Annual
AnnualReport
ReportShinkin
ShinkinCentral
CentralBank
Bank

2017
2017

Shinkin Central Bank,
the Central Bank for
Shinkin Banks
As the central financial institution in Japan forthe cooperative regional financial institutions,known as shinkin banks, the Shinkin Central Bank
(hereinafter the SCB) occupies a well-establishedposition in Japan’s financial industry. Shinkin banks
currently hold funds totaling some ¥137 trillion(around US$1,229 billion).

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

Operational Policies

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

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

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

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

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

Corporate Data (as of March 31, 2017)
Name:
Established:
Number of employees:
Domestic network:
Overseas network:
Total assets:
Total funds:
Paid-in capital:
Preferred shares:
Capital adequacy ratio(consolidated):
Number of member Shinkin banks:Long-term credit ratings:(as of July 31, 2017)

Shinkin Central Bank (SCB)
June 1, 1950
1,199
14
5
¥37,656 billion ($335 billion)¥36,007 billion ($320 billion)¥690 billion ($6,159 million)¥90 billion ($811 million)
37.03%264
A1 (Moody’s)
A (S&P)
A+ (R&I)
AA (JCR)*	‌The number of employees includes full-time Directors and Corporate Auditors.
Our overseas network includes Shinkin International Ltd., a subsidiary in London.
The total assets and total funds are the average balances for the year ended March
31, 2017.

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

2017

2016

Millions of US Dollars*
2015

2017

2016

2015

$2,531$2,393$2,315

For the Fiscal Year
Total income¥284,018 ¥269,675 ¥278,236

Total expenses

235,680

213,797

197,230

2,100

1,897

1,641

Net income (loss)

41,38340,87560,817

368

362

506

Net business profit (loss)

42,65750,321

74,286

380

446

618

¥37,257,840¥34,887,645¥33,269,249$332,095$309,589$276,897

Loans and bills discounted

7,995,390

6,763,822

5,885,739

71,26660,021

48,986

Securities

17,204,776

17,839,405

19,132,160

153,353

158,305

159,235

Total liabilities

35,654,367

33,274,483

31,861,297

317,803295,274

265,179

Deposits

29,176,129

27,236,823

25,571,093

260,059

241,696

212,826

Debentures

2,952,900

3,055,520

3,007,780

26,32027,11425,033

1,603,472

1,613,161

1,407,951

14,292

14,315

11,718At the Year-end
Total assets

Net assets*	‌US dollar amounts are given for convenience only, converted at the rate of ¥120.15, ¥112.69, and ¥112.19 per US$1.00, the prevailing rate as of March 31, 2015, 2016, and 2017,
respectively. Total assets and total funds amounted to ¥37,656 billion ($335 billion) and ¥36,007 billion ($320 billion) of the average balance at the year ended March 31, 2017.

Contents
Financial Highlights (Non-consolidated Financial
Summary) ................................................................................. 1
Message from the President and CEO ............................. 2
Corporate Management and Auditors ............................. 3
Powerful, TSE-listed Financial Institution ........................ 4

Asset Quality ........................................................................ 12
Important Management Indices ........................................ 13
Corporate Governance ...................................................... 14
Strengthening the Compliance System .......................... 15

Management Issues and Strategies .................................... 6

Risk Management .................................................................. 16
Corporate Social Responsibility Activities .................... 19

Helping Recovery Following the Great East Japan
Earthquake and the Kumamoto Earthquake ................... 8

What Are Shinkin Banks? ................................................. 20
Preferred Shares ................................................................. 22

Overseas Networks .............................................................. 9
Business Overview ............................................................. 10

Financial Section .................................................................. 23
Organization / The SCB Group ....................................... 80

Capital Adequacy ................................................................. 11International Directory ..................................................... 81

This material contains certain forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties, while actual results may materiallydiffer from those contained in the forward-looking statements as a result of various factors.
US dollar amounts are converted for convenience only, at ¥112.19 per US$1.00, the prevailing rate on March 31, 2017.

1

Message from the President and CEO

The Shinkin Central Bank (the “SCB”) serves
as the central bank for Japan’s 264 shinkinbanks—regional financial institutions, thatspecialize in operations with small andmedium-sized enterprises (SMEs).
Since its establishment in 1950, the SCB
has provided a wide range of financial services
in order to expand the potential of the shinkinbank industry.

Fiscal 2016 Earnings Performance
In fiscal 2016 (ended March 31, 2017), as themarket environment surrounding us changed
dramatically, we continued to take steps todiversify our revenue streams by further promoting globally diversified investment while
taking a stronger proactive stance on financing business operating companies. As a result,ordinary income amounted to ¥48.3 billion
and net income totaled ¥41.3 billion.

Management Plan Progress, Support
for Disaster-stricken Regions
The SCB started a medium-term management
plan, the “SCB Medium-term Action Program
2016,” covering the three years from fiscal
2016 through to fiscal 2018. In fiscal 2016, thefirst fiscal year of the plan, as one of our main
measures, the SCB launched a trust banking
business. Alongside the launch of this business, we developed the original trust products2

as the private brand of Shinkin Bank Industry
for individual customers called “Shinkin Inheritance Trust ‘Kokoro no Baton’” and “Shinkin
Annual Benefit Trust ‘Kokoro no Ribbon,’”which we sell through shinkin banks, which
serve as agents to handle trust agreements.
Moreover, we expanded and enhanced functions and services to assist shinkin banks toenhance their customer relations. These efforts included providing shinkin banks with
programs to support SMEs over each stage of
their development, conducting matching services with a focus on SME’s technologies,
forming new business alliances with overseas
local banks, and supporting shinkin banks’ efforts to promote regional revitalization. In
helping recovery following the Great East Japan Earthquake, the “Shinkin no Kizuna Reconstruction Support Project,” which we established in collaboration with the Japan NPO
Center, gave assistance for NPOs engaged inproviding mental health care to disaster victims and helping them rebuild their lives, andsupporting regional community and culturalrevitalization activities. We also provided support for recovery efforts related to the Kumamoto Earthquake such as assistance to expand sales channels for shinkin bank customers
in the areas affected by the disaster.

Future Business Strategy
The SCB has positioned fiscal 2017, the second
year of the medium-term management plan, asa “year for striving to build a sustainable business model for the next 10 years.” Amid rapidchange in the political, financial and economic
situation all over the world, technological innovation has advanced, as seen with the development of fintech. Today, the operating
environment surrounding Japanese financial
institutions is on the cusp of a major transition. The SCB seeks to respond appropriately
to these changes, and we will implement specific measures under the plan in an effort tobuild a sustainable business model for the medium to long term at the shinkin banks and

SCB Medium-term Action Program 2016

Core Plan 1

Core Plan 2

Assist shinkin banks
to enhancetheir customer relations

Assist shinkin banks
to enhance their
management stability

Core Plan 3
Enhance SCB’s
management stability

build a rock-solid management stability at the
SCB. We have also made it a high-priority
management agenda to support the recovery
from the Great East Japan Earthquake and the
Kumamoto Earthquake, and will continue toprovide various forms of support according to
the needs of the affected areas.

Mitsuo Tanabe
President and CEO
July 2017

Corporate Management and Auditors

Koji Sato

Chairman of the Board of Directors

Mitsuo Tanabe

President and Chief Executive Officer

Katsuo Akiyama

Hiroyuki Shibata

Hajime Hioki

Chairman of the Board of
Directors (Part-time)

Directors

Kenichiro Mimuro

Toshio Muroi

Masatoshi Takahashi

Koji Sato

Yuzuru Nishino

Minoru Kondo

Naoki Hemmi

Yutaka Nunogaki

President and Chief Executive Officer

Takehiko Murotani

Hiroyuki Hashimoto

Mitsuo Tanabe

Hiromichi Chisaka

Hiroshi Tsuboi

Deputy President

Deputy President

Senior Managing Director

Akihiro Hasui

Deputy Presidents

Director and Executive Consultant

Hiromi Nomura

Katsuo Akiyama

Hiroshi Nakahara

Kenichi Toyozumi

Directors (Part-time)

Corporate Auditor

Senior Managing Director

Masatoshi Masuda

Naoya Okajima

Hajime Hioki

Toshihisa Sato

Hiroyuki Shibata

Daisuke Watanabe

Corporate Auditors (Part-time)

Managing Directors

Hiroshi Hiramatsu

Takashi Abe

Norihiro Takano

Tetsuji Hara

Seiji Hino

Hiroshi Sudo

Kazuo Kobayashi

Masamichi Narita

Keisuke Izutsu

Kazuhiko Jinbo

Akio Okuyama

Kiyoshi Yamachi(As of July 31, 2017)3

Powerful, TSE-listed Financial Institution
The SCB has the dual roles of operating
as both the central financial institution
for shinkin banks, and an independent
financial institution.
The SCB is the central financial institution in
Japan for the nationwide network of shinkinbanks, comprising 264 banks and approximately 7,400 branches.
Japan’s shinkin banks have an extremely
important role in the financial industry, holding around ¥137 trillion ($1,229 billion) in deposits (refer to page 20 “What Are Shinkin
Banks?”).
The SCB provides various financial
products and services, and uses the abundantfunds deposited from shinkin banks throughout Japan to invest in marketable securities in
the financial markets in Japan and overseas, aswell as to provide loans to operating companies and so forth.
Here we explain the two main roles of the
SCB.

The Roles of the SCB
Roles as a Central Bank
(1) Supplementing Shinkin Banks’ Operations
Japan’s 264 shinkin banks play a key role insupporting regional economies by lending tolocal organizations and small and mediumsized enterprises (SMEs).
However, individual shinkin banks
throughout Japan sometimes encounter restrictions in performing their banking functions because of their scale and limitations on
their business area.
To address this issue, the SCB and its
eight subsidiaries work together as a group toprovide various financial products and services to shinkin banks. In this way, the SCB supplements services that shinkin banks cannot
perform easily or efficiently on an individual
basis, and enables shinkin banks to respondrapidly to changes in their management environment, such as diversification and increasing sophistication of customers’ needs and intensifying competition from other businesscategories.
Specifically, the SCB provides shinkinbanks with various deposit and loan products
so they can respond to their customers’ needs
and enhance their competitiveness. The SCB
also provides a variety of services to shinkinbanks to support their initiatives on the key
measures of “SMEs,” “individuals,” and “communities” (refer to page 7 “Assist Shinkin
Banks to Enhance Their Customer Relations”).
The SCB also acts as a clearing house be-4

Shinkin Bank
Shinkin Bank
Shinkin Bank
Shinkin Bank
Shinkin Bank
Total assets: ¥37,257 billion ($332 billion)
Domestic network: 14
Overseas network: 5
Number of employees: 1,199
Number of member shinkin banks: 264

Shinkin Bank
Number of shinkin banks: 264
Total assets: ¥151,227 billion ($1,347 billion)
Number of branches: 7,361
Number of employees: 109,587
Number of members: 9,264,892(As of March 31, 2017)

tween shinkin banks in the same way that the
Bank of Japan acts as a clearing house between
banks. In addition, the SCB’s role includes acting as a clearing house between shinkin banks
and other financial institutions and making
lump sum payments of public utilities charges
received by shinkin banks.
In addition, the SCB provides support forshinkin banks’ risk management, including
consultations on fund management, and assists with their human resource developmentby providing training and so forth.
(2) M aintaining and Improving Creditworthiness of the Shinkin Bank Industry
The SCB performs the role of a consultant forshinkin banks, and operates the “Shinkin BankManagement Reinforcement System.” The
SCB also strives to prevent deterioration ofshinkin bank management by providing management analysis of shinkin banks and information to help resolve management issues. If ashinkin bank should come to require financial
support despite these measures, the SCB shall
supply capital in an effort to maintain and improve the creditworthiness of the shinkinbank industry.
Japanese financial institutions have experienced several major crises including the issue of the disposal of bad loans following thecollapse of the bubble economy and the global
financial crisis triggered by the Lehman Brothers bankruptcy. During such unstable periods
for the financial system, however, the SCB
played a crucial role in maintaining confidence
in the shinkin bank industry and contributed
to the stability of Japan’s financial system.

The Shinkin Bank Management Reinforcement System
Management analysis system
Objective quantitative and qualitative analyses arecarried out on the management status of shinkin banks.

Management advisory system

ShinkinCentralBank

Discussions on management are carried out to address
overall management and individual management themesof shinkin banks.

Capital reinforcement system
Shinkin banks that require capital reinforcement receive
capital contribution through subordinated loans or
preferred shares.

ShinkinbanksRole as an Independent Financial Institution(1) Comprehensive Financial Services Provider
The SCB conducts deposit-related operations, lending operations and foreign exchange
operations—the core functions of a financial
institution—and issues debentures.
The SCB also fulfills its role as a “comprehensive financial services provider” by undertaking, either itself or through its subsidiaries,
auxiliary operations such as underwriting
public bonds, handling private placement
bonds, and issuing personal loan guarantees,
as well as peripheral operations including theprovision of trusts, securities, investment
management, and M&A-related advice.

(2) One of Leading Institutional Investors in
Japan
The SCB has assets under management of approximately ¥37 trillion ($332 billion) as ofMarch 31, 2017. Of this, it invests approximately ¥17 trillion ($153 billion) in securities—mainly as government bonds, corporate
bonds, and foreign securities—and approximately ¥11 trillion ($100 billion) in short-termmoney markets.
The SCB fulfills an important role in Japan’s money and securities markets as a leading institutional investor.

(3) Contributor to Regional Development
The SCB provides loans to local governments,
operating companies, private finance initiatives, etc., for the purpose of helping develop
and revitalize communities.
Also, it proactively supports shinkinbanks in their efforts to resolve issues confronting communities and SMEs. The SCB thus
fulfills its role as a contributor to regional development together with shinkin banks.

Overseas Networks and Correspondent BanksThe SCB has offices in New York, Hong Kong, Shanghai, Bangkok, and London. In addition to proactively collecting information on local
areas, the SCB supports the overseas expansion of shinkin banks’ customers. As of March 31, 2017, the SCB had 230 overseas correspondent banks with main branches in 48 countries.

Shinkin International Ltd. (London)
New York Representative Office

Europe70 banks
Middle East
2 banksAsia
105 banks

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

Africa2 banks

Latin America
10 banks

Oceania
7 banks5

Management Issues and Strategies
Initiatives for the Next 10 Years
As the first year of the medium-term management plan, the “SCB Medium-term Action Program 2016,” fiscal 2016 was positioned as a year to take a step forward on enhancing customer relations and management stability for the next 10 years. The SCB
worked to assist shinkin banks to enhance their customer relations and enhance their management stability, and in order to implement these measures in a timely and appropriate manner, the SCB took steps to enhance the SCB’s management stability.
We will explain the characteristic initiatives of the core plans below.

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

Core Plan 1

Core Plan 2

Assist shinkin banks to enhancetheir customer relations

Assist shinkin banks to enhancetheir management stability

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

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

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

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

Target Figures

Consolidated capital
adequacy ratio(domestic standard):
At least 15%

Profit attributable toowners of parent:¥40 billion
Outlier ratio:
20% maximum
Overhead ratio:
45% maximum

6

Assist Shinkin Banks to Enhance
Their Customer Relations

are expanding overseas. In fiscal 2016, theSCB formed business alliances with BDO Unibank, Inc. in the Philippines and with Banco
Mercantil del Norte, S.A. in Mexico, its firstalliance outside the Asian region, to enhance
its overseas support capabilities in areas
where shinkin bank customers are expanding
their operations.

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

• Support SMEs during Development
The SCB provides shinkin banks with programs
to support SMEs over each stage of their development—such as establishment, growth, maturation and succession. In fiscal 2016, the SCB
added an “energy field loan entry support program.” The SCB will continue to revise and expand its support programs, while working together with the SCB’s consolidated subsidiary
Shinkin Capital Co., Ltd. and external specialists to step up support for shinkin banks thatare expected to provide stronger consulting
services to their customers.

