7,031
6,813
1
－
－
23,031
15,513
379
－
4,710
6,300

1,888
889
1
－
－
18,373
13,163
65
－
2,972
3,254

1,262
94
－
－
－
29,424
20,652
193
－
3,474
2,246

4,618
4,225
－
－
－
9,297
7,373
－
－
187
1,530

Total

110,208

55,73836,687

23,69433,02017,205

Over 10 years－－※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 ¥6,484 million ($62 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, 2013
Millions of Yen
Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

28,643
－
－

2,000
－
－

1,000
－
－

－
－
－

187,023

－

7,705
－
－

Within 1 year
Due from Banks (※1)
Bills Bought and Call Loans
Receivables under Resale Agreements
Receivables under Securities Borrowing
Transactions

3,060,164
636,264
80,985－－－－

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)

17,161

41,157

13,385

12,42820,261

226,293

1,124,495
912,200
29,355－
142,940
2,497,612
1,284,000
46,021
15,000212,250
2,999,299

328,235
282,300－－
43,8432,940,737
1,275,400
93,453－668,969
1,070,037

636,122
619,400
400－－
2,296,820
1,661,500
25,784－331,198
626,783

518,870
456,400－－－
1,826,090
1,454,800
7,445－
278,624
292,541

202,6429,700－－－
3,697,031
2,682,000
14,736－
237,004
285,919469,690435,000－－－
1,220,221
824,000－－
10,496
178,315

Total

10,603,005

4,408,811

3,580,817

2,651,931

4,206,854

2,094,520※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 ¥7,879 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.

53Note 4: Amounts of deposits, debentures and other interest bearing debt scheduled for repayment after the consolidated balance sheet date
As of March 31, 2014
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Deposits (※1)

12,161,005

Debentures

798,960

Borrowed Money (※2)

113,500

Bills Sold and Call Money408,067

Payables under Repurchase Agreements

35,437

Payables under Securities Lending
Transactions

966,659－

14,483,629

10,506,036

Total

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

9,336,656

847,704

157,303

10,000－－－－

162,480－－

324,350

－

－

－

－

14,5001,203,470－

1,160,629

1,159,380

－

－
－

－
－

－
2,051,174

157,303－－

1,484,979

176,980

Millions of U.S. Dollars
Within 1 year

Over 1 year,
within 3 years

Deposits (※1)

118,136

Debentures

7,761

Borrowed Money (※2)

1,102

Bills Sold and Call Money

3,964

Payables under Repurchase Agreements
Payables under Securities Lending
Transactions

344
9,390

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

90,699

8,234

1,528

－

97

－

－
－

－

1,578

－

－

3,150

－

－

－

140

11,690－11,274

11,262

－

－
－

－
－

－

－

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

140,699

102,059

19,925－－

1,528

14,425

1,719

As of March 31, 2013
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

Deposits (※1)

11,584,537

8,736,352

1,644,635

21,0401,007,980

1,379,550

－

－

－
－

－
－

－

1,637,068

－

－

－

－

559,088－324,350

Bills Sold and Call Money

－

－

－

160,550－－

Borrowed Money (※2)－

1,149,820－

13,744

Debentures

Payables under Repurchase Agreements
Payables under Securities Lending
Transactions－※1. Demand deposits, included in “Deposits,” are stated under amounts payable “Within 1 year.”※2. Borrowed Money without maturity is not included.
Total

54

14,949,224

10,115,902

2,794,455

21,040－338,094－－－－25. Fair Value of Securities and Money Held in Trust:
1. Securities
The following tables contain information relating to Securities, Trading Assets (trading account securities and short-term corporate
bonds), Cash and Due from Banks (negotiable certificates of deposit) and Monetary Debts Purchased (loaned claims in trust) in the
consolidated balance sheet.
(1) Trading Securities
Millions of Yen
2014
Net Unrealized Gains (Losses)
Recognized as Income