• Trust Business Services to Individuals
As Japan’s population ages and property taxes
are strictly enforced, there is growing demandfor inheritance-related products that facilitate
the transfer of assets between generations. In
January 2017, the SCB started providing two
products to individual customers throughshinkin banks, which serve as agents to handle
trust agreements. “Shinkin Inheritance Trust‘Kokoro no Baton’” enables individual customers to leave the necessary funds for theirfamilies by completing a simple procedure,and “Shinkin Annual Benefit Trust ‘Kokoro no
Ribbon’” uses the non-taxable gift allowanceto gift funds. During fiscal 2017, the number ofshinkin banks providing these products is expected to reach around Shinkin 150 shinkinbanks.

•	Business Matching Services
The SCB’s matching services are intended to
expand the sales channels for shinkin bank customers. Initially the services focused on food,but the SCB has been widening the scope toother fields. In fiscal 2016, the SCB establisheda system for its customers to sell their traditional artisan products and home and kitchen
products on an e-commerce website operatedby Amazon Japan G.K.. The SCB also collaborated with NineSigma Japan, Inc., which operates a technology matching website and related services, to match SMEs that have advanced
technologies with large corporations.

• Progress on Assets under Management
Recognizing the trend of people shifting fromsaving to asset buildup, the SCB is working torealize stable asset buildup for individual customers and ensure customer first operation
management. To facilitate this, the SCB willcommence development of a new system designed to strengthen compliance in over-thecounter investment trust sales at shinkin banks,
enhance customer service capabilities, optimize their operations, and so forth. The SCB
will also work with the SCB’s consolidated subsidiaries Shinkin Securities Co., Ltd. and Shinkin•	Overseas Expansion
The SCB utilizes its network of three officesin Asia (Hong Kong, Shanghai, and Bangkok)
and nine allied banks to support sales channel
expansion for shinkin bank customers who
Shinkin International Ltd.

Bank of China

Established in October 1990

Established a business alliance in May 2011
Beijing

LondonThe Bank of East Asia
Established a business alliance in November 2013
Hanoi

Joint Stock Commercial Bank for
Investment and Development of Vietnam (1)Established a business alliancein April 2013

Bangkok

SCB Bangkok Representative Office
Set up in October 2012

Set up in November 1983
New York

Shinkin Central BankTokyo

SCB Hong Kong Representative Office
Set up in November 1994

SCB New York Representative Office

Shanghai

SCB Shanghai Representative Office
Set up in September 2004

Hong Kong

Bank of Communications
Established a business alliance in December 2010

ManilaBank of Shanghai

Mexico City

Established a business alliance in October 2014

Banco Mercantil del Norte, S.A.
Established a business alliance in January 2017

BDO Unibank, Inc.
Established a business alliance in March 2017

Bangkok Bank (2)Established a business alliance in October 2010
Jakarta

Maybank Indonesia (1)Established a business alliance in July 2012

:SCB Office:Alliance member( ) indicates the number of staff members seconded to other companies

Asset Management Co., Ltd. in a united SCB
Group effort to bolster progress on assets under management in the shinkin bank industry.

• Initiatives for Regional Revitalization
Shinkin banks are making regional revitalization efforts in their role as the best supporter
for community. To provide active support forthese, the SCB and the Nippon Foundation
teamed up in an initiative to support shinkinbanks and local companies in their regional
revitalization projects through the Nippon
Foundation’s Wagamachi fund. The fund will
provide up to ¥10 million in assistance per
project for a total of around ¥1.0 billion. Thisinitiative will create new flows of money in regional areas and provide more effective solutions for community issues and support development of leaders for regional revitalization.
Assist Shinkin Banks to Enhance
Their Management Stability
The SCB provides products and services thatwill help to “boost earnings capacity” and “enhance financial soundness” of shinkin banks,
while progressively expanding its support ofhuman resources development by, for example, dispatching the professionals needed byshinkin banks.

•	Provision of Investment Products Leveraging Trust Banking BusinessTo diversify investment tools by shinkin banks,
the SCB is leveraging its trust banking business functions, aiming to provide an investment product called “SCB Global Trust” thatspreads investment across diverse asset classes overseas.

•	Centralization of Deposit Assessment Operations
To improve operational efficiency and reduce
costs, the SCB is taking steps to centralize
common operations in the shinkin bank industry. As an initial step, the SCB is building an
operation processing system for centralizing
deposit assessment operations* at eachshinkin bank.
*	‌
Deposit assessment operations: An operation conducted by financial institutions to respond to requests
for a statement of transaction status of individual andcorporate deposit accounts from public institutions
such as local public entities.

Enhance the SCB’s Management
Stability
In order to make steady progress in carryingout the first and second core plans of the“SCB Medium-term Action Program 2016,”
the SCB works to enhance its own financial

7and earnings stability through organizational
reform and human resources development
over the medium to long term.

• Stable Earnings
The SCB aims to diversify its revenue streams
through measures such as promoting diversified investment and strengthening loans tocorporations. In fiscal 2016, to expand thecustomer base and increase transaction opportunities, the SCB established the customer
introduction system, for receiving introductions to local listed companies and other entities that shinkin banks have strong relationships with.

• Preparing for Stricter Financial Regulations
Ahead of the expected stricter financial regulations, the SCB intends to systematically devise
companywide countermeasures, while closely
monitoring all relevant regulatory trends.
• Enhancing Operation Management Systems
The SCB is examining utilization of RPA* forincreasing efficiency and reducing labor in its
existing operations by identifying pre-defined
operations and so forth that can be executed
based on certain processing rules, from theperspectives of reducing costs, improving productivity, and improving quality.
*RPA: Robotic Process Automation. A system

for increasing the efficiency of operations byautomating certain decisions by using software with robotic functions incorporated.

• Developing Human Resources
The SCB sets up human resources development programs for each area of its operations
and provide its employees with training to become experts. It also continues its efforts tomake its workplace environment dynamic, giving employees reason to find worth and pridein their work, while raising motivation andensuring that female employees can thrive on
the job.

Helping Recovery Following the Great East Japan Earthquake
and the Kumamoto Earthquake
Since the earthquakes, the shinkin bank industry has been making coordinated efforts to
support the reconstruction of areas that sustained major damage.

Support Achievements of “Shinkin no
Kizuna” Reconstruction Support Project
To support recovery from the Great East Japan Earthquake, the SCB and the Japan NPO
Center jointly established the “Shinkin no Kizuna Reconstruction Support Project.” Using
donations received from the “Shinkin no Kizuna Reconstruction Support Fixed-term Deposit” offered by shinkin banks nationwide,
the fund has provided a total of ¥360 million inassistance since fiscal 2015 for 111 projects ofNPOs and others working to provide mental
health care to disaster victims and helping
them rebuild their lives, and supporting regional community and cultural revitalization
activities.

8

Mental health care through artistical activities

Support for Expanding Sales Channelsof Shinkin Bank Customers in Disaster
Affected Areas
Listing on Business Matching Website
between Shinkin Banks
A special Kumamoto recovery support pagehas been set up in the business matching information page of the “Shinkin Information Sharing Platform,” which is operated by the SCB.

Recovery Support Sales Event
A recovery support sales event was held at
the SCB head office with specialty products
from Tohoku and Kumamoto. The event featured 40 products made by 25 customers
from 15 shinkin banks.
Posting in the Electronic Brochure“Shinkin no Ippin”
To help shinkin bank customers in Kumamoto
to expand their sales channels, a special Kumamoto recovery support page was added tothe electronic brochure “Shinkin no Ippin,”which features products and so forth ofshinkin bank customers.

Overseas Networks
The SCB has offices in New York, Hong Kong,
Shanghai, Bangkok, and London. In addition toproactively collecting information on local areas, the SCB supports the overseas expansionof shinkin banks’ customers.
The overseas representative offices also
help Japan-side human resource development
programs by accepting trainees, visitors andmissions from shinkin banks.

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

Hong Kong Representative OfficeSince a Hong Kong office was set up in November 1994, it has supported the activities ofshinkin bank customers in Asian countries. It
has done this by providing information such asthat on local bank services, legal systems, tax
systems, and employment, particularly for its
customers in southern China, Taiwan, and thePhilippines. The Hong Kong office, meanwhile,provides shinkin banks and their customers
with economic and financial data, and information on the investment environment in
Asian countries.

ment and financing environment, as well as local
laws, taxation, and employment.

Shinkin International Ltd. (London)
Shinkin International Ltd. was established in
London in October 1990 as a locally incorporated company to conduct securities businessin order to expand investment opportunities
for the shinkin bank industry.
The company arranges eurobonds in astrong relationship with issuing bodies andoffers these securities to the shinkin bank industry in close cooperation with Shinkin
Securities Co., Ltd., another subsidiary of the
SCB. The company also serves its customers’
secondary market-trading needs, and provides any market information required.

Support for overseas expansion of
SMEs• Alliances with local banks overseas
The SCB is forming business alliances with local banks overseas to enhance and strengthen
its capability to support shinkin bank customers in the Asia region.
The SCB provides a wide range of support
to shinkin bank customers who conduct business overseas such as by opening local bankaccounts, and providing local currency denominated financing based on standby L/C.
The SCB further expanded its overseas
network by forming alliances with the Banco
Mercantil del Norte, S.A. in Mexico, its firstalliance outside the Asian region, in January
2017 and with BDO Unibank, Inc. in Philippines in March 2017.
In addition, the SCB seconded two employees to Bangkok Bank and one employee to

Bangkok Representative OfficeThis office opened in October 2012, and provides shinkin bank customers expanding, orplanning to expand, to Thailand and neighboring countries with information on the relevant
economic and financial conditions, the invest-• Providing Information
In addition to printed materials, such as theInternational Business Support Office Monthly
and the China Business Guidebook, the SCB
provides shinkin banks and their customers with up-to-date information in a variety
of formats, including overseas investment
seminars. From time to time we also provide
investment climate survey reports that focus
on Asia, and the latest information from ouroverseas networks.
• Overseas Business Consultations
Our officers with expertise in trade finance or
direct investment in foreign countries provide
advice about the foreign investment environment, local legal issues and market conditions
to the customers of Shinkin banks who arerunning a business or planning to start a business abroad.
In addition, we also provide individual consultation to customers about business operations abroad, helping to resolve unique problems in other countries.

Expansion into Asia by Shinkin Bank Customers
South Korea: 99

Shanghai Representative Office
Set up in September 2004, the Shanghai officehas been providing information relating toeconomic and financial conditions, the investment and loan environment, and the laws,
taxation regimes, and employment situationof each region for shinkin bank customers
expanding to China and those planning sucha move.

Maybank Indonesia and Joint Stock Commercial Bank for Investment and Development ofVietnam respectively.

China: 1,291

Hong Kong: 108
Taiwan: 90

Thailand: 462
Vietnam: 315

Philippines: 110
Malaysia: 72

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

Singapore: 43
Indonesia: 170
Source: Eleventh Survey on the Overseas Business of Shinkin Bank Customers (2015)9

Business Overview
Earnings Performance
Looking at the financial results for fiscal 2016
overall, operating income amounted to ¥284
billion ($2,531 million), up ¥14 billion ($128
million), or 5.3%, year on year. The increase
mainly reflected an increase in gains on salesof bonds associated with the sell-offs ofhedged securities, which outweighed a decline
in interest income due to a decline in interest
rates. Meanwhile, operating expenses came to¥235 billion ($2,100 million), up ¥22 billion($196 million), or 10.3%, year on year, mainlyreflecting an increase in financial derivative
expenses associated with the unwinding ofhedge transactions, which was partially offset
by a decline in fund procurement expenses
following the decline in interest rates.
As a result, ordinary income came to ¥48
billion ($430 million), a decline of ¥7 billion($68 million), or 13.6%, year on year. However, net income was mainly flat year on year at¥41 billion ($368 million), reflecting a decline
in income taxes.

Funding
In fiscal 2016 (ended March 31, 2017), the total
amount of funding increased ¥2,505 billion($22,334 million) year on year, for a total of¥35,148 billion ($313,298 million). Of this figure, deposits received came to ¥29,176 billion($260,059 million), an increase of ¥1,939 billion ($17,286 million), which mainly comprised
fixed-term deposits from shinkin banks.
After deducting redemptions, debenturesat the end of fiscal 2016 came to ¥2,952 billion($26,320 million), down ¥102 billion ($914 million) during the fiscal year, including ¥476 billion ($4,248 million) in debentures issued by
the SCB.
Borrowed money amounted to ¥3,019 billion ($26,918 million), a year-on-year increaseof ¥669 billion ($5,963 million), mainly comprising borrowings under a funding provision
to support increased lending by the Bank ofJapan and foreign currency denominated repurchase transactions.

Asset Management
The amount of assets under management in fiscal
2016 increased ¥1,982 billion ($17,672 million),or 5.7%, to ¥36,636 billion ($326,555 million).

Mainly due to lower government bondholdings, outstanding invested securities decreased ¥634 billion ($5,656 million), or 3.5%,
to ¥17,204 billion ($153,353 million) at fiscal
year end.
As a result chiefly of an increase in loans
to business corporations and national and government agencies and orga­nizations, loans andbills discounted increased ¥1,231 billion($10,977 million), or 18.2%, during the year
under review to ¥7,995 billion ($71,266 million).
The outstanding amount of short-termmoney market assets rose ¥1,493 billion($13,314 million) year on year, or 15.3%, to¥11,230 billion ($100,101 million). This primarilyreflects Bank of Japan current deposit increases.
Securities
As of March 31, 2017, the outstanding amount of
securities was ¥17,204 billion ($153,353 million).
Government bonds, corporate bonds,
and other domestic securities accounted for¥12,058 billion ($107,481 million), and foreign
securities for ¥4,173 billion ($37,197 million).
In terms of foreign securities, the SCB
mainly invests in safe assets, which include
government-secured financial institution
bonds and government-agency bonds in major
developed countries.
To advance its diversified investment
portfolio, the SCB also invests in such risk
assets as stocks and investment trust funds
not subject to interest risk, while optimizing
its portfolio in response to shifts in the financing and investment environment.
The SCB also carries out interest rate
swaps and other derivative trading, to hedge
risks linked to assets under management.
Loans and Bills Discounted
The SCB conducts a variety of loan-related
business. As of March 31, 2017, the outstanding amount of loans and bills discounted was¥7,995 billion ($71,266 million). Of the total
amount, loans to shinkin bank customers
through those banks accounted for ¥257 billion ($2,298 million), while direct loans to suchparties as national and government agencies
and organizations, regional public corporations, and charitable organizations accounted

Ordinary Income and Net Income (Non-consolidated)

10(Millions of yen)

FY2012FY2013

FY2014FY2015FY2016

Ordinary income (loss)

41,16348,651

81,19855,971

48,342

Net income (loss)

32,02435,39660,81740,87541,383for ¥4,696 billion ($41,863 million). Directloans to business corporations accounted for¥2,392 billion ($21,323 million).

Breakdown of Funding*
8.6%(¥3,019 billion)
8.4%(¥2,952 billion)
0.0%(¥0.0 billion)
83.0%(¥29,176 billion)

Deposits
Negotiable deposits
Debentures
Borrowed money

Breakdown of Asset Management*
0.6% (¥205 billion)

30.6%(¥11,230 billion)

21.8%(¥7,995 billion)
47.0%(¥17,204 billion)

Short-term market
operation
Securities
Loans and bills
discounted
Trading assets

Breakdown of Securities*
1.3%(¥226 billion)
24.3%(¥4,173 billion)

45.9%(¥7,901 billion)

4.3%(¥746 billion)
20.8%(¥3,570 billion)

3.4%(¥586 billion)

Government bonds
Municipal bonds
Corporate bonds
Stocks & investment
trust funds
Foreign securities
OthersBreakdown of Loans and Bills
Discounted*
8.1%(¥648 billion)
3.2%(¥257 billion)
29.9%
50.0%
(¥2,392 billion) (¥3,993 billion)

National andgovernment
agencies andorganizations
Regional public
corporations
and charitableorganizations
and others
Business
corporations

8.8%(¥703 billion)* As of March 31, 2017.

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

Raising Capital
In order to improve and enhance its financial
position in preparation for possible changes
in the regulatory framework, the SCB raised¥200 billion ($1,782 million) in specific common shares from the shinkin bank industry,
with September 30, 2015 as the payment date.
Therefore, there is no dilution in the distribution of residual assets for the preferredshareholders.
*	‌If the capital increase by general common shares isdetermined, instead by specific common shares, a dilution
will be caused in the distribution of residual assets forpreferred shareholders. In this case, there is no change in
the normal policy to conduct anti-dilution measures.

Consolidated Capital Adequacy Ratio
The SCB’s consolidated capital adequacy ratio
at March 31, 2017, was 37.03%.
Equity capital, the numerator for calculating the capital adequacy ratio, amounted to¥1,764 billion ($15,729 million).
Risk assets, the denominator for calculating the capital adequency ratio, amounted to¥4,765 billion ($42,476 million).

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

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

Capital Adequacy Ratio (Domestic Standard*)

Consolidated
Non-consolidated

Capital adequacy ratio
Amount of capital
Amount of risk-weighted assets
Capital adequacy ratio(%, billions of yen)
FY2012
33.57
1,422
4,236
33.42

FY2013
37.86
1,692
4,469
37.84

FY2014
36.40
1,656
4,551
36.46

FY2015
41.10
1,824
4,439
42.38

FY2016
37.03
1,764
4,765
38.28

* Figures for FY2012 are based on the previous standard; figures for FY2013 to FY2016 are based on the new standard.

11Asset Quality
Risk-Monitored Loans
The amount of risk-monitored loans as of theend of March 2017 was ¥106 million ($0.9
million) for loans to bankrupt borrowers,¥10,954 million ($97 million) for delinquentloans, ¥9 million ($0.0 million) for loans past
due three months or more, and ¥30,672

million ($273 million) for restructured loans.
Total risk-monitored loans increased¥5,153 million ($45 million) to ¥41,743 million($372 million) during the fiscal year.
The ratio of total risk-monitored loans tototal loans remained as low at 0.52%, and theRisk-monitored Loans (Non-consolidated)

(%, millions of yen)
End of March
2016
135
5,517
24
30,912
36,590Loans to bankrupt borrowers
Delinquent loans
Loans past due three months or more
Restructured loans
Total risk-monitored loans (A)End of March
2017
106
10,954930,672
41,743

Increase or
Decrease
(29)
5,437
(15)
(240)
5,153

310

204

(106)

6,763,822
0.54

7,995,390
0.52

1,231,568(0.02)End of March
2016
135
5,517
24
30,912
36,590End of March
2017
106
10,954930,672
41,743

Increase or
Decrease
(29)
5,437
(15)
(240)
5,153

310

204

(106)

6,763,824
0.54

7,995,391
0.52

1,231,567(0.02)

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

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

(%, millions of yen)

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

Asset Assessment under
the Financial Reconstruction Law
As of the end of March 2017, bankrupt andquasi-bankrupt assets amounted to ¥204
million ($1 million), doubtful assets ¥10,857
million ($96 million), and substandard assets¥30,682 million ($273 million).
Accordingly, the total amount of bad debts
under the Financial Reconstruction Law increased ¥5,153 million ($45 million) to ¥41,743
million ($372 million).

The coverage ratio of bad debts (the totalof claims deemed collectible with collateral andguarantees and the allowance for possible loan
losses divided by total bad debts) was 72.78%.
Bankrupt and quasi-bankrupt assets arerecorded for the remaining amount after
deducting the amounts deemed collectible withcollateral and guarantees, while doubtful assets
are recorded for the loss-expected amount of

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

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

12

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

End of March2017
204
10,85730,682
41,7438,060,144

Increase or
Decrease
(49)
5,458
(254)
5,153
1,227,381

310

204

(106)

6,869,354
0.53

8,101,888
0.51

1,232,534(0.02)

25,15168.73

30,383
72.78

5,232
4.05

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

Consolidated capital
Adequacy Ratio (%)

Nonperforming Loan Ratio (%)(As of September 30, 2016)(As of September 30, 2016)41.20%
1.96%
16.59%

1.11%

11.70%

Long-term Credit Rating(As of July 31, 2017)

0.44%
SCB

City banks1 Regional banks2

SCB

City banks Regional banks

37.03%

0.52%

Notes:Note:
NPL ratio = total risk-monitored loans/total loans.
Source: Japanese Bankers Association(As of March 31, 2017)(As of March 31, 2017)

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

A1

A

A+

AA

Moody’s

S&P

R&I

JCR

Note:

Symbols indicating credit rating are assigned byeach rating agency.

The SCB promotes streamlining of management through ongoingsweeping restructuring.

Funds per Employee(As of September 30, 2016)

Ratio of Expenses (%)(As of September 30, 2016)(Millions of US dollars)

268
0.88%
0.73%

38
SCB

18

City banks Regional banks

0.08%
SCB

City banks Regional banks$237 million

0.08%

Notes:Note:(As of March 31, 2017)

1. Total funds = deposits + CDs + debentures
2. ‌US dollar amounts are converted for convenience only, at ¥101.05 and ¥112.19 per
US$1.00, the prevailing rate on September
30, 2016 and March 31, 2017, respectively.
Source: Japanese Bankers Association(As of March 31, 2017)

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

13

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

Institutional Structure

General Assembly of Representatives
The SCB is a cooperative financial institution
comprising 264 shinkin banks nationwide (asof March 31, 2017) that are its members andinvestors. The General Assembly of Representatives, equivalent to the general meetingof shareholders in a joint-stock company, isheld annually to elect directors and resolve
important issues.
Board of Directors
The SCB’s Board of Directors, comparable to
the Board of Directors in a joint-stock company, holds regular meetings nine times per
year, and makes decisions regarding importantbusiness matters.
The Board of Directors includes 13 fulltime directors, and 18 part-time directors. In
accordance with Article 32, paragraph 4 of
the Shinkin Bank Act, the SCB’s Articles ofIncorporation stipulate that more than half
the total number of board members must be
executive officers of shinkin banks. As such,part-time directors are selected fromamong the presidents or board chairs ofshinkin banks from each region in Japan.
There are no board members corresponding
to the outside directors as defined by theCompanies Act.
The SCB is confident that the appropriate
check on management provided by the parttime directors ensures that supervision andsafeguard functions are in place and have ahigh degree of objectivity and transparency inbusiness operations.
Corporate Auditors
The SCB’s corporate auditors, comparable
to the corporate auditors of a joint-stockcompany, audit the execution of duties by the
directors.
The SCB appoints one full-time corporate
auditor and two part-time corporate auditorsfrom among the presidents and board chairsof shinkin banks, and two part-time corporate
auditors who are not executives of the SCB
or shinkin banks (non-member corporate
auditors), equivalent to outside corporate auditors as defined by the Companies Act. Nonmember corporate auditors are appointed
from among persons who meet the requirements stipulated in Article 32, paragraph 5 of
the Shinkin Bank Act. There are no stipulations of standards or guidelines regarding independence for the appointment of non-14

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

Checks on Business Operations

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

Improving Internal Control Systems

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

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

Compliance System

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

accidents, the SCB has established the Risk
Management Committee.
7.	‌In addition to conducting regular lectures
and training seminars for directors andemployees, each division and branch also
carries out its own training programs as
part of the SCB’s efforts to strengthen
compliance education.
8.	‌The audit items used by the Internal Audit
Division include compliance-related items,
and internal audits include investigation ofwhether the compliance system is functioning adequately.
9.	‌In cases of compliance violation, re ports from the heads of the divisions or
branches concerned are promptly called
for, and appropriate actions are taken toprevent a recurrence.
10.	‌T he SCB operates a hotline to facilitate
repor ting of compliance breaches bydirectors and employees. The SCB also
has in place strict measures to protect
whistle-blowers.
11.	‌Pursuant to the Law on Sales of Financial
Products, the SCB has formulated andmade public its Financial Products Solicitation Policy. To ensure that solicitation iscarried out fairly, important points regarding a product must be explained to thecustomer at the time of sale.

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

Compliance System Overview
Customers
Division or branch

Corporate
lawyerCorporate
Auditors

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

Deputy head ofcomplianceadministration

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

Supervisor of compliance

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

Compliance hotline

Employees

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

Risk Management Committee

Directors (full time)

Executive Committee
Board of Directors

15

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

In the wake of the global financial crisis, financial
institutions face significant changes in economic
and financial market conditions and otheraspects of their operating environment. To
respond promptly and appropriately to thesechanges, financial institutions require very finely
tuned risk management.
The SCB has positioned risk management
as a key management priority for ensuringsound management and securing adequate
profits. All directors and employees conduct
their daily duties with a full awareness of theimportance of risk management.
The SCB classifies risk in two broad categories—risk that must be controlled andrisk that must be absolutely minimized—
and manages the risks accordingly. The typesof risk that must be controlled are market,
liquidity, and credit risks. The type of risk thatmust be minimized is operational risk. The
Risk Management Division coordinates the
management of different risks to provide
comprehensive risk management.
The SCB has also established cross­organizational bodies—the Risk Management
Committee 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 indepen­
dent from its risk management systems—tomonitor the SCB’s risk management activities.

Integrated Risk Management

To manage risk in a comprehensive manner,
the SCB employs the integrated risk management method to cope with quantifiable risk.
Integrated risk management is a way tomanage its diverse risks by calculating themwith uniform criteria, such as the Value-atRisk (VaR) method, and comparing theiraggregated value to the institution’s overall
financial strength (i.e., capital adequacy).
For market risk and credit risk, the SCB
calculates the VaR. For the calculation of operational risk capital requirements, the SCB
employs the basic indicator approach, proposed under regulations concerning capital
adequacy ratios.
The SCB defines capital under its integrated risk management system and allocates quantitative risk limits, operation-

al risk and other types of risk.* Separately,
the SCB estimates losses under various
stress scenarios as part of its efforts tomonitor potential impacts on capital.
The quantit ative risk limits and re ser ve amounts for each f iscal year are
determined by the Executive Committee
following deliberation by the Risk Management Committee. The Risk Management
Division, which oversees integrated risk
management, measures the amount of risk
exposure both during and at the end of eachmonth, to ensure that quantitative limits
for each type of risk are not exceeded. The
Risk Management Division provides reports
on risk status to senior management andrelated divisions through the Risk Management Committee.
*	‌With regard to subsidiaries within the SCB’s scope of
consolidation, the SCB monitors risk exposure at eachsubsidiary and allocates capital commensurate with theamount of risk. These allocations enable subsidiaries totake risks.

Risk Categories
Category
Market risk

Must becontrolled

Must beminimized

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

Liquidity risk

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

Credit risk

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

Operational risk

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

Administrative risk

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

Information
technology risk

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

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

16

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

Executive Committee

Risk Management
Committee
Risk Management Division

Risk Management Division

Responsible for integrated risk
management

Responsible for overall management ofoperational risk

Risk Management Division(Assessment)

Operations Division

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

Systems Division

Credit Planning & Supervision Division
Responsible for credit assessment

Responsible for administrative risk
management

Responsible for liquidity risk
management

Responsible for the management of otheroperational risk

Responsible for credit control

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 fluctuation in interest rates.
The status of these risk management
activities is reported to senior management at
biweekly meetings of the ALM Committee.

Market Risk Management Framework
Board of Directors
Executive Committee
Decisions

Matters for discussion

Risk Management Committee
ALM Committee
Decisions

Responsible for market risk
management

Financial Management Division

Divisions stipulated by Risk
Management Division

Risk Management Division, Credit
Planning & Supervision Division

Risk Management Division

Risk Management Division

Responsible for information technology
risk management

Responsible for capital adequacy

ALM
Committee

CreditCommittee

Decisions

Reports

Divisions responsible formarket risk management

Matters for discussion

Market divisions
Mutual checks

Mutual checks

Mutual checks

Administrative control divisions

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

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

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

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

17

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

18

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

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

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

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

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

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

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

Community and Environmental

Assisting Local Society

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

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

Shinkin banks are born of their communities,
and develop together with them. The “Shinkin
Bank Social Contribution Award” was createdin 1997 to help publicize the shinkin 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 “20th Shinkin Bank Social Contribution Award” elicited submissions for 593 social contribution initiatives in a wide range ofareas, from 166 shinkin banks and three related organizations, between October 2016 andDecember 2016. Activities were evaluated on
the basis of continuity, social significance, integrity with the community, and impact on the local society. Awards were presented for activities at six shinkin banks, with individual
prizes awarded to three people, as good examples for shinkin bank employees to emulate.

Provision of Financial Products
Socially Responsible Investing (SRI) and
Environment, Social and Governance (ESG) Fund
Shinkin Asset Management Co., Ltd., a wholly
owned SCB subsidiary, offers the Shinkin SRI
Fund, which focuses on the social responsibility of companies and investments.
SRI is based on the philosophy that“companies with the best potential for steady
growth are those that maintain sustainableeconomic growth by fulfilling their corporatesocial responsibilities.” Consequently, SRI
backs investment on the basis of research andanalysis carried out from a broad range ofperspectives, including financial, environmental, social, and ethical considerations.
Shinkin Asset Management began managing the Shinkin ESG Special Fund. Limited toqualified institutional investors, the fund provides a source of information for making investment decisions based on non-financial
factors, namely environmental performance,social contribution, and good governance.

Metrolink Nihonbashi

Shinkin Bank Social
Contribution Award

19

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

Outline of Shinkin Banks

Japan’s 264 shinkin banks form an extensive
network, with approximately 7,400 locations
across the country, from Hokkaido in the northto Kyushu and Okinawa in the south.
Shinkin banks dedicate themselves to providing high-quality services to local residents,
as financial institutions that are deeply rooted
in their respective regions, and contribute toregional development.
Total deposits outstanding at 264 shinkinbanks as of March 31, 2017, reached approximately ¥137 trillion ($1,229 billion), which ranks
it in third place after Japan’s city and regionalbanks, and gives shinkin banks an important position in Japanese financial markets.
Shinkin banks continue to further deepen
their presence and roles as important infrastructure for regional economies and communities.

Deposits1 Outstanding by
Bank Segment (As of March 31, 2017)
City Banks

2,257

Shinkin Banks

1,229

Second-tier Regional BanksManagement improvement /enterprise renewal

Co-financing

Succession support / M&As

Product and service expansion

Overseas expansion

Personal lending businessBusiness start-ups

Local-area revitalization

Shinkinbankcustomers

Nationwide Network of Shinkin Banks (264 banks)

Hokuriku (16 banks)
Kinki (29 banks)

Hokkaido (22 banks)

Chugoku (21 banks)
Tohoku (27 banks)

Kyushu (28 banks)

Kanto (49 banks)

Tokyo (23 banks)
Tokai (38 banks)

Okinawa (1 bank)

Shikoku (10 banks)

Deposits Outstandingat Shinkin Banks(Trillions of yen / billions of US dollars)$3,036

Agricultural Cooperatives

124.8(1,327)128.0(1,244)131.9(1,098)134.7(1,195)

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

137.9(1,229)
63.6
(676)

64.4
(626)

2013

2014

65.8
(547)

67.3
(597)

69.1
(616)

877
2

586

Credit Cooperatives

177

Labor Credit Associations

171

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

20

Shinkinbanks(Billions of US dollars)
2

Regional Banks2

Notes:

Shinkin Bank Services

2013

Note:

2014

2015

2016

2017

Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥94.10, ¥102.94, ¥120.15, ¥112.69
and ¥112.19 per US$1.00, the prevailing rate on
March 31, 2013, 2014, 2015, 2016 and 2017,
respectively.
Source: The SCB.

Note:

2015

2016

2017

Items in parentheses are US dollar amounts.
They are given for convenience only, withconversion at ¥94.10, ¥102.94, ¥120.15, ¥112.69
and ¥112.19 per US$1.00, the prevailing rate on
March 31, 2013, 2014, 2015, 2016 and 2017,
respectively.
Source: The SCB.

Capital Adequacy Ratio of Shinkin Banks
13.16%

13.04%

13.17%

The capital adequacy ratio of shinkin banks asof March 31, 2017, decreased 0.31 percentage
point over the previous fiscal period to 12.77%(preliminary figure).
The ratio maintains a level that is not inferior to that of other business categories,
and is outperforming other domestic regionalbanks (9.94%) and second-tier regional banks(9.47%).