99

Millions of Yen
2013

Millions of U.S. Dollars
2014

553

0

(2) Held-to-Maturity Debt Securities
As of March 31, 2014
Millions of Yen

1,314,524
400－
40,141
258,875
1,613,941
499,857
－
－
3,802
397
504,058

1,400,438
426－
40,255
288,708
1,729,829
498,947
－
－
3,801
389
503,138

Unrealized
Gains (Losses)
85,91326－
114
29,833
115,887
(910)
－
－
(1)
(7)
(919)

2,117,999

2,232,967

114,968

Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding Carrying
Value

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

Fair Value

Millions of U.S. Dollars
Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding Carrying
Value

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

Fair Value

Unrealized
Gains (Losses)

12,769
3
－
389
2,514
15,678
4,855
－
－
36
3
4,896

13,604
4
－
391
2,804
16,804
4,846
－
－
36
3
4,887

834
0
－
1
289
1,125
(8)
－
－
(0)
(0)
(8)

20,575

21,691

1,116

55

As of March 31, 2013
Millions of Yen

2,409,219
29,776－
172,758
316,908
2,928,663
320,026－－
14,531
900
335,458

2,506,244
29,894－
173,249
348,036
3,057,424
319,684－－
14,525
900
335,110

Unrealized
Gains (Losses)
97,024117－
491
31,128
128,761
(342)
－
－
(6)
－
(348)

3,264,121

3,392,535

128,413

Carrying Value

Items with Fair
Value Exceeding
Carrying Value

Items with Fair
Value notExceeding Carrying
Value

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

Fair Value(3) Other Securities
As of March 31, 2014
Millions of Yen
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

56

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

40,848
11,718,637
9,495,242
174,440
14,9962,033,958
3,522,239
15,281,725－
520,911
180,300
10,463－
330,147
522,118
1,043,029
16,324,755

Acquisition Cost
27,022
11,497,500
9,291,061
172,508
14,9952,018,934
3,339,934
14,864,457－
521,336
180,339
10,489－330,507527,033
1,048,370
15,912,828

Unrealized
Gains (Losses)
13,825
221,137
204,1811,931
015,024
182,304
417,268
－
(425)
(39)
(25)
－
(359)
(4,915)(5,340)411,927

Millions of U.S. Dollars
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

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

396
113,839
92,2401,694
145
19,75834,216

148,452
－
5,060
1,751
101
－
3,207
5,072
10,132
158,585

Acquisition Cost
262
111,691
90,257
1,675
145
19,61232,445
144,399
－
5,064
1,751
101
－
3,210
5,119
10,184
154,583

Unrealized
Gains (Losses)
134
2,148
1,983
18
0
145
1,770

4,053
－
(4)
(0)
(0)
－
(3)
(47)
(51)
4,001

As of March 31, 2013
Millions of Yen
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

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

35,092
11,478,758
9,521,182
189,228
14,9981,753,350
4,231,134
15,744,986
2,988
51,131
13,9982,080－
35,052856,068
910,188
16,655,175

Acquisition Cost
24,592
11,228,658
9,290,389
186,392
14,995
1,736,881
4,052,347
15,305,598
3,121
51,312
13,9982,083－
35,229864,177
918,611
16,224,209

Unrealized
Gains (Losses)
10,499250,100
230,793
2,835
2
16,469178,787439,387
(133)
(180)
(0)
(2)
－
(177)
(8,108)(8,422)430,965(4) Held-to-Maturity Debt Securities Sold during the Fiscal Year
Not applicable.

57(5) Other Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2014
Millions of Yen
Amounts ofSecurities Sold

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks20,023

6,155

168

Bonds

1,104,718

11,128

1,222

Japanese Government Bonds－－

11,119

1,218

－

－

－

Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds－

1,097,469

7,249

8

4

Others1,529,994

5,799

27,390Total

2,654,736

23,08328,781Millions of U.S. Dollars
Amounts ofSecurities Sold

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks

194

59

1

Bonds

10,731

108

11

Japanese Government Bonds

－

－

－

10,661

108

11

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

70

0

0

Others

14,862

56

266

Total

25,789224

279

Municipal Government Bonds

For the Fiscal Year Ended March 31, 2013
Millions of Yen
Amounts ofSecurities Sold