13.08%
12.77%FY2013

FY2014FY2015FY2016FY2017(Preliminary figure)

Source: The SCB.

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

Nonperforming-loan Ratioof Shinkin Banks (%)(as of March, 31, 2016)16.75%

6.84%

12.77%
9.94%

6.45%
5.91%

9.47%

5.30%
4.76%

Shinkinbanks

City banks(Preliminary figure)

Regional Second-tierbanks regional banks

FY2013

FY2014FY2015FY2016(Domestic)

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

FY2017(Preliminary figure)

Source: The SCB.

Difference between Shinkin Banks and Commercial Banks
Category

Shinkin Banks

Commercial Banks
Banking Act

Legal foundation

Shinkin Bank Act

Organization

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

Membership qualifications(1) ‌Those who have an address or location in the Noneregion(2) Those who have a business office in the region(3) Those who work in the region(4) ‌Executive officers of companies that have abusiness office in the region(In the case of businesses)
Businesses with no more than 300 employees orwith less than 900 million yen in capital21

Preferred Shares
The SCB’s Preferred Shares

Trading of Preferred Shares

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

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

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

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

Composition of Preferred Shares (March 31, 2017)
・Number of Investors (20,559)
Foreign institutions
and others
50(0.2%)
Financial institutions
211(1.0%)
Other corporations
211(1.0%)

Other corporations
38,401(5.4%)(Closing price,yen)First day of listing (December 22, 2000) 200,500
Foreign institutions
and others
4,245(0.6%)

Highest price (March 15, 2006)

311,500

Lowest price (April 14, 2009)

102,400

Closing price (July 31, 2017)

233,000* The price of preferred shares is split-adjusted, reflecting
the stock split of preferred shares as at July 31, 2009.

Individuals
115,978(16.4%)
Individuals
20,076(97.7%)

22

Price of Preferred Shares*

・Number of Subscription (708,222)
Securities companies
6,996(1.0%)

Securities companies
11(0.1%)The SCB’s preferred shares are treatedas stocks in the taxation system, and are given
the same preferential treatment concerning
tax as stocks.
For fiscal 2016, the dividend for preferredshares was ¥6,500 ($57) per share, which
included a preferred dividend of ¥3,000 ($26)
and a participating dividend of ¥3,500 ($31).

Financial institutions
542,602(76.6%)

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
76 Independent Auditor’s Report
77 Non-Consolidated Balance Sheet
78 Non-Consolidated Statement of Income
79 Statement of Trust Account (Consolidated)

23

Five-Year Summary (Consolidated)(Millions of yen)
FY2012FY2013

FY2014FY2015FY2016

Total Income

408,917308,171

307,894

302,154319,307

Trust Fees

594

597

600

665

595

Total Expenses

367,469

255,548

223,028

242,097

266,503

Profit Attributable to Owners of Parent

32,862

37,612

62,69642,78143,871

Comprehensive Income

171,545

48,004

173,51218,303

11,056

Net Assets

1,249,229

1,276,826

1,433,756

1,632,969

1,625,842

Total Assets

30,410,702

31,184,564

33,516,073

35,092,905

37,464,593

Net Assets per Share (yen)263,016.93

268,795.17

301,997.98

301,512.71

299,542.84

Net Income per Share (yen)6,528.60

7,537.36

12,865.13

7,115.71

6,223.20

16,603

16,603

18,957

18,115

19,603General Common Shares

12,00012,00014,00012,00012,000Specific Common Shares

－

－

－

1,512

3,000

Preferred Shares

4,603

4,603

4,957

4,603

4,603

Total Trust Assets

2,305,491

2,180,138

2,096,294

2,181,287

1,859,161

Dividends

Notes:
1. National and local consumption tax incurred by the Shinkin Central Bank and its domestic consolidated subsidiaries are
excluded from transaction amounts.
2. In the fiscal year ended March 31, 2017 the Shinkin Central Bank started trust business; “Trust Fees” and “Total Trust Assets”
have therefore been added to the above table.
3. “Total Trust Assets” is calculated by means of simple aggregation of the trust assets for each consolidated company
conducting trust business pursuant to the “Act on Engagement in Trust Business Activities by Financial Institutions”.
Consolidated companies conducting such trust business comprised only Shinkin Trust Bank, Ltd. until the fiscal year ended
March 31, 2016, and in the fiscal year ended March 31, 2017 comprised the Shinkin Central Bank and Shinkin Trust Bank,
Ltd.

24

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

Liabilities and Net Assets
Liabilities
Deposits (Note 25)
Debentures (Note 12, 25)
Trading Liabilities (Note 10, 25)
Borrowed Money (Note 9, 11, 25)
Bills Sold and Call Money (Note 25)
Payables under Repurchase Agreements (Note 9, 25)
Payables under Securities Lending Transactions (Note 9, 25)
Foreign Exchanges Liabilities
Borrowed Money from Trust Account
Other Liabilities (Note 13)
Reserve for Employee Bonuses
Reserve for Directors' Bonuses
Net Defined Benefit Liability(Note 23)
Reserve for Directors' Retirement Allowances
Reserve under Specific Law
Deferred Tax Liabilities (Note 22)
Deferred Tax Liabilities for Land Revaluation (Note 14)
Acceptances and Guarantees
Total Liabilities
Net Assets
Common Shares and Preferred Shares (Note 21)
Capital Surplus
Retained Earnings
Total Shareholders' Equity
Net Unrealized Gains (Losses) on Other Securities (Note 22, 26)
Net Deferred Gains (Losses) on Hedging Instruments (Note 22, 27)
Land Revaluation Excess (Note 14)
Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans (Note 23)
Total Accumulated Other Comprehensive Income
Non-controlling interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of these financial statements.

2017

Millions of Yen
2016

Millions of
U.S. Dollars(Note 1)
2017

10,611,955
362,234
19,99986,206
180,477
232,088
17,164,425
7,995,391
20,514
488,62273,89914,843
3,895
255,536(45,499)
37,464,593

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

94,589
3,228
178
768
1,608
2,068
152,994
71,266
182
4,355
658
132
34
2,277
(405)
333,938

29,150,114
2,950,000
84,345
1,203,870
27,821
188,402
1,606,958
368
360
234,605
1,726
83
41,524535
186,387
6,109
255,536
35,838,750

27,214,026
3,052,920
129,461829,320
54,39763,804
1,414,550
256
3,324
307,124
1,765
80
40,419554
1102,554
6,109
239,266
33,459,936

259,828
26,294751
10,730247
1,679
14,323
3
3
2,091
15
0
370
4
0
770
54
2,277
319,446

690,998
100,678546,678
1,338,355
348,931(72,705)
13,455(3,246)(9,351)
277,083
10,403
1,625,842
37,464,593

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

6,159
897
4,872
11,929
3,110
(648)
119
(28)
(83)
2,469
92
14,491
333,93825

Consolidated Statement of Income
Shinkin Central Bank For the year ended March 31,
IncomeInterest Income:Interest on Loans and Discounts
Interest on Due from Banks
Interest on Bills Bought and Call Loans
Interest on Receivables under Resale Agreements
Interest on Receivables under Securities Borrowing Transactions
Interest and Dividends on Securities
OthersTrust Fees
Fees and Commissions (Note 16)
Trading Income (Note 17)
Other Operating Income
Other Income (Note 18)
Total Income

Expenses
Interest Expenses:
Interest on Deposits
Interest on Debentures
Interest on Borrowed Money
Interest on Bills Sold and Call Money
Interest on Payables under Repurchase Agreement
Interest on Payables under Securities Lending Transactions
OthersFees and Commissions (Note 16)
Trading Losses
Other Operating Expenses
General and Administrative Expenses
Other Expenses (Note 19)
Total Expenses

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

2017

Millions of Yen

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

26

2016

201,637
17,869
8,448
753
0
148
173,879
538
595
42,6855,260
59,028
10,099319,307

204,873
23,783
9,532
1,064
20
75
169,535
860
665
39,897
12,55537,5596,603
302,154

1,797
159
75
6
0
1
1,549
4
5
380
46
526
90
2,846

122,381
39,689
7,998
8,292
254
1,062
9,267
55,817
14,78474,53452,043
2,759
266,503

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

1,090
353
71
73
2
9
82
497
131
664
463
24
2,375

52,80460,057470

12,199(3,948)8,250
44,554682
43,871

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

108
(35)
73
397
6
391

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

U.S. Dollars(Note 1)
2017
55.47
26.74
13.37
57.93

Yen

Net Income per Share (Note 31)
Dividend Declared per Share (General Common Shares)
Dividend Declared per Share (Specific Common Shares)
Dividend Declared per Share (Preferred Shares)

Millions of
U.S. Dollars(Note 1)
2017

2017
6,223.20
3,000.00
1,500.00
6,500.00

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

2017

44,554(33,497)(129,013)
96,145(1,593)963
11,056
10,328727

2016

43,425(25,121)37,854(54,372)(2)(368)(8,232)
18,30318,185
118

Millions of
U.S. Dollars(Note 1)
2017
397
(298)
(1,149)
856
(14)
8
98
92
6

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

27

Consolidated Statement of Changes in Net Assets
Shinkin Central Bank For the year ended March 31,2017

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

Capital Surplus

690,998

Retained Earnings
100,678

Total Shareholders’ Equity
520,923

1,312,600

Surplus Dividends(18,115)(18,115)

Profit attributable to owners of parent

43,87143,871

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

25,75525,755690,998

100,678546,678

1,338,355

Accumulated Other Comprehensive Income
Net Unrealized
Gains (Losses)
on Other
Securities
Balance at Beginning of Year477,944

Net Deferred
Gains (Losses) Land Revaluation
on Hedging
ExcessInstruments(168,850)

Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
IncomeForeign
Currency
Translation
Adjustments

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

310,625

Noncontrolling
Interests

Total Net
Assets

9,743

1,632,969

Fluctuation Amount during the Fiscal Year
Surplus Dividends(18,115)

Profit attributable to owners of parent

43,871Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year

(129,013)

96,145-(1,593)919(33,542)660(32,882)

Total Fluctuation Amount during the Fiscal Year

(129,013)

96,145-(1,593)919(33,542)660(7,126)

Balance at End of Year348,931(72,705)

13,455(3,246)(9,351)

277,083

10,403

1,625,842

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

Capital Surplus

6,159

Retained Earnings
897

Total Shareholders’ Equity
4,643

11,699Surplus Dividends

(161)

(161)

Profit attributable to owners of parent

391

391

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

-

-

229

229

6,159

897

4,872

11,929

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

4,260

Net Deferred
Gains (Losses) Land Revaluation
on Hedging
ExcessInstruments(1,505)119

Foreign
Currency
Translation
Adjustments
(14)

Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
Income(91)

2,768

Noncontrolling
Interests

Total Net
Assets86

14,555

Fluctuation Amount during the Fiscal Year
Surplus Dividends(161)

Profit attributable to owners of parent

391

Net Changes in Items Other Than Shareholders’Equity during the Fiscal Year28

(1,149)

856

-

(14)

8

(298)

5

(293)

Total Fluctuation Amount during the Fiscal Year

(1,149)

856

-

(14)

8

(298)

5

(63)

Balance at End of Year

3,110

(648)

119

(28)

(83)

2,469

92

14,491

Shinkin Central Bank For the year ended March 31,2016

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

Capital Surplus

490,998

Retained Earnings
100,678

Total Shareholders’ Equity
497,099

1,088,776

Fluctuation Amount during the Fiscal Year
Increase of Common shares

200,000

200,000

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

Profit attributable to owners of parent

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

200,000-

23,824

223,824

Balance at End of Year690,998

100,678

520,923

1,312,600

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

440,090

Net Deferred
Gains (Losses) Land Revaluation
on Hedging
ExcessInstruments(114,477)

13,457

Foreign
Currency
Translation
Adjustments(1,285)

Total
Remeasurements Accumulatedof Defined Benefit
Other
Plans
Comprehensive
Income(2,563)335,222

Noncontrolling
Interests

9,758

Total Net
Assets1,433,756

Fluctuation Amount during the Fiscal Year
Increase of Common shares

200,000

Surplus Dividends(18,957)

Profit attributable to owners of parent

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

(2)

(368)

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

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

(2)

(368)

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

199,212

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

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

310,625

9,743

1,632,969

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

29

Consolidated Statement of Cash Flows
Millions of
U.S. Dollars
2016(Note 1)
2017

2017

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

52,804
10,647
(544)
(38)
3
1,105
(18)
(201,637)
122,381(32,002)(224)
43,797
11
42,064(45,116)
2,579(1,231,567)
1,936,087(102,920)
482,700
35,045(28,146)
34,334
98,023
192,408(2,788)(6,714)112(2,964)
268,378(139,300)(352,062)
1,176,436(18,665)
1,157,771

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

470
94
(4)
(0)
0
9
(0)
(1,797)
1,090
(285)
(2)
390
0
374
(402)
22
(10,977)
17,257
(917)
4,302
312
(250)
306
873
1,715
(24)
(59)
1
(26)
2,392
(1,241)(3,138)
10,486(166)
10,319Cash 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(4,333,235)
2,195,709
2,575,669(40,000)
112,955(4,542)(4,007)
502,548(2,434,862)
1,150,848
2,492,517(40,000)
98,717(3,532)(3,061)117
1,260,745(38,624)
19,571
22,958
(356)
1,006
(40)
(35)
4,479

Cash Flows from Financing Activities:
Repayment of Subordinated Borrowings
Proceeds from Increase of Shares
Dividends Paid
Dividends Paid to Non-controlling Interests
Net Cash Provided by (Used in) Financing Activities(108,150)(18,115)(66)(126,332)(100,000)
200,000(18,957)(133)
80,908

(963)
(161)
(0)
(1,126)

Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period (Note 2 (2) )(0)1,533,987
8,134,353
9,668,340(1)
2,504,183
5,630,169
8,134,353(0)
13,67372,50586,178The accompanying notes are an integral part of these financial statements.

30

Millions of Yen

Shinkin Central Bank For the year ended March 31,

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 ¥112.19 to U.S.$1, the exchange
rate prevailing as of March 31, 2017. The amounts in U.S. dollars arepresented in millions of U.S. dollars by rounding down figures. As aresult, the totals in U.S. dollars shown in the consolidated financial
statements do not necessarily agree with the sums of the individual
account balances. The U.S. dollars amounts are included solely forthe convenience of readers outside Japan and this translation should
not be construed as representation that Japanese yen amounts havebeen or could be readily converted, realized or settled in U.S. dollars
at that or at any other rates.
2. Significant Accounting Policies:(1) Principles of Consolidation
The consolidated financial statements include the accounts of the
Bank and its eight consolidated subsidiaries as of March 31, 2017
listed below:
Ownership
Location
Percentage
Name
The Shinkin Banks Information
System Center Co., Ltd.
Tokyo
50.7%
Shinkin International Ltd.
London100%
Shinkin Chukin Business Co., Ltd.
Tokyo
100%
Shinkin Asset Management Co., Ltd.
Tokyo
100%
Shinkin Trust Bank, Ltd.
Tokyo
100%
Shinkin Securities Co., Ltd.
Tokyo
100%
Shinkin Capital Co., Ltd.
Tokyo
100%
Shinkin Guarantee Co., Ltd.
Tokyo
100%
Unconsolidated subsidiaries
Shinkin no Kizuna Limited Liability Investment Partnership
Shinkin no Tsubasa Limited Liability Investment Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because their total assets, total income, net income(amount based on the equity method), retained earnings (amountbased on the equity method) and accumulated other comprehensive
income (amount based on the equity method) are immaterial and do
not hinder a rational judgment of the Bank’s financial condition andresults of operation when excluded from the scope of consolidation.
The fiscal year and the closing date thereof for the financial
statements of the consolidated subsidiaries are in agreement withthose of the Bank, except for Shinkin International Ltd., which has afiscal year ended on December 31. For the consolidation of thesubsidiary, the Bank makes appropriate adjustments for any materialtransactions subsequent to December 31.