Aggregate Losses on
Sales

Stocks46,086

1,305

5,919

Bonds

2,718,676

113,137

156

Japanese Government Bonds

－

－

－

2,718,275

113,137

156

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

400

0

－

Others1,328,099

5,659

10,495

Total

4,092,861

120,103

16,572

Municipal Government Bonds

58

Aggregate Gains on
Sales(6) Impaired Securities
Of Securities other than Trading Securities (excluding those where there is significant difficulty in determining fair value), if the fairvalue 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 therate of decline over past periods, the securities are devalued and the fair value is recorded as the carrying amount on the consolidated
financial balance sheet. In addition the difference between the fair value and the acquisition price is treated as impairment losses in thefiscal year.
In the fiscal year ended March 31, 2013, the amount of impairment losses on securities was ¥407 million (all impairment losses wereincurred on stocks).
In the fiscal year ended March 31, 2014, there were no impairment losses.

2. Money Held in Trust(1) Money Held in Trust for Trading Purposes
As of March 31, 2014
Millions of Yen
Unrealized Gains (Losses)
Recognized as Income

Carrying Value
Money Held in Trust for
Trading Purposes

131,852

Carrying Value
Money Held in Trust for
Trading Purposes(157)

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

1,280

(1)

As of March 31, 2013
Millions of Yen
Carrying Value
Money Held in Trust for
Trading Purposes

Unrealized Gains (Losses)
Recognized as Income

182,9019(2) Held-to-Maturity Money Held in Trust
Not applicable.

(3) Other Money Held in Trusts (Money Held in Trust other than Held for Trading Purposes or Held-to-Maturity)
As of March 31, 2014

Carrying
Value
Other Money Held in Trusts

Items with
Carrying Valuenot Exceeding
Acquisition Cost－

Millions of U.S. Dollars
Items with
Unrealized
Acquisition
Carrying Value
Gains
Exceeding
Cost(Losses)Acquisition Cost
900

Items with
Carrying Valuenot Exceeding
Acquisition Cost－

Acquisition
Cost

1,002

Carrying
Value
Other Money Held in Trusts

Millions of Yen
Items with
Unrealized
Carrying Value
Gains
Exceeding(Losses)Acquisition Cost
2
2

9

1,000

59

As of March 31, 2013
Not applicable.

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, 2014
Millions of U.S.
Millions of Yen
Dollars
Other Securities

394,171

3,829

2

0

Net Unrealized Gains

394,173

3,829

Deferred Tax Liabilities

107,760

1,046

Net Unrealized Gains(Prior to Equity Method Adjustment)

286,413

2,782

Minority Interests’ Portion－－

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

286,413

2,782

Other Money Held in Trust

Net Unrealized Gains

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

As of March 31, 2013
Millions of Yen
Other Securities
Other Money Held in Trust

410,651－

Net Unrealized Gains

410,651

Deferred Tax Liabilities

111,829

Net Unrealized Gains(Prior to Equity Method Adjustment)

298,822

Minority Interests’ Portion－

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

Net Unrealized Gains

298,822

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

60

26. Derivatives:
1. Derivative transactions to which hedge accounting was not applied
The following summarizes the contract values or the contracted principal equivalents, fair values, net unrealized gains (losses) and thevaluation methods of the fair values of the Bank’s derivative transactions that do not qualify for hedge accounting as of the consolidatedbalance sheet date, which were classified by types of financial instruments. Please note that the contract values in themselves do not reflect
the market risk associated with the Bank’s Derivative Transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2014
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

9,981

－

(0)

(0)

Bought

9,981

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

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

12,614,058

10,047,075

198,444

198,444

Variable Rate Receivable/Fixed Rate Payable

12,266,614

9,132,797(159,467)(159,467)

Variable Rate Receivable/Variable Rate Payable

54,20044,20022

22

Fixed Rate Receivable/Fixed Rate Payable

30,00030,000

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

4,684,400

2,844,400(48,808)(1,921)

Bought4,320,666

2,905,250(1,522)(20,917)－－(11,332)

16,159Interest Rate Options:Over the Counter Transactions
Interest Rate Forwards:

Interest Rate Swaps:

Interest Rate Options:

Others:Total

61

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

96

－

(0)

(0)

Bought

96

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

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

122,537

97,601

1,927

1,927

Variable Rate Receivable/Fixed Rate Payable

119,162

88,719(1,549)(1,549)Variable Rate Receivable/Variable Rate Payable

526

429

0

0

Fixed Rate Receivable/Fixed Rate Payable

291

291

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

45,506

27,631

(474)

(18)

Bought41,972

28,222

(14)

(203)

－

－

(110)

156

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

Interest Rate Swaps:

Interest Rate Options:

Others:

Total

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

62

As of March 31, 2013
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

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

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

13,156,877

10,836,129

270,979

270,979

Variable Rate Receivable/Fixed Rate Payable

13,430,970

10,207,085(226,548)(226,548)

Variable Rate Receivable/Variable Rate Payable

47,00037,00029

29

Fixed Rate Receivable/Fixed Rate Payable

110,000

30,000

546

546

Sold

－

－

－

－

Bought

－

－

－

－

Sold

4,281,400

3,414,400(47,118)(9,009)Bought

4,465,530

3,001,450(5,688)(20,244)－－(7,800)15,753

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

Interest Rate Swaps:

Interest Rate Options:

Others:

Total

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

63

(2) Currency-Related Transactions
As of March 31, 2014
Millions of Yen
Total Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Fair Value

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－38,92425,076

(87)

(87)

Sold

87,058

142

(485)

(485)

Bought64,397

－

719

719

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

－

－

146

146

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

Currency Options:

Others:

Total

64Millions of U.S. Dollars
Total Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Fair Value

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

378

243

(0)

(0)

Sold

845

1

(4)

(4)

Bought

625

－

6

6

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

－

－

1

1

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

Currency Options:

Others:

Total

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

65

As of March 31, 2013
Millions of Yen
Total Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Net Unrealized
Gains (Losses)

Fair Value

Exchange-Traded Transactions
Currency Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought－－－－55,59935,585

245

245

Sold

49,548

－

(523)

(523)

Bought55,511

－

381

381

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

－

－

102

102

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

Currency Options:

Others:

Total

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

66(4) Bond-Related Transactions
As of March 31, 2014
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

4,633

Bought10,869

－

5
(23)

5
(23)

－

－

－

－

－

－

－

－

－

－

－

－

－

－

(17)

(17)

Fair ValueNet Unrealized
Gains (Losses)

Bond Futures Options:
Sold－

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

BoughtOthers:Sold－

Bought
Total

－

－

－

－

－

－

Millions of U.S. Dollars
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Exchange-Traded Transactions
Bond Futures:
Sold
BoughtBond Futures Options:
Sold
Bought

45
105

－
－

0

0

(0)

(0)

－

－

－

－

－

－

－

－

－

－

－

－

－

－

(0)

(0)

－

－

－

－

Over the Counter Transactions
Bond Options:
Sold
BoughtOthers:Sold
Bought
Total

－

－

－

－

－

－

－

－

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

67

As of March 31, 2013
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair Value

23,457

－
－

38

－

－

Sold

－

－

－

1,000

－

－

Bought

2

(1)

－

－

－

－

－

－

－

－

－

－

40

37

Net Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:
Sold
BoughtBond Futures Options:－38

Over the Counter Transactions
Bond Options:
Sold
BoughtOthers:Sold
Bought
Total

－

－

－

－

－

－

－

－

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

(6) Credit Derivative Transactions
Not applicable.