All significant intercompany accounts and transactions havebeen eliminated in consolidation. The Bank’s share of net assets ofsubsidiaries is valued at fair value on acquisition. Minority interests
in net assets of subsidiaries are valued at fair value on acquisition in
the consolidated financial statements. The excess of the cost over thefair value of the underlying net equity in subsidiaries on acquisition isexpensed when incurred.
The application of equity-method to unconsolidated subsidiaries andaffiliates is as follows:
Non-consolidated equity-method subsidiaries:
N/A
Affiliated equity-method companies:
N/A
Unconsolidated subsidiaries that are not accounted for by the equity
method:Shinkin no Kizuna Limited Liability Investment Partnership
Shinkin no Tsubasa Limited Liability Investment Partnership
Unconsolidated subsidiaries that are not accounted for by theequity method are excluded from the scope of equity method because
their effect on the accompanying consolidated financial statements, interms of net income (amount based on the equity method) andretained earnings (amount based on the equity method), would not bematerial.
Affiliated companies to which the equity method is not applied due toimmateriality:
Aozora Loan Services Co., Ltd.
(2) Cash and Cash Equivalents
In the consolidated statement of cash flows, “Cash and Cash
Equivalents” consist of Cash and Due from Central Bank.
Reconciliation between Cash and Due from Banks in the
consolidated balance sheet and Cash and Cash Equivalents at March
31, 2017 and 2016 is as follows:
Millions ofMillions of Yen
U.S. dollars
2017
2016
2017
Cash and Due fromBanks

10,611,955

9,113,465

94,589Due from Banks(Excluding Duefrom Central Bank )(943,615)(979,112)(8,410)Cash and Cash
Equivalents

9,668,340

8,134,353

86,178(3) Trading Assets and Liabilities
Transactions for “Trading Purposes” (for purposes of seeking tocapture gains arising from short-term changes in interest rates,
currency exchange rates or market prices of financial instruments andother market related indices or from gaps among markets) are
included in “Trading Assets” and “Trading Liabilities” on the
consolidated balance sheet on a trade date basis. In addition, gains
and losses from “Trading Assets” and “Trading Liabilities” arerecorded as “Trading Income” and “Trading Losses” on the
consolidated statement of income on a trade date basis.
Securities and monetary debts purchased for trading purposes
are stated at fair value at the fiscal year end. Trading-related financial
derivatives such as swaps, futures and options are stated at thedeemed amounts that would be received or paid for settlement if suchtransactions were terminated at the fiscal year end.

31

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

32

prior to the commencement of transactions, and there exists spot andforward liabilities exceeding the acquisition costs of the foreign
currency securities designated as hedged items on a foreign currency
basis.
(c) Internal Derivative Transactions
Internal derivative transactions between trading accounts and otheraccounts, which are designated as hedges, are not eliminated andrelated gains and losses are recognized in the consolidated statementof income or deferred under hedge accounting because the internalinterest rate swaps and currency swaps transactions, etc. designatedas hedging instruments are conducted in a manner without any
subjection and are appropriately covered by third party transactions
conducted in accordance with the standard articulated by JICPA
Industry Audit Committee Reports No. 24 and No. 25.
(5) Tangible Fixed Assets (excluding Leased Assets)
Tangible fixed assets of the Bank are depreciated by the decliningbalance method. However, buildings acquired on or after April 1,
1998 (excluding facilities installed in buildings), and facilities
installed in buildings and structures that are acquired on or after April
1, 2016, are depreciated by the straight-line method.
The estimated useful lives of major items are as follows:
Buildings ................. 5 to 50 years
Others ...................... 3 to 20 years
Tangible fixed assets of consolidated subsidiaries are, in
principle, depreciated using the declining balance method, based on
their estimated useful lives.
(6) Intangible Fixed Assets (excluding Leased Assets)
Intangible fixed assets are amortized by the straight-line method. The
costs of software for internal use are amortized by the straight-line
method, mainly over a 5 year period (the estimated useful life of thesoftware).
(7) Leased Assets
Leased assets of Tangible Fixed Assets and Intangible Fixed Assets
related to finance leases that do not transfer ownership are
depreciated using the straight-line method with estimated useful lives
equal to lease terms, and zero residual values.
(8) Deferred Debenture Charges
Debenture charges are expensed in the fiscal year of issuance.
(9) Reserve for Possible Loan Losses
Reserve for possible loan losses of the Bank is provided inaccordance with the Bank’s predetermined internal rules forwrite-offs and provisions as follows:
The reserve for loans to borrowers who are classified as
substantially bankrupt or who are bankrupt in the legal sense isprovided at 100% of the amount remaining after write-offs anddeduction of expected collection from the disposal of collateral andthe execution of guarantees. In addition, a reserve is provided forloans to borrowers who, although not actually bankrupt in the legal
sense, are experiencing serious financial difficulties and whose
failure is imminent. In such cases, the reserve is provided at theamount deemed necessary based on the borrower’s capability of
repayment after deduction of expected collection from the disposal ofcollateral and the execution of guarantees.
The Bank calculates the reserve by the cash flow estimate
method to those borrowers who owe the debts classified as Loans toProbably Bankrupt Borrowers and Restructured Loans by the Bank,

whose total credit exceeds a certain amount and also the cash flow
related to collection of the principal and interests from whom can be
estimated. The cash flow estimate method is to determine the amountof reserve for possible loan losses from the gap between the amounts
calculated by discounting the cash flow by the contracted interest rateprior to relaxation of terms and conditions of loans and their bookvalues.
For all other loans, a reserve is provided based on the ratio of
actual defaults for a certain period in the past.
All claims are assessed by the Operating Related Division
based on internal rules for self-assessment of asset quality.
Subsequently, the Asset Auditing Division, that is independent fromthe Operating Related Division, audits these self-assessments. The
reserve is provided based on the results of the assessments.
For loans to Bankrupt Borrowers and Substantially Bankrupt
Borrowers, amounts deemed uncollectible, which are calculated after
deduction of expected collection from the disposal of collateral andthe execution of guarantees, are written off. The amount written off
was ¥204 million ($1 million) as of March 31, 2017 and ¥310 million
as of March 31, 2016.
Reserve for possible loan losses of the consolidated subsidiaries
for general claims is provided as the amounts deemed necessary
based on the default rate calculated from actual default during acertain period in the past, and for doubtful claims as the amounts
deemed uncollectible based on the assessment of each claim.
(10) Reserve for Employee Bonuses
Reserve for Employee Bonuses is set aside to pay employee bonuseswith respect to the portion of estimated bonus payments to employeesthat correspond to this fiscal year.
(11) Reserve for Directors’ Bonuses
Reserve for Directors’ Bonuses is set aside to pay directors andcorporate auditors bonuses with respect to the portion of estimatedbonus payments to directors and corporate auditors that correspond to
this fiscal year.
(12) Reserve for Directors’ Retirement Allowances
Reserve for Directors’ Retirement Allowances provided for by the
Bank is calculated based on the estimated allowances to be paid up to
the end of this fiscal year.
(13) Reserve under Specific Law
This reserve amount is calculated pursuant to Article 46-5, Paragraph
1 of the “Financial Instruments and Exchange Act” and Article 175of the “Cabinet Office Ordinance on Financial Instruments Business”
to indemnify any losses incurred from accidents in the conduct ofmarket derivative transactions on behalf of clients.
(14) Employees’ Retirement Benefits
The Bank accounted for retirement benefit obligation based on the
projected benefit obligations. The projected benefit obligations are
attributed to periods on a benefit formula basis. The methods foramortizing prior service costs and actuarial differences are as
follows:
Prior service costs:
Prior service costs are amortized, using the straight-line method overa certain number of years (10 years) within the average remaining
service period of current employees at the time the cost is incurred.
Actuarial differences:
Actuarial differences are amortized from the following year, using thestraight-line method over a certain number of years (10 years) within

the average remaining service period of current employees at eachtime the cost is incurred.
Also, certain consolidated subsidiaries calculate the net defined
benefit liability and retirement benefit cost using the simplified
method which assumes the retirement benefit obligation to be equal
to the necessary payments of the voluntary retirement for all
employees at the fiscal year-end.
(15) Translation of Foreign Currency-denominated Assets andLiabilities
Foreign currency-denominated assets and liabilities are translated
into Japanese yen at exchange rates prevailing at the end of the fiscal
year. Foreign currency-denominated assets and liabilities of
consolidated subsidiaries are translated into Japanese yen at exchange
rates prevailing at the end of the fiscal year.
(16) Consumption Tax
National and local consumption tax incurred by the Bank and its
domestic consolidated subsidiaries are excluded from transaction
amounts. However, national and local consumption tax paid onpurchases of tangible fixed assets and intangible fixed assets, which
are not deductible as a tax credit, are expensed in this fiscal year.
(17) Amortization of Goodwill
Goodwill is fully amortized in the fiscal year incurred.
(18) Changes in Accounting Policies
In accordance with the revision to the Corporation Tax Act, the Bank
has applied the “Practical Solution on a change in depreciation
method due to Tax Reform 2016” (ASBJ PITF No. 32, June 17,2016) from this fiscal year, and changed the depreciation method forfacilities installed in buildings and structures acquired on or after
April 1, 2016 from the declining balance method to the straight-line
method.
There is no significant impact on the consolidated financial
statements as a result of this change.
(19) Changes in Presentation
Consolidated balance sheet
As the Bank started trust business, “Borrowed Money from Trust
Account,” which was included in “Other Liabilities” in the previous
fiscal year, has been stated separately from this fiscal year. In order toreflect the change in the presentation, the relevant reclassification has
been made to the consolidated financial statements for the previous
fiscal year.
Consequently, the ¥310,449 million presented under “Other
Liabilities” in the previous fiscal year’s consolidated balance sheet
has been reclassified as “Borrowed Money from Trust Account” of¥3,324 million and “Other Liabilities” of ¥307,124 million.
Consolidated statement of income
As the Bank started trust business, “Trust Fees,” which was included
in “Fees and Commissions” in the previous fiscal year, has beenstated separately from this fiscal year. In order to reflect the change inthe presentation, the relevant reclassification has been made to theconsolidated financial statements for the previous fiscal year.
Consequently, the ¥40,562 million presented under “Fees andCommissions” in the previous fiscal year’s consolidated statement ofincome has been reclassified as “Trust Fees” of ¥665 million and“Fees and Commissions” of ¥39,897 million.

33

(20) Additional Information
Effective from this fiscal year, the Bank has applied the “Guidance on
Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26,
March 28, 2016).

3. Trading Assets:
The details of Trading Assets as of March 31, 2017 and 2016 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
Trading AccountSecurities
Trading Bonds-Related
Financial Derivatives
Derivatives of Securities
related to Trading
Transactions

2017

2016

2017

26,38533,228

235

6

11

0

6

1

0

Trading-Related
Financial Derivatives

47,64562,882424

Other Trading Assets

158,044

178,028

1,408

Total

232,088274,153

2,068

4. Securities:
The details of Securities as of March 31, 2017 and 2016 are as
follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2016
2017
Japanese Government
7,908,654 9,855,041
70,493
Bonds
Municipal Government
586,126
358,089
5,224
Bonds
Short-term Corporate
－
－
－
Bonds
3,570,547 2,942,390
31,825
Corporate Bonds
Stocks64,84065,773577

Others5,034,256

4,587,305

44,872

Total

17,164,425 17,808,601

152,994

Notes:
1. Stocks include investments in affiliated companies totaling ¥189
million ($1 million) as of March 31, 2017 and 2016.
2. Others include common shares and investment in unconsolidated
subsidiaries totaling ¥7,859 million ($70 million) as of March 31,2017 and ¥8,418 million as of March 31, 2016. Others also include
preferred shares issued by Shinkin Banks which were contributedin accordance with the Shinkin Bank Management Reinforcement
System. The amount was ¥215,090 million ($1,917 million) as ofMarch 31, 2017 and ¥231,880 million as of March 31, 2016,
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
2017

2016

2017

Loans to Bankrupt
Borrowers

106

135

0

Delinquent Loans

10,954

5,517

97

9

24

0

Restructured Loans

30,67230,912273

Total

41,74336,590372

Loans Past Due Three
Months or More

The above amounts are the amounts before exclusion of reserves forpossible loan losses.
Loans to Bankrupt Borrowers represent non-accrual loans toborrowers who are legally bankrupt as defined in Article 96,
Paragraph 1, Item 3 (a)-(e) or Item 4 of the “Order for Enforcement of
the Corporation Tax Act” (Cabinet Order No. 97 of 1965).
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, the extensionof maturity dates, and the renunciation of claims in order to assist or
facilitate the business restructuring of borrowers under financial
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 ¥20,300 million ($180 million) as of March 31, 2017 and¥37,100 million as of March 31, 2016, respectively. Of these amounts,¥5,800 million ($51 million) as of March 31, 2017, and ¥17,800
million as of March 31, 2016, respectively, were provided to Shinkin
Banks in accordance with the Shinkin Bank Management
Reinforcement System.
Bills Discounted are accounted for as financial transactions inaccordance with JICPA Industry Audit Committee Report No. 24,
February 13, 2002 “Accounting and Auditing Treatment of
Accounting Standards for Financial Instruments in Banking Industry”.
The face value of bills of lading amounted to ¥265 million ($2million) as of March 31, 2017 and ¥258 million as of March 31, 2016,
respectively. The Bank has the right to freely dispose of, sell or
re-collateralize such bills.
With respect to loan participation, in accordance with
“Accounting and Presentation of Loan Participation” (JICPA
Accounting Committee Report No. 3, November 28, 2014), theamount of the participation principal is accounted for as a loan to theoriginal debtor, and this amounted to ¥31,632 million ($281 million)
as of March 31, 2017 and ¥32,432 million as of March 31, 2016.

6. Commitments to Overdrafts and Loans:
Commitments related to overdrafts and loans represent agreements toextend overdrafts or loans up to a pre-agreed amount at thecustomer’s request as long as there is no violation of the conditions
stipulated in commitment agreements.
The amount of unused commitment lines does not necessarily
have a significant effect on the future cash flows of the Bank because
most of these commitment lines are terminated without being
exercised. Most of these agreements have provisions which stipulatethat the Bank may not extend the loan or may decrease thecommitment when there are certain changes in the financial
conditions, certain issues relating to collateral and other reasons. The
Bank limits the commitment line to an amount below the amount of
the related customer’s time deposit. The Bank periodically checks thefinancial condition of its customers based on its internal rules andperforms certain actions to secure loans or revises the contracts, asnecessary.
The amounts of unused commitment lines under suchagreements are ¥22,390,249 million ($199,574 million) as of March
31, 2017 and ¥20,861,883 million as of March 31, 2016, 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 ¥22,311,810 million ($198,875 million) as of March 31,2017 and ¥20,780,913 million as of March 31, 2016, 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 ¥163,059 million ($1,453 million) as of March 31, 2017 and¥105,845 million as of March 31, 2016.
Of cash-collateralized securities borrowings, those freely
disposable for sale or re-collateralized, and pledged as collateralamounted to ¥402 million ($3 million) as of March 31, 2017. Those
held by the Bank without being disposed of as of March 31, 2017
amounted to ¥102,572 million ($914 million) and as of March 31,
2016 amounted to ¥141,541 million.

8.