682. Derivative transactions to which hedge accounting was applied
The following summarizes the contract values or the contracted principal equivalents, fair values and the valuation methods of the Bank’s
derivative transactions that qualify for hedge accounting as of the consolidated balance sheet date, which were classified by types of financial
instruments. Please note that the contract values in themselves do not reflect the market risk associated with the Bank’s Derivative
Transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2014

Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Items

Total Contract
Value

Fixed Rate Receivable/Variable Rate Payable

635,000

120,000

6,834

Variable Rate Receivable/Fixed Rate Payable

5,387,830

5,067,331(111,509)

Variable Rate Receivable/Variable Rate Payable

118,340

118,340(4,975)

Fixed Rate Receivable/Variable Rate Payable

980,000

820,000

6,927

Variable Rate Receivable/Fixed Rate Payable

920,020920,020(56,225)－－(158,948)

Interest Rate Swaps

Method for Hedge
Accounting

Exceptional
Treatments forInterest Rate
Swaps

Fair Value

Interest Rate Swaps

Total

Basic Treatment

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

Items

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

Total Contract
Value

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

6,168

1,165

66

Variable Rate Receivable/Fixed Rate Payable

52,33949,226(1,083)

Variable Rate Receivable/Variable Rate Payable

1,149

1,149

(48)

Fixed Rate Receivable/Variable Rate Payable

9,520

7,965

67

Variable Rate Receivable/Fixed Rate Payable

8,937

8,937

(546)

－

－

(1,544)

Interest Rate Swaps

Total

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

69

As of March 31, 2013

Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Items

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

Total Contract
Value

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

1,300,000

635,000

9,534

Variable Rate Receivable/Fixed Rate Payable

4,646,832

4,444,593(141,932)

Variable Rate Receivable/Variable Rate Payable

102,172

102,172(6,106)

Fixed Rate Receivable/Variable Rate Payable

1,450,000

980,000

11,907

Variable Rate Receivable/Fixed Rate Payable

885,000

885,000(66,509)－－(193,106)Interest Rate Swaps

Total

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted, Other
Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Held-to-Maturity Debt Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 24, “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in Banking Industry”.
4. Fair value calculation: Transactions on exchanges were valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions were valued using discounted present value or calculation models for option prices,etc.
(2) Currency-Related Transactions
As of March 31, 2014
Millions of Yen
Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

606,086

273,255(1,819)1,115,258－(9,168)－(10,988)

Forward Foreign Exchange Contracts:
Sold－

Bought

－

Total

－

－

Millions of U.S. Dollars
Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

5,887

2,654

(17)

10,834

－

(89)

－

(106)

Forward Foreign Exchange Contracts:
Sold
Bought
Total

70

－
－

－

－

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

As of March 31, 2013
Millions of Yen
Method for Hedge
Accounting
Basic Treatment

Items
Currency Swaps

Contract Value(Over 1 Year until
Settlement or Expiry)

Total Contract
Value

Fair Value

1,008,663

398,647(153)

539,025－(12,776)－(12,929)

Forward Foreign Exchange Contracts:
Sold
Bought
Total

－
－

－

－

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

(4) Bond-Related Transactions
Not applicable.

27. Related Party Transactions:
For the Fiscal Year Ended March 31, 2014
There were no significant related-party transactions.
For the Fiscal Year Ended March 31, 2013
There were no significant related-party transactions.

7128. Segment Information:(1) Description of Reportable Segments
The Group classifies the businesses of the Bank and its consolidated subsidiaries as individual business segments. Among thosebusiness segments, the business of the Bank is deemed as the reportable segment.
The Bank, as an individual financial institution, provides such financial services as deposits, debentures, lending, market fundmanagement, trading operations and clearing. As the central financial institution for Shinkin Banks, the Bank complements the functionsof 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”.
Reportable segment profit is based on net income.
(3) Amounts by Reportable Segment
For the Fiscal Year Ended March 31, 2014
(Millions of Yen)
Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

278,879

29,390308,270(98)

308,171

2,092

2,192

4,285

(4,285)－

Total

280,971

31,583

312,555(4,383)308,171

Segment profit

35,396

2,821

38,218(606)

37,612

Segment assets

30,939,429

312,993

31,252,423(67,858)

31,184,564

Segment liabilities

29,684,307

231,589

29,915,896(8,158)29,907,738

Depreciation

4,839

4,195

9,034

(0)

9,033

Interest Income

229,617473

230,091(84)

230,006

Interest Expenses

141,222

189

141,411(27)