Tangible Fixed Assets:
Millions of Yen
2017
2016

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
2017

91,87787,907

818

1,764

1,764

15

(－)

(－)

(－)

9. Assets Pledged as Collateral and Associated Liabilities:
Assets pledged as collateral for the fiscal years ended March 31, 2017and 2016 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2016
2017
Assets Pledged as Collateral
Trading Assets

7,894

9,331

70

2,692,973

2,758,030

24,003Loans and Bills Discounted 3,070,482

2,876,152

27,368

Total

5,771,350

5,643,514

51,442598,200

115,500

5,332

63,804

1,679

1,414,550

14,319Securities

Liabilities associated with
Assets Pledged as Collateral
Borrowed Money

Payables under Repurchase
188,402
Agreements
Payables under Securities
1,606,555
Lending Transactions

Trading Assets of ¥504 million ($4 million) as of March 31, 2017 and¥506 million as of March 31, 2016 and Securities in the amount of¥616,693 million ($5,496 million) as of March 31, 2017 and¥1,140,646 million as of March 31, 2016, respectively, were secured
as collateral for exchange settlement transactions, etc. or as substitutefor margin money in futures transactions, etc.
Other assets include guarantee money, cash collateral paid forfinancial instruments and security deposits for exchange transaction.
The amounts are as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
Guarantee money
Cash collateral paid
for financial
instruments
Security deposits
for exchangetransaction

2016

2017

397

399

3

212,247

6,146

1,891

167,918－

1,496

10. Trading Liabilities:
The details of Trading Liabilities as of March 31, 2017 and 2016 are
as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2016
2017
Trading Bonds Sold

7,930

18,43870

Trading-Related Financial
Derivatives

76,414

111,022

681

Total

84,345

129,461751

35

11. Borrowed Money and Lease Obligations:
Balance as of
Category
April 1, 2016
(Millions of Yen)
829,320
Borrowings

Balance as ofMarch 31, 2017
(Millions of Yen)
1,203,870

829,320

1,203,870

10,730

0.59

1,458

1,171

10

1.82

－

1,743

1,171

10

1.59

May 2018Dec. 2022

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

Balance as of
Average
March 31, 2017
Interest Rate (%)(Millions of U.S. Dollars)
10,7300.59

Maturity－
July 2017No maturity

Notes:
1. Average interest rates were computed by the weighted average method using the interest rates and the balances at the fiscal year-end.
2. The repayment schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Over 4 years,
Within 1 year
within 2 years
within 3 years
within 4 years
within 5 years
130,200
468,000－－－
Borrowed Money
1,171
611
296
123
120
Lease Obligations

Within 1 year

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

Over 4 years,
within 5 years

1,160
4,171
－
－
－
Borrowed Money
10
5
2
1
1
Lease Obligations
3. Borrowed Money includes subordinated borrowings of ¥605,670 million ($5,398 million) as of March 31, 2017 and ¥713,820 million as ofMarch 31, 2016, respectively.

12. Debentures:
IssuerThe Bank

The Bank

The Bank
Total

Name of Issue

No.257-328
5-yearInterest-bearing
debentures
No.2
7-yearInterest-bearing
debentures
No.2
10-yearInterest-bearing
debentures－

Balance as of Balance as of Balance as ofApril 1,March 31,
March 31,
2016
2017
2017
(Millions of (Millions of (Millions of
Yen)
Yen)
U.S. Dollars)Interest
Rate (%)

Collateral

Redemption
Date

Apr. 2011Mar. 2017

3,022,920

2,920,000

26,0270.010.70－

Apr. 2016Mar. 2022

Sep. 25, 2015

10,00010,000

89

0.29

－

Sep. 27, 2022

Sep. 25, 2015

20,00020,000

178

0.52

－

Sep. 26, 2025－

3,052,920

2,950,000

26,294

－

－

－

Note:
The redemption schedule within 5 years after the balance sheet date is as follows:
Millions of Yen
Over 1 year,
Over 2 years,
Over 3 years,
Within 1 year
within 2 years
within 3 years
within 4 years
579,460
627,610
638,530
598,260

Over 4 years,
within 5 years
476,140

Millions of U.S. Dollars
Over 2 years,
Over 3 years,
within 3 years
within 4 years
5,691
5,332

Over 4 years,
within 5 years
4,244

Within 1 year
5,164

36

Issuance Date

Over 1 year,
within 2 years
5,594

13. Asset Retirement Obligations:
The details of Asset Retirement Obligations were omitted because theamount was one-hundredth or less of the total balance of Liabilities
and Net Assets as of April 1, 2016 and as of March 31, 2017,
respectively.

17. Trading Income:The details of Trading Income for the fiscal years ended March 31,2017 and 2016 are as follows:
Millions ofMillions of Yen
U.S. Dollars

14. Land Revaluation:
Based on the “Act on the Revaluation of Land” (Act No. 34,
promulgated on March 31, 1998), land used for business was revalued.
Deferred tax on the revaluation of the land was recorded as “Deferred
Tax Liabilities for Land Revaluation” under Liabilities, and unrealized
gain on the revaluation of the land, net of deferred tax, was recorded as“Land Revaluation Excess” under Net Assets.

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

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

18. Other Income:The details of Other Income for the fiscal years ended March 31, 2017and 2016 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2016
2017
Gains on sale of stocks and other
9,312
6,554
83
securities
Others786
48
7
10,099
6,603
90
Total

2017

15. Trusts with contracts:
The details of principal amounts of trusts with contracts forcompensation of principal for the fiscal years ended March 31, 2017and 2016 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2017
2016
Money Trust
0
74
－

2016

2017

522

501

4

53

129

0

4,638

11,785

41

46
5,260

138
12,555046

19. Other Expenses:
The details of Other Expenses for the fiscal years ended March 31,2017 and 2016 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2016
2017
Losses on sale of stocks and
2,719
1,158
24
other securities
Others

39

3,048

0

Total

2,759

4,207

24

16. Fees and Commissions:
The details of Fees and Commissions for the fiscal years ended March
31, 2017 and 2016 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2017
2016
2017
Deposit, Fixed Income
400
376
3
Securities and Lending
429
433
3
Exchange Business
9,004
7,988
80
Securities Related Business
2,225
2,263
19
Agency Business
9,569
8,793
85
Guarantee Business
20,546 19,448
183
Trustee Business
509
595
4
OthersIncome on Fees and42,685 39,897
380
Commissions Businesses
243
245
2
Exchange
14,540 14,004
129
OthersExpenses on Fees and
14,784 14,249
131
Commissions Businesses

3720. Consolidated Statement of Comprehensive Income:For the fiscal year ended March 31, 2017 and 2016
Reclassification adjustment amount and tax effect amount related to Other Comprehensive Income
Millions ofMillions of Yen
2017

U.S. Dollars
2016

2017

Net Unrealized Gains (Losses) on Other Securities:
The Amount Arising during the Period(157,528)

70,878

Reclassification Adjustment Amount(21,603)(17,880)(192)

Prior to Tax Effect Adjustment(179,132)

52,998(1,596)Tax Effect Amount(1,404)

50,118(15,143)446(129,013)

37,854(1,149)The Amount Arising during the Period

64,629(150,746)

576

Reclassification Adjustment Amount

68,77675,280613

Prior to Tax Effect Adjustment

133,405(75,465)

1,189

Tax Effect Amount(37,260)

21,093(332)

Net Deferred Gains (Losses) on Hedging Instruments

96,145(54,372)

856

The Amount Arising during the Period

－

－

－

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Tax Effect Amount

－

(2)

－

Land Revaluation Excess

－

(2)

－

The Amount Arising during the Period(1,593)

(368)

(14)

Reclassification Adjustment Amount

－

－

－

Prior to Tax Effect Adjustment

－

－

－

Net Unrealized Gains (Losses) on Other Securities
Net Deferred Gains (Losses) on Hedging Instruments :Land Revaluation Excess:Foreign Currency Translation Adjustments:

Tax Effect Amount

－

－

－

(1,593)

(368)

(14)

The Amount Arising during the Period(601)(12,200)(5)

Reclassification Adjustment Amount

1,951

632

17

Prior to Tax Effect Adjustment

1,349(11,568)

12

Tax Effect Amount

(385)

3,335

(3)

Foreign Currency Translation Adjustments
Remeasurements of Defined Benefit Plans:38

Remeasurements of Defined Benefit Plans

963(8,232)

8

Other Comprehensive Income(33,497)(25,121)(298)

21. Changes in Net Assets:(1) Class and Number of Shares Outstanding, and Class and Number of Shares of Treasury Shares
Number of Share Units at
Number of Share Units at
Increase During the Fiscal Decrease During the Fiscal
March 31, 2017
April 1, 2016 (Thousand
Year (Thousand Units)
Year (Thousand Units)(Thousand Units)
Units)
Shares Outstanding
General Common Shares

4,000

－

－

4,000

Specific Common Shares

2,000

－

－

2,000

Preferred Shares (Type-A)

708

－

－

708

6,708

－

－

6,708

General Common Shares

－

－

－

－

Specific Common Shares

－

－

－

－

Preferred Shares (Type-A)

－

－

－

－

－

－

－

－

Amount Per Share(Yen)

Record Date

Effective Date

Total
Treasury Shares

Total(2) Dividends
Dividends paid during the fiscal year ended March 31, 2017
Resolution

Annual General Meeting of
Shareholders, June 24, 2016

Class of share

Total Dividend
Amount (Million Yen)

GeneralCommon shares

12,0003,000

March 31, 2016

June 24, 2016

Specific Commonshares

1,512

1,500

March 31, 2016

June 24, 2016

Preferred shares(Type-A)

4,603

6,500

March 31, 2016

June 24, 2016

Note:
The total dividend amount for the specific common shares is calculated on a per-diem basis from the date of payment (September 30, 2015) tothe fiscal year-end (March 31, 2016).
Among the dividends whose record date falls within the fiscal year ended March 31, 2017, those whose effective date will fall within thefollowing fiscal year:
Resolution

Annual General Meeting of
Shareholders, June 21, 2017Class of share

Total Dividend
Amount (Million Yen)

Resource ofDividends

Amount Per Share(Yen)

Record Date

Effective Date

GeneralCommon shares

12,000Retained Earnings

3,000

March 31, 2017 June 21, 2017

Specific
Common shares

3,000

Retained Earnings

1,500

March 31, 2017 June 21, 2017

Preferred shares(Type-A)

4,603

Retained Earnings

6,500

March 31, 2017 June 21, 201739

22. Income Taxes:(1) Breakdown of Deferred Tax Assets and Liabilities is as follows:
Millions ofMillions of Yen
U.S. Dollars
2017

2016

2017

Depreciation

3,006

3,142

26

Reserve for Possible Loan
Losses

5,272

6,596

46

Net Defined Benefit Liability

11,997

11,673106

Write-Downs for Securities

3,513

4,531

31

Net Deferred Losses on
Hedging Instruments

28,17665,436251

Tax Loss Carryforwards

9

15

0

Others

2,785

3,022

24

Valuation Allowances(2,510)(8,484)(22)

Total Deferred Tax Assets

52,25085,933465(134,325) (184,443)(1,197)

Deferred Tax Assets:

Deferred Tax Liabilities:
Net Unrealized Gains on Other
Securities
Others

(416)

(406)

(3)

Total Deferred Tax Liabilities(134,741) (184,850)(1,201)Net Deferred
Tax Liabilities(82,491)(98,916)(735)(2) Reconciliation between the effective statutory tax rate and theactual effective tax rate for the fiscal years ended March 31, 2017 and2016:

Statutory effective tax rate

2017

2016

27.92 %

－ %(Adjustments)
Change in Valuation Allowances(11.30%)－ %Dividends received, not taxable(1.46%)－ %Others

0.46 %－ %Actual effective income tax rate after
the application of tax effect accounting

15.62 %－ %Note:
In the previous fiscal year, since the difference between the statutory
effective tax rate and the actual effective income tax rate after theapplication of tax effect accounting was less than 5% of the statutory
effective tax rate, notes on this are omitted.

40(3) Amendments to the amounts of deferred tax assets and deferred
tax liabilities owing to the changes in corporate tax rates
The “Act for Partial Amendment of the Act for Partial Amendment of
the Consumption Tax Act and Others to Make Fundamental Reformof the Taxation System for Securing Stable Financial Resources forSocial Security, etc.” (Act No. 85 of 2016) and the “Act for Partial
Amendment of the Act for Partial Amendment of the Local Tax Act
and the Local Allocation Tax Act to Make Fundamental Reform of theTaxation System for Securing Stable Financial Resources for Social
Security, etc.” (Act No. 86 of 2016) were enacted on November 18,
2016. As a result, the effective statutory tax rate used to measure theBank’s deferred tax assets and liabilities, relating to the temporary
differences expected to be realized or settled in the period from thefiscal year beginning April 1, 2017, to the fiscal year beginning April
1, 2019, was changed from 27.93% to 27.92%.
There is no significant impact on the consolidated financial
statements as a result of this change of tax rate.

23. Retirement Benefit Plans:(1) Retirement Benefit Scheme
The Bank and some of its consolidated domestic subsidiaries have adefined benefit plan that offers lump-sum payments upon retirement
and contributes to the Employees’ Pension Fund for all shinkin banks
nationwide.
With regard to notes related to employees’ retirement benefits
based on a multiple-employer plan, they are included in notes related
to employees’ retirement benefits based on a defined benefit plan.
(2) Defined Benefit Plan as of March 31, 2017 and 2016 is as follows:(i) Reconciliation of beginning- and end-of-period balance ofRetirement Benefit Obligation
Millions ofMillions of Yen
U.S. Dollars
2017

2016

Retirement Benefit
Obligation at Beginningof Period

61,72649,307550

Service Cost

2,922

2,257

26

Interest Cost

238

690

2

Actuarial Difference
Incurred

233

10,8792(1,667)(1,408)(14)

Prior Service Cost

－

－

－

Other

－

－

－

63,45461,726565

Retirement Benefits Paid

Retirement Benefit
Obligation at End of
Period2017

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

2017

2016

21,307

21,400

189

426

642

3

(367)

(1,321)

(3)

1,478

1,452

13

(914)

(867)

(8)

－

－

－

21,92921,307

195

Other
Balance of Pension Plan
Assets at End of Period

2017(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
2017

2016

Funded Plan Retirement
Benefit Obligation

52,23550,687465

Pension Plan Assets(21,929)(21,307)(195)

30,30529,379270

11,218

11,03999

41,52440,419370

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

2017

Millions of
U.S. Dollars

Millions of Yen
2017

2016

41,52440,419370

Net Defined Benefit Asset

－

－

－

Net Amount of Liabilities
and Assets Presented on
the Consolidated Balance
Sheets41,52440,419370

Net Defined Benefit
Liability

2017(iv) Breakdown of Retirement Benefit Expense

Millions of
U.S. Dollars

Millions of Yen
2017

2016

2017

Service Cost

2,922

2,257

26

Interest Cost

238

690

2

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

(426)

(642)

(3)

1,951

628

17

－

4

－

Other

(544)

(533)

(4)

Retirement Benefit
Expenses Related toDefined Benefit Plan

4,141

2,405

36

Note:
Other includes the employee contribution amount to the Employees’
Pension Fund.
(v) Remeasurements of Defined Benefit Plan
Remeasurements of Defined Benefit Plan (before tax effects)
comprise the following.
Millions ofMillions of Yen
U.S. Dollars
2017

2016

2017

Prior Service Cost

－

4

－

Actuarial Differences

1,349(11,572)

12

Other

－

－

－

Total

1,349

(11,568)12(vi) Accumulated Remeasurements of Defined Benefit Plan
Accumulated Remeasurements of Defined Benefit Plan (before tax
effects) comprise the following.
Millions ofMillions of Yen
U.S. Dollars
2017
UnrecognizedPrior Service Cost
Unrecognized
Actuarial Differences

2016

2017

－

－

－

14,143

15,493

126

Other

－

－

－

Total

14,143

15,493126

41

(vii) Pension Plan Assets(a) The ratios by main asset categories in total pension plan assets are
as follows:
2017
2016
Bonds

66 %

67 %

Stocks26 %24 %Cash and Deposits

6%

7%

Other

2%

2%

Total

100 %

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 and thecurrent and future expected rate of return on the diverse range ofassets that makes up the pension assets.
(viii) Underlying actuarial assumptions
Main underlying actuarial assumptions as of March 31, 2017 and2016, are as follows:

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

2017

2016

0.0～0.6 %0.0～0.6 %

2.0 %

3.0 %

0.0～7.4 %0.0～7.4 %24. Leases:
1. Finance Leases(1) Finance leases that do not transfer ownership(i) Outline of lease assets(a) Tangible fixed assets
Hardware related to computer equipment(b) Intangible fixed assets
Software related to computer equipment(ii) Lease asset depreciation method
Depreciation method is described in the “Significant Accounting
Policies”.
(2) Finance leases that do not transfer ownership accounted for inaccordance with the ordinary lease transaction method
Data omitted due to immateriality.