141,383

Income Taxes

13,2691,463

14,732(428)

14,304

Increase in Tangible andIntangible Fixed Assets

4,269

2,153

6,422

－

6,422

Inter-segment

Other items

72

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

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

2,709

285

2,994

(0)

2,993

20

21

41

(41)

－

2,729

306

3,036

(42)

2,993

Segment profit

343

27

371

(5)

365

Segment assets

300,557

3,040

303,598(659)

302,939

Segment liabilities

288,3652,249

290,614(79)

290,535

Depreciation

47

40

87

(0)

87

Interest Income

2,230

4

2,235

(0)

2,234

Interest Expenses

1,371

1

1,373

(0)

1,373

Income Taxes

128

14

143

(4)

138

Increase in Tangible andIntangible Fixed Assets

41

20

62

－

62

Inter-segment
Total

Other items

Notes:
1. The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, 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 ¥606 million ($5 million) comprises reduction of ¥706 million ($6 million) on
minority interests and addition of ¥100 million ($0 million) on inter-segment eliminations, etc.
(ii)Within adjustment of segment assets, reduction of ¥67,858 million ($659 million) comprises reduction of ¥53,114 million ($515
millions) on eliminations relating to capital consolidation and ¥14,743 million ($143 million) on inter-segment elimination, etc.
(iii) Reduction of ¥8,158 million ($79 millions) on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv)The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from Net Income presented in the Consolidated Statement of Income.

73For the Fiscal Year Ended March 31, 2013
(Millions of Yen)
Reportable segment
Other

Shinkin Central Bank
business

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

382,120

27,035409,156(238)

408,917

1,827

2,144

3,972

(3,972)－

Total

383,948

29,180413,128(4,211)

408,917

Segment profit

32,024

1,737

33,761(899)

32,862

Segment assets

30,184,837

300,847

30,485,685(74,982)

30,410,702

Segment liabilities

28,956,639

223,520

29,180,160(18,687)

29,161,473

Depreciation

5,116

4,014

9,130

(0)

9,129

Interest Income

240,538486

241,024(88)

240,936

Interest Expenses

161,980245

162,225(42)

162,183

Income Taxes

7,364

914

8,279

(92)

8,186

Increase in Tangible andIntangible Fixed Assets

3,293

5,398

8,691

－

8,691

Inter-segment

Other items

Notes:
1. The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, 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 ¥899 million comprises reduction of ¥399 million on minority interests and ¥499
million on inter-segment eliminations, etc.
(ii)Within adjustment of segment assets, reduction of ¥74,982 million comprises reduction of ¥53,114 million on eliminations relating tocapital consolidation and ¥21,867 million on inter-segment elimination, etc.
(iii) Reduction of ¥18,687 million on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv)The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from Net Income presented in the Consolidated Statement of Income.

(Related Information)
For the Fiscal Year Ended March 31, 2014
1. Information by service(Millions of Yen)
Securities investment
operations
Ordinary Income fromexternal customers

212,876

Lending operations

Other

33,257

Total
61,702

307,837(Millions of U.S. Dollars)
Securities investment
operations
Ordinary Income fromexternal customers

74

2,067

Lending operations
323

Other

Total
599

2,990

2. Information by geographic region(1) Ordinary Income
Japan

Europe170,031

28,112Japan

Europe1,651

273

United States
23,145

Other

United States

Other

86,548(Millions of Yen)
Total
307,837(Millions of U.S. Dollars)
Total
840
2,990

224

Note:
Ordinary income from derivative transactions and trading operations 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

Ordinary Income

Name of customer
The Government of Japan

Ordinary Income

78,912(Millions of Yen)
Related segment
Shinkin Central Bank business

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

For the Fiscal Year Ended March 31, 2013
1. Information by service(Millions of Yen)
Securities investment
operations
Ordinary Income fromexternal customers

315,329

Lending operations

Other

39,605

Total
53,925

408,860

2. Information by geographic region(1) Ordinary Income
Japan

Europe286,233

25,915

United States
26,699Other
70,011(Millions of Yen)
Total
408,860

Note:
Ordinary income from derivative transactions and trading operations 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

Ordinary Income
94,376(Millions of Yen)
Related segment
Shinkin Central Bank business75

(Information related to Impairment losses of Fixed Assets by Reportable Segment)
For the Fiscal Year Ended March 31, 2014
Not applicable.
For the Fiscal Year Ended March 31, 2013
(Millions of Yen)

Impairment losses

Reportable segment
Shinkin Central Bank business
1,813

Other

Total
－

1,813

Note:
The “Other” classification comprises the Bank’s eight consolidated subsidiaries which are not included within the reportable segment.
The Bank’s consolidated subsidiaries provide such financial services as trust and banking, securities, investment advisory and investment
trust, 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.

7629. Amounts per Share:
Yen
2014

U.S. Dollars
2014

2013

Net Assets per Share
268,795.17

263,016.93

2,611.18

7,537.36

6,528.60

73.22

－

－

－

Net Income per ShareNet Income per Share after Adjustment for Common
Share equivalents

Notes:
1. In the calculation of net assets per share and net income per share, preferred dividends were deducted from current net income. However,participating dividends were not deducted from current net income.
2. The basis for calculation of net assets per share is as follows:
2014
2014
2013
Total Net Assets

Millions of Yen

1,276,826

1,249,229

Millions of U.S.
dollars

12,403

Amount Deducted from Total Net Assets

Millions of Yen

11,27910,887

Millions of U.S.
dollars

109

Minority Interests

Millions of Yen

9,154

8,763

Millions of U.S.
dollars88

Preferred Dividends

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

20

Millions of Yen

1,265,547

1,238,342

Millions of U.S.
dollars

12,294Unit

4,708,222

4,708,222－－

Number of Common
Share Units

Unit

4,000,000

4,000,000－－

Number of Preferred
Share UnitsUnit

708,222708,222－－

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

3. The basis for calculation of net income per share is as follows:
2014

2014

2013

Net Income

Millions of Yen

37,61232,862Millions of U.S.
dollars365

Amount Deducted from Net Income

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

20

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

20

Millions of Yen

35,48730,738Millions of U.S.
dollars344

Unit

4,708,222

4,708,222－－

Average Number of Common
Share Units

Unit

4,000,000

4,000,000－－

Average Number of Preferred
Share UnitsUnit

708,222708,222－－

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

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

77

Changes in Accounting Policies
Effective from the fiscal year ended March 31, 2014, the Bank has applied the Accounting Standard for Retirement Benefits(Accounting Standards Board of Japan (ASBJ) Statement No. 26, May 17, 2012, excluding the provision of article 35) and Guidance on
Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012, excluding the provision of article 67). Changes
have been applied in accordance with transitional accounting as stipulated in article 37 of the Accounting Standard for Retirement
Benefits.
As a result, net assets per share at the end of the fiscal year decreased by ¥741.06 ($7.19).

30. Subsequent Events:

Not applicable.

78

79

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
Allowance for Investment Losses
Total Assets

80

2014

2013

2014

4,927,322
578,351
86,980104,692
269,583
162,090132,854
18,450,501
5,975,832
5,212
130,148
68,797
4,602
82,383(39,919)(5)
30,939,429

3,107,570
636,264
80,985
113,130
329,858
396,119
182,901
19,681,236
5,460,155
4,413
102,089
68,744
5,813
44,765(29,159)(52)
30,184,837

47,865
5,618
844
1,017
2,618
1,574
1,290
179,235
58,051
50
1,264
668
44
800
(387)
(0)
300,557

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

23,689,313
3,168,110
89,700937,320
366,767
35,437
950,945558
273,344
1,214
78
17,537327
65,164
6,106
82,38329,684,307

22,012,166
3,548,380
88,013811,890519,088
1,599,947
187
257,272
1,143
77
17,302357
49,9206,129
44,76528,956,639