2. Operating Leases
Future lease payments related to non-cancelable operating leases: Not
applicable42

25. Financial Instruments:
1. Matters concerning financial instruments(1) Policies on financial instruments
Shinkin Central Bank Group (the “Group”) works to ensure the stableprocurement of funds through the acceptance of deposits mainly fromits Shinkin Bank members and through the issuance of debentures.
Additionally, the Group takes steps to diversify its funding methods
by procuring funds from short-term money markets depending onmarket conditions.
Procured funds are invested in short-term money market
instruments, marketable securities, and loans.
Moreover, the Group uses derivative transactions for the
purpose of risk-hedging in ALM (asset liability management)
activities and engages in short-term trading of securities andderivatives.
To appropriately manage the various risks that result from thesefinancial instruments, the Group engages in ALM activities including
the above-mentioned derivative transactions. For its trading activities,
the Group establishes risk limit and loss limit amounts and engages intransactions within the scopes of these risk limits, as a way topreserve a sound management and to ensure stable earnings.
(2) Types and related risks of financial instruments
Financial assets held by the Group consist mainly of short-term funds,
securities, and loans assets.
Short-term funds are invested in the call loan and euro-yen
deposits.
These investments are exposed to market risks such as thecounterparty credit risk, interest rate risk, and foreign currency risk.
Securities portfolios of the Group consist of domestic securities
including Japanese government bonds (JGBs), corporate bonds andother bonds as well as foreign securities such as government bonds,
government-guaranteed bonds, and agency bonds issued in the majorindustrialized countries. The Group also invests in equity securities
and investment funds to diversify its portfolio.
These investments are exposed to market risks such as theindividual issuers’ credit risk, interest rate risk, price fluctuation risk,
and foreign currency risk, and market liquidity risk.
Loans assets consist of direct loans to low-risk borrowers
including Shinkin Banks, central and local governments, public
service corporations, good standing domestic and overseas companies,
and agency loans provided through Shinkin Banks.
These loans are exposed to market risks such as counterparty
credit risk, interest rate risk, and foreign currency risk.
Meanwhile, financial liabilities of the Group consist mainly of
deposits and debentures.
Deposits include current deposits, ordinary deposits, deposits at
notice, term deposits, and foreign currency-denominated deposits,
most of which are deposits from Shinkin Bank members.
These deposits are exposed to market risks such as interest raterisk and foreign currency risk, and liquidity risk.
As a debenture issuer, the Group issues interest-bearing
debentures.
These debentures are exposed to interest rate risk and liquidity
risk.
Furthermore, the Group engages in derivative transactions.
Specifically, the Group trades interest rate derivatives (interest
swaps, interest futures, and interest options), currency derivatives(foreign currency forwards and currency swaps) and bond derivatives(bond futures and bond futures options).
These transactions are exposed to market risks such ascounterparty credit risk, interest rate risk, and foreign currency risk.
The Bank hedges market risks of its financial assets andliabilities through ALM activities.
The Group partially avoids exposure to market risks by
mitigating (i) interest rate risk through interest rate swaps and(ii) foreign currency risk of foreign currency-denominated assets
through foreign currency-denominated fund procurement, currency
swaps, and forex swaps.
Hedge accounting is applied to risk hedges through ALM
activities including the use of derivatives. With regard to hedge
accounting, hedged items, hedging methods, policies, and methods ofhedge effectiveness assessment, etc. are described in the “Significant
Accounting Policies.”(3) Risk management frameworks of financial instruments
The basic policies for risk management of the Bank are broadly
divided into “risks to be minimized” and “risks to be controlled”.
Credit risk, market risks, and liquidity risks fall into the latter
category. Both categorized risks are managed by risk management
divisions that are independent of the client service divisions. The
Risk Management Division comprehensively manages these risks.
<Integrated risk management>
For the integrated management of risks, the Bank has introduced
integrated risk management for quantifiable risks. Integrated risk
management is a risk management method of measuring various risks
using a uniform risk measure such as Value at Risk (VaR),
aggregating the measurements, and comparing the aggregatedamounts with the Bank’s capital. The Bank measures credit risks andmarket risks using VaR methodology, and monitors this 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 are measured weekly by the Risk
Management Division, which takes steps to prevent any of thevarious risk limits from being breached, and through the Risk
Management Committee, reports regularly to the management andrelevant divisions.
The values of risk at consolidated subsidiaries are aggregatedand managed through the integrated risk management framework.
(i) Credit risk management
For the accurate identification and strict management of credit risk,
the Bank has established credit risk management policies. Moreover,the Bank has created a structure in which divisions responsible for
credit control, credit management and credit assessment are clearly
segregated from divisions involved in client services, with mutuallyindependent tasks to ensure effective internal checking functions.
The Bank established the Credit Committee and the Risk
Management Committee, comprised of senior management and headsof divisions related to credit risk, as bodies to deliberate and makedecisions on matters relating to credit risk management. The Credit
Committee deliberates on credit transactions that exceed the credit
limit, while the Risk Management Committee deliberates on theestablishment and the review of policies regarding credit
management. The Executive Committee deliberates and makes

43

decisions on matters related to asset self-assessments including theresults of asset self-assessments, asset write-offs and asset reserve
provisions.
Divisions responsible for credit control manage the credit riskfor each borrower relating to loans and market trading activities. An
overall credit limit is set for each borrower according to the credit
rating of the borrower. These divisions analyze the Bank’s overall
credit portfolio according to credit rating, industry, country 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, these divisions
continually check whether the client service divisions are conducting
appropriate credit control, and provide guidance as necessary.
Divisions responsible for credit assessment undertake andmanage operations relating to asset self-assessments, and thecalculation of asset write-offs and asset reserve provisions.
Credit risks of consolidated subsidiaries are added to the credit
risk of the Bank by each borrower and monitored.
(ii) Market risk management
To maintain an accurate understanding of market risk and rigorously
manage this risk, the Bank has issued a market risk management
policy. Furthermore, divisions responsible for market risk
management are clearly separated from divisions involved in market
operations, providing a risk management structure in which internal
checks are maintained through independent functions.
The Bank has established the ALM Committee as the body
responsible for deliberating and making decisions on matters relating
to market risk management. The ALM Committee is comprised ofsenior management and heads of divisions related to market risk.
Based on risk status information—obtained via reports from divisions
responsible for market risk management and other sources—the ALM
Committee deliberates broadly and in a timely manner ALM related
policies and market transactions including the Bank’s fund-raisingand management as well as the usage of hedging transactions
involving derivatives such as interest rate swaps.
Divisions responsible for market risk management quantify andmanage market risk mainly by VaR within the limit set by the
Executive Committee. In addition, market risk is classified into
several categories, and the amount of risk for each category ismonitored. Market risk management at the Bank not only uses VaR
methodology but takes multi-faceted approaches, that is, monitoring
sensitivity to change in individual risk factors such as the interest raterisk based on outlier standard and the basis point value (BPV: theamount of the change in a portfolio’s market value from a specificchange in the interest rate), stress loss amounts from unexpectedmarket changes, and appraisal losses from financial instruments. For
stress loss amounts, in particular, a supplementary framework has
been incorporated into the integrated risk management, in addition to
the above monitoring system. In this way, market risks including
those that cannot be captured through VaR methods alone aremanaged.

44

Moreover, for trading operations, clear regulations are in placeconcerning the trading instruments and trading management methods,
enabling appropriate trading operations by setting a specific loss limit
amount.
Market risks of consolidated subsidiaries are not directly added
to the values of market risk of the Bank but are managed separately
under integrated risk management.
<Quantitative information on market risk>(a) Financial instruments held for trading purposes
The Bank uses VaR analysis for quantifying market risk of trading
securities held within securities and interest-rate andforeign-exchange instruments held for trading purposes withinderivative transactions. The VaR model is based on the delta method
and uses a 99.0% confidence interval, a holding period of fivebusiness days and an observation period of one year. In addition, withregard to market risk related to trading operations at consolidated
subsidiaries, which is managed separately within the integrated risk
management framework, the Bank uses a market risk-equivalentamount under the regulations on banks’ capital ratio.
The market risk amount (estimated loss amount) of the Bank’s
trading operations was ¥100 million ($0 million) as of March 31,2017 and ¥193 million as of March 31, 2016 and the market risk
amount (estimated loss amount) of the trading operations of theBank’s consolidated subsidiaries was ¥548 million ($4 million) as ofMarch 31, 2017 and ¥516 million as of March 31, 2016.
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, 2017, theactual loss amount exceeded the VaR model on one occasion, and the
Bank believes that the measurement model it uses has an adequatelevel of accuracy to capture market risk. However, it should be notedthat VaR measures the amount of market risk at certain probability
levels statistically calculated based on historical market fluctuation.
Hence, there may be cases where market risk cannot be captured insituations where market conditions change unprecedentedly.
(b) Financial instruments other than those held for trading purposes
The Bank uses VaR analysis for quantifying market risk of due frombanks, securities not held for trading purposes, loans and bills
discounted, deposits, debentures, payables under securities lendingtransactions and, within derivative transactions, interest-rate andforeign-exchange instruments not held for trading purposes. The VaRmodel is based on the delta method and uses a 99.0% confidence
interval, a holding period of one year and an observation period offive years. In addition, with regard to market risk at consolidated
subsidiaries related to operations other than trading operations, which
is managed separately within the integrated risk management
framework, such risk is calculated in accordance with methods usedby the Bank.
The Group’s market risk amount (estimated loss amount) otherthan for trading purposes was ¥284,122 million ($2,532 million) as ofMarch 31, 2017 and ¥266,515 million as of March 31, 2016. The
Bank conducts back testing to compare VaR calculated using themodel with actual loss amounts, and believes that the measurement
model it uses has an adequate level of accuracy to capture market risk.
However, it should be noted that VaR measures the 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 of liquidity
risk, the Bank has established liquidity risk management policies.
Divisions responsible for liquidity risk management are clearly
separated from divisions involved in cash management and market
operations, allowing internal checks to be maintained through theindependent functions. In addition, the ALM Committee deliberates
and makes decisions on matters relating to liquidity risk management.
Methods used for managing liquidity risk include the setting
and daily monitoring of risk limit amounts relating to the gap
between cash receipts and payments. This is carried out for individual
currencies and periods. In the event that a significant liquidity riskarises, the Bank has preparations to respond rapidly, including thesecuring of funding sources.
The liquidity risk management frameworks created by the Bank
include subsidiaries as well, by providing overdraft facilities forconsolidated subsidiaries with operations involving fund movements
in relatively large amounts.
(4) Supplementary explanation concerning the fair values of financial
instruments
Fair values of financial instruments, in addition to values based onmarket prices, also include values based on reasonable estimates ifmarket prices are unavailable. Since value estimates are predicated on
certain assumptions, values may vary if the underlying assumptions
change.

45

2. Matters concerning fair value and others of financial instruments
Carrying values stated on the consolidated balance sheet, fair value and differences between them are as follows. Unlisted stocks and similar
items with significant difficulty in determining fair value are not included in the table below. (See Note 2.)
Immaterial items have been omitted.
As of March 31, 2017
Millions of Yen
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

10,611,955

10,611,958

2(2) Bills Bought and Call Loans

362,234

362,234－(3) Receivables under Resale Agreements

19,99919,999－(4) Receivables under Securities Borrowing Transactions

86,206

86,206－(5) Monetary Debts Purchased (*1)

180,476

180,4771

Trading Securities

184,425

184,425－(7) Money Held in Trust

－

－

－

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

1,282,771

1,390,011

107,240

Other Securities

15,647,543

15,647,543－

7,953,722

8,003,992

50,270Total Assets

36,329,335

36,486,850

157,514(1) Deposits

29,150,114

29,157,033

6,919(2) Debentures

2,950,000

2,961,148

11,148

7,930

7,930

－

(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

7,995,391(41,669)(3) Trading Liabilities
Trading Bonds Sold

1,203,870

1,218,813

14,943(5) Bills Sold and Call Money(4) Borrowed Money27,821

27,821－(6) Payables under Repurchase Agreements

188,402

188,402－(7) Payables under Securities Lending Transactions

1,606,958

1,606,958－

Total Liabilities

35,135,098

35,168,110

33,011(9,903)(9,903)－(105,183)(182,129)(76,944)(115,089)(192,033)(76,944)

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

46

Millions of U.S. Dollars
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

94,58994,5890(2) Bills Bought and Call Loans

3,228

3,228

－

(3) Receivables under Resale Agreements

178

178

－

(4) Receivables under Securities Borrowing Transactions

768

768

－

1,608

1,608

0

Trading Securities

1,643

1,643

－

(7) Money Held in Trust

－

－

－

(5) Monetary Debts Purchased (*1)
(6) Trading Assets(8) Securities
Held-to-Maturity Debt Securities

11,433

12,389955

Other Securities

139,473

139,473－

70,89571,343448

Total Assets

323,819

325,2231,404(1) Deposits

259,828

259,88961(2) Debentures

26,294

26,394

99

70

70

－

10,73010,863

133

247

247

－

1,679

1,679

－

(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

71,266(371)(3) Trading Liabilities
Trading Bonds Sold
(4) Borrowed Money(5) Bills Sold and Call Money(6) Payables under Repurchase Agreements(7) Payables under Securities Lending Transactions

14,323

14,323－

Total Liabilities

313,174

313,469294

To which Hedge Accounting is not applied

(88)

(88)

－

To which Hedge Accounting is applied(937)(1,623)(685)(1,025)(1,711)(685)

Derivatives (*2)

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

47

As of March 31, 2016
Millions of Yen
Carrying Value

Fair Value

Difference(1) Cash and Due from Banks

9,113,465

9,113,466

0(2) Bills Bought and Call Loans

339,088

339,088－(3) Receivables under Resale Agreements

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

120,541

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

177,688

177,6891

Trading Securities

211,257

211,257－(7) Money Held in Trust

72,826

72,826－(6) Trading Assets(8) Securities
Held-to-Maturity Debt Securities

1,693,329

1,832,724

139,394

Other Securities

15,865,459

15,865,459－

6,723,661

6,792,741

69,080Total Assets

34,332,319

34,540,794

208,475(1) Deposits

27,214,026

27,228,590

14,563(2) Debentures

3,052,920

3,068,397

15,477

18,43818,438－(9) Loans and Bills Discounted
Reserve for Possible Loan Losses (*1)

6,763,824(40,163)(3) Trading Liabilities
Trading Bonds Sold
(4) Borrowed Money829,320854,428

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

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

1,414,550

1,414,550－

Total Liabilities

32,647,457

32,702,607

55,150To which Hedge Accounting is not applied(12,743)(12,743)－

To which Hedge Accounting is applied(217,685)(310,840)(93,154)(230,429)(323,584)(93,154)

Derivatives (*2)

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

48

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

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

2017

Millions of U.S. Dollars
2016

2017

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

221,263

237,355

1,972

Investment in investment partnerships (*3)

12,847

12,456

114

Total

234,110249,8122,086*1. Unlisted stocks, etc. means unlisted common shares and preferred shares held by the Bank. Since unlisted stocks, etc. have no market prices
and therefore are with significant difficulty in determining fair value, unlisted stocks, etc. are not included in fair value disclosure
information.
*2. In the fiscal year ended March 31, 2016, the Bank recognized impairment losses totaling ¥72 million on unlisted stocks.
*3. Investment in investment partnerships is not included in fair value disclosure information given that investment partnership assets include
items such as unlisted stocks, etc., which are with significant difficulty in determining fair value.
Note 3: Amounts of monetary claims and securities with maturities scheduled for redemption after the consolidated balance sheet date
As of March 31, 2017
Millions of Yen

50

Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

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

10,276,129
362,234
19,999189,828－－

128,365
－
－

3,000
－
－

－
－
－

－
－
－

86,206

－

－

－

－

－

4,372

3,484

29,127

8,612

13,536

121,337

335,802335,000－－－
1,201,366
758,100
33,941－
292,010
5,052,955

456,146
455,000－－－
3,310,618
1,667,500
105,878－
1,216,067
1,224,590

28,033－－－－3,301,651
1,788,800
181,497－
868,809808,273

23,8107,000－－－
2,326,634
1,096,500
47,954－562,433
346,239

176,294
170,000－－－
1,844,333
622,000
205,846－
479,104
392,124

265,000
265,000－－－
982,777444,000－－
80,404
162,417

Total

17,339,067

5,184,668

4,295,452

2,708,297

2,426,289

1,531,532

Millions of U.S. Dollars

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

Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

Over 7 years,
within 10 years

Over 10 years

91,595
3,228
178

1,692
－
－

1,144
－
－

26
－
－

－
－
－

－
－
－

768

－

－

－

－

－

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)

38

31

259

76

120

1,081

2,993
2,986
－
－
－
10,708
6,757
302
－
2,602
45,039

4,065
4,055
－
－
－
29,50914,863
943－
10,83910,915249－－－－
29,42915,944
1,617
－
7,744
7,204

212
62
－
－
－
20,738
9,773
427
－
5,013
3,086

1,571
1,515
－
－
－
16,439
5,544
1,834
－
4,270
3,495

2,362
2,362
－
－
－
8,759
3,957
－
－
716
1,447

Total

154,550

46,21338,287

24,14021,626

13,651*1. Current deposits, ordinary deposits, deposits at notice, and transfer deposits, included in “Due from banks,” are stated under amounts
redeemable “Within 1 year.”*2. The loans of ¥8,558 million ($76 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, 2016
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

8,833,829
339,088
14,99979,538－－

171,380－－

13,000
－
－

－
－
－

－
－
－

120,541

－

－

－

－

－

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)

11,492

5,445

14,868

6,993

13,439124,699

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

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

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

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

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

Total

16,167,448

4,663,378

3,732,342

3,408,525

2,025,885

1,699,776*1. Current deposits, ordinary deposits, deposits at notice, and transfer deposits, included in “Due from banks,” are stated under amounts
redeemable “Within 1 year.”*2. The loans of ¥5,481 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.