230,127
30,776
871
9,105
3,562
344
9,237
5
2,655
11
0
170
3
633
59
800
288,365

Total Net Assets
Total Liabilities and Net Assets

1,255,122
30,939,429

1,228,197
30,184,837

12,192
300,557-

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

2014

2013

2014

229,61733,257
6,471
891
104
255
186,739
1,897
7,485
14,72422,087
7,055
280,971

240,538
39,605
4,045
1,280
77
285
192,706
2,538
6,720
11,403
122,312
2,972
383,948

2,230
323
62
8
1
2
1,814
18
72
143
214
68
2,729

141,22253,32323,564
9,584
652
1
2,593
50,268
1,233
6,518
243
45,851
26,39012,079232,305

161,980
65,01035,101
10,905906
64,280
44,876
894
6,687
751
138,737
26,241
10,159344,559

1,371
518
228
93
6
0
25
488
11
63
2
445
256
117
2,256

48,66539,389472

1,845
11,423
13,26935,396

55
7,308
7,364
32,024

17
110
128
343

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

Yen
2014

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

7,066.76
3,000.00
6,500.00

U.S. Dollars
2013

6,350.60
3,000.00
6,500.00

2014

68.64
29.14
63.14

81

Organization (As of July 31, 2014)
General Meeting of Members
Auditors
Board of Directors
Chairman of the Board of Directors (Part-Time)
President and Chief Executive Officer
Deputy President
Senior Managing Director
Managing Directors
Directors

Chief Secretary
Internal Audit Division
General Affairs Division
Legal & Compliance OfficeBusiness Continuity Management Office
Personnel Division
Strategic Planning Division
Investor & Public Relations OfficeFinancial Management Division
Risk Management Division
Credit Planning & Supervision Division
Business Promotion Division
Product Development Office
Disaster Recovery & Reconstruction
Support Office ＊SME Business Solution Division
Shinkin Networks Promotion OfficeInternational Business Solution DivisionInternational Operations Center
Retail Business Solution Division
Client Assets Business Promotion Office

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

Hokuriku Branch
Shizuoka Branch
Nagoya Branch
Osaka Branch
Kobe Branch

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 InstituteRegional Innovation Support Office
SDB Office

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 Tohoku Branch

SCB Group
SCB Group
Trust businessBanking

Shinkin
Trust Bank

82

Shinkin
Securities

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

Dealing■

Brokerage■

Underwriting■

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

■

Asset
management

Personal loan
guarantee

Venture capital
M&A advisory

Data processing
consignment

Consigned
clerical works

Shinkin AssetManagement

Shinkin
Guarantee

Shinkin
CapitalShinkin Banks
Information
System Center

Shinkin
ChukinBusiness■

Data processing
consignment(handles SCB
administrative work)■

Softwaredevelopment■

Computing■

Promissory
note exchange■

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

Securities

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 pounds incapital (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)¥1.0bn in capital(99.1% stakewith Shinkin
Trust at 0.8%) ;¥0.8bn capitalreserve■

Venturecapitalbusiness■

M&A
brokering■■■

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

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

International Directory (As of July 31, 2014)
Deputy President(in charge of Treasury Operations)Katsuo Akiyama
Managing Director(in charge of International Operations/
Overseas Offices)
Akira ItoManaging Director(in charge of International Planning)
Hajime Hioki
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: Atsushi Kudo
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: Shigeo Enomoto
Operations Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7655
Facsimile: +81-3-3278-7041
General Manager: Hideki Kasahara
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: Akira Tatano
Treasury Business Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7642
Facsimile: +81-3-3278-7040
SWIFT: ZENB JPJT
General Manager: Hiroyuki Toda
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
Director: Yasuhiko Hori

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 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 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 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 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

Overseas Subsidiary
Shinkin International Ltd.
Address: 1st Floor, 85 London Wall,London EC2M 7AD, U.K.
Telephone: +44-20-7562-0500
Facsimile: +44-20-7256-8544
Managing Director: Kengo KajiTohokuHokuriku

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: Kenji Tanaka

ChugokuOkayama Kobe
Osaka

Head Office

NagoyaShizuoka

Shikoku

FukuokaMinami-Kyushu

Head Office
BranchOffice/Subsidiary

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

83

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