51

Note 4: Amounts of deposits, debentures and other interest bearing debt scheduled for repayment after the consolidated balance sheet date
As of March 31, 2017
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)

16,660,118

11,356,601

319,669

11,298802,427－

Debentures

579,460

1,266,140

1,074,400

10,00020,000－Borrowed Money (*2)

130,200－

468,000

216,200－

162,480

Bills Sold and Call Money27,821

－

－

－

－

－

Payables under Repurchase Agreements

188,402

－

－

－

－

－

Payables under Securities Lending
Transactions

1,606,958

－

－

－

－

－

Total

19,192,961

12,622,741

1,862,069

237,498

822,427

162,480

Millions of U.S. Dollars
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

148,499

101,226

2,849

100

7,152

Debentures

5,164

11,285

9,576

89

178

－

Borrowed Money (*2)

1,160

－

4,171

1,927

－

1,448

Deposits (*1)

Bills Sold and Call Money

Over 7 years,
within 10 years Over 10 years
－

247

－

－

－

－

－

Payables under Repurchase Agreements

1,679

－

－

－

－

－

Payables under Securities Lending
Transactions

14,323

－

－

－

－

－

Total

171,075

112,512

16,597

2,116

7,330

1,448

*1. Demand deposits, included in “Deposits,” are stated under amounts payable “Within 1 year.”*2. Borrowed Money without maturity is not included.
As of March 31, 2016
Millions of Yen
Within 1 year

Over 1 year,
within 3 years

Over 3 years,
within 5 years

Over 5 years,
within 7 years

13,959,911

11,167,257

761,462

81,801

1,243,594

Debentures

578,860

1,206,570

1,237,490

10,00020,000－Borrowed Money (*2)

115,500－－

324,350－

162,480

Deposits (*1)－

Bills Sold and Call Money54,397

－

－

－

－

－

Payables under Repurchase Agreements

63,804

－

－

－

－

－

Payables under Securities Lending
Transactions

1,414,550

－

－

－

－

－

Total

16,187,023

12,373,827

1,998,952

416,151

1,263,594

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

52

Over 7 years,
within 10 years Over 10 years26. Fair Value of Securities and Money Held in Trust:
1. Securities
The following tables contain information relating to Securities, Trading Assets (trading account securities and short-term corporate bonds), Cashand Due from Banks (negotiable certificates of deposit) and Monetary Debts Purchased (beneficiary rights) in the consolidated balance sheet.
(1) Trading Securities
Millions of Yen
Net Unrealized Gains (Losses)
Recognized as Income

2017

Millions of U.S. Dollars
2017

2016
43

478

0

(2) Held-to-Maturity Debt Securities
As of March 31, 2017
Millions of Yen

1,129,127－－－
43,2691,172,397
110,373－－－
1,500
111,873

1,226,049－－－
53,616
1,279,666
110,345－－－
1,500
111,845

Unrealized
Gains (Losses)
96,922－－－
10,347
107,269
(28)
－
－
－
－
(28)

1,284,271

1,391,511

107,240

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)

10,064－－－385
10,450
983
－
－
－
13
997

10,928－－－477
11,406
983
－
－
－
13
996

863
－
－
－
92
956
(0)
－
－
－
－
(0)

11,447

12,403955

53

As of March 31, 2016
Millions of Yen

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

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

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

1,696,329

1,835,724

139,394

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
OthersTotal
Total(3) Other Securities
As of March 31, 2017

Millions of Yen
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

54

Fair Value

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

58,6699,449,379
6,393,480
401,087－
2,654,811
3,504,514
13,012,563－
1,376,447
275,673
185,038－
915,735
1,530,796
2,907,244
15,919,807

Acquisition Cost
27,7209,169,106
6,155,320
396,547－
2,617,238
3,269,059
12,465,885－
1,380,632
277,977
185,346－917,307
1,588,349
2,968,982
15,434,867

Unrealized
Gains (Losses)
30,949280,273
238,159
4,540－
37,573
235,455
546,677－(4,184)(2,304)(307)－(1,571)(57,553)(61,737)
484,940

Millions of U.S. Dollars

Stocks
Bonds
Japanese Government Bonds
Municipal Government Bonds
Short-Term Corporate Bonds
Corporate Bonds
Others522
84,22656,987
3,575－
23,663
31,237247
81,72854,865
3,534－
23,32829,138

Unrealized
Gains (Losses)
275
2,498
2,122
40
－
334
2,098

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

115,986－
12,268
2,457
1,649
－
8,162
13,64425,913141,900

111,114－
12,306
2,477
1,652
－
8,176
14,157
26,463
137,577

4,872
－
(37)
(20)
(2)
－
(14)
(512)
(550)
4,322

Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

As of March 31, 2016

Millions of Yen
Carrying Value

Items with Carrying
Value Exceeding
Acquisition Cost

Items with Carrying
Value notExceedingAcquisition Cost

Acquisition 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

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

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

Unrealized
Gains (Losses)
33,393414,676363,275
5,757－
45,642245,812693,882－(2,367)(2,201)
(20)
－
(145)
(19,545)(21,913)
671,96955

(4) Held-to-Maturity Debt Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2017

Japanese Government Bonds
Municipal Government Bonds
Total

Millions of Yen

Costs of Securities
Sold
8,107
400
8,507

Amounts ofSecurities Sold
8,474
412
8,886

Gains (Losses) on
Sales
366
12
379

Millions of U.S. Dollars

Japanese Government Bonds
Municipal Government Bonds
Total

Costs of Securities
Sold
72
3
75

Amounts ofSecurities Sold75
379

Gains (Losses) on
Sales
3
0
3

Reason for sale
Consolidated subsidiary Shinkin Trust Bank, Ltd. sold its bond holdings during the fiscal year ended March 31, 2017, as part of the businesstakeover procedures in preparation for the merger of Shinkin Trust Bank, Ltd. and Mitsubishi UFJ Trust and Banking Corporation in September
2017.
For the Fiscal Year Ended March 31, 2016
Not applicable.
(5) Other Securities Sold during the Fiscal YearFor the Fiscal Year Ended March 31, 2017
Millions of Yen
Amounts ofSecurities Sold

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks89,002

9,177

2,719

Bonds

1,208,239

47,062

8,918

Japanese Government Bonds

1,208,239

47,062

8,918

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

－

－

－

Others541,901

7,261

14,676

Total

1,839,142

63,501

26,314

Millions of U.S. Dollars
Amounts ofSecurities Sold

56

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks

793

81

24

Bonds

10,769419

79Japanese Government Bonds

10,769419

79

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

Corporate Bonds

－

－

－

Others

4,830

64

130

Total

16,393566

234

For the Fiscal Year Ended March 31, 2016
Millions of Yen
Amounts ofSecurities Sold

Aggregate Gains on
Sales

Aggregate Losses on
Sales

Stocks64,905

6,499

1,158

Bonds

618,322

32,993

870

Japanese Government Bonds

617,322

32,981870

Municipal Government Bonds

－

－

－

Short-Term Corporate Bonds

－

－

－

1,000

11

－

Others306,302

1,641

1,965

Total

989,529

41,134

3,994

Corporate Bonds(6) Impaired Securities
Of Securities other than Trading Securities (excluding those where there is significant difficulty in determining fair value), if the fair value falls
by 30% or more compared with the acquisition price and it is not expected to recover up to the acquisition price in view of the rate of decline
over past periods, the securities are devalued and the fair value is recorded as the carrying amount on the consolidated balance sheet. In addition
the difference between the fair value and the acquisition price is treated as impairment losses in the fiscal year.
In the case where the issuer is in bankruptcy, de facto bankruptcy, or has a likelihood of falling into bankruptcy, impairment loss isrecognized for securities when the market price is below the purchase price.
In the fiscal year ended March 31, 2017, the amount of impairment losses on securities was ¥366 million ($3 million) (all impairment
losses were incurred on other securities).
In the fiscal year ended March 31, 2016, the amount of impairment losses on securities was ¥1 million (all were classified under stocks).

2. Money Held in Trust(1) Money Held in Trust for Trading Purposes
As of March 31, 2017
Not applicable.

As of March 31, 2016
Millions of Yen
Carrying Value
Money Held in Trust for
Trading Purposes

72,826

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

57

3. Net Unrealized Gains on Other Securities and Other Money Held in Trust
Components of Net Unrealized Gains on Other Securities in the consolidated balance sheets are as follows:
As of March 31, 2017
Millions ofMillions of Yen
U.S. Dollars
Other Securities

483,259

4,307

－

－

Net Unrealized Gains

483,259

4,307

Deferred Tax Liabilities

134,328

1,197

Net Unrealized Gains(Prior to Equity Method Adjustment)

348,931

3,110

Non-controlling interests’ Portion－－

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

348,931

3,110

Other Money Held in Trust

Net Unrealized Gains

Note:
Unrealized Gains on foreign currency translations of foreign currency-denominated other securities where there is significant
difficulty in determining fair value are included in “Other Securities” under “Net Unrealized Gains”.
As of March 31, 2016
Millions of Yen
Other Securities
Other Money Held in Trust

662,391－

Net Unrealized Gains

662,391

Deferred Tax Liabilities

184,447

Net Unrealized Gains(Prior to Equity Method Adjustment)

477,944

Non-controlling interests’ Portion－

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

Net Unrealized Gains

477,944

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

5827. Derivatives:
1. Derivative transactions to which hedge accounting is not applied
The following summarizes the contract values or the contracted principal equivalents, fair values, net unrealized gains (losses) and the valuation
methods of the fair values of the Bank’s derivative transactions that do not qualify for hedge accounting as of the consolidated balance sheet date,
which are classified by types of financial instruments. Please note that the contract values in themselves do not reflect the market risk associatedwith the Bank’s derivative transactions.
(1) Interest-Rate-Related Transactions
As of March 31, 2017
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

7,445,308

6,676,307

148,427

148,427

Variable Rate Receivable/Fixed Rate Payable

7,400,635

5,984,527(114,550)(114,550)

Variable Rate Receivable/Variable Rate Payable

212,330

179,630

(87)

(87)

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

2,362,600

1,688,600(34,381)(6,611)

Bought2,393,200

1,731,700(9,171)(25,444)(9,762)

1,734

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

Interest Rate Swaps:

Fixed Rate Receivable/Fixed Rate Payable
Interest Rate Options:

Others:

Total

59

Millions of U.S. Dollars
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

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

66,36359,508

1,323

1,323

Variable Rate Receivable/Fixed Rate Payable

65,96553,342(1,021)(1,021)

Variable Rate Receivable/Variable Rate Payable

1,892

1,601

(0)

(0)

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

21,05815,051

(306)

(58)

Bought21,331

15,435

(81)

(226)

(87)

15

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

Interest Rate Swaps:

Fixed Rate Receivable/ Fixed Rate Payable
Interest Rate Options:

Others:

Total

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

60

As of March 31, 2016
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Interest Rate Futures:
Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

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

8,687,142

7,544,229

243,719

243,719

Variable Rate Receivable/Fixed Rate Payable

8,671,290

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

Variable Rate Receivable/Variable Rate Payable

195,330

195,330

55

55

Fixed Rate Receivable/Fixed Rate Payable

20,000

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

Sold

3,411,600

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

Bought3,314,000

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

6,947

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

Interest Rate Swaps:

Interest Rate Options:

Others:

Total

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

61(2) Currency-Related Transactions
As of March 31, 2017
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－－－－14,635

7,122

32

32

Sold

118,406

－

555

555

Bought74,955

－

(333)

(333)

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

254

254

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

Currency Options:

Others:

Total

62

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

－

－

－

－

130

63

0

0

Sold

1,055

－

4

4

Bought

668

－

(2)

(2)

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

2

2

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

Currency Options:

Others:

Total

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

63

As of March 31, 2016
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

－－－－16,754

13,848

(22)

(22)

Sold

104,510

2,423

750

750

Bought

86,306

2,377

(357)

(357)

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

369

369

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

Currency Options:

Others:

Total

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

64(4) Bond-Related Transactions
As of March 31, 2017
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

12,779－5

5

Bought

3,907

－

(0)

(0)

Sold

－

－

－

－

Bought

5,300

－

6

(0)

Sold

－

－

－

－

Bought

－

－

－

－

Sold

－

－

－

－

Bought

－

－

－

－

12

5

Fair ValueNet Unrealized
Gains (Losses)

Bond Futures Options:Over the Counter Transactions
Bond Options:

Others:

Total

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

Total
Contract
Value
Exchange-Traded Transactions
Bond Futures:
Sold

113

－

0

0

Bought

34

－

(0)

(0)

Bond Futures Options:
Sold

－

－

－

－

Bought

47

－

0

(0)

Over the Counter Transactions
Bond Options:
Sold

－

－

－

－

Bought－－－－Others:

Total

Sold

－

－

－

－

Bought

－

－

－

－

0

0

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

65

As of March 31, 2016
Millions of Yen
Total
Contract
Value

Contract Value(Over 1 Year until
Settlement or Expiry)

Fair ValueNet Unrealized
Gains (Losses)

Exchange-Traded Transactions
Bond Futures:Sold

59,382

－

(78)

(78)

Bought

1,516

－

(3)

(3)

Sold

－

－

－

－

Bought

3,000

－

11

3

Sold

－

－

－

－

Bought

1,000

－

0

(1)

Sold

－

－

－

－

Bought

－

－

－

－

(70)

(80)

Bond Futures Options:Over the Counter Transactions
Bond Options:

Others:

Total

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

(6) Credit Derivative Transactions
Not applicable.

662. Derivative transactions to which hedge accounting is applied
The following summarizes the contract values or the contracted principal equivalents, fair values and the valuation methods of the fair values of
the Bank’s derivative transactions that qualify for hedge accounting as of the consolidated balance sheet date, which are classified by types offinancial instruments and methods for hedge accounting. Please note that the 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, 2017
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

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

80,00080,000

1,968

Variable Rate Receivable/Fixed Rate Payable

4,661,221

4,240,018(110,281)

Fixed Rate Receivable/Variable Rate Payable

180,000－

338

Variable Rate Receivable/Fixed Rate Payable

1,142,207

988,227(77,283)

Interest Rate Swaps

Total

Method for Hedge
Accounting
Basic Treatment

Exceptional
Treatments forInterest Rate
Swaps

Fair Value(185,256)

Items

Total Contract
Value

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

Fair Value

Interest Rate Swaps
Fixed Rate Receivable/Variable Rate Payable

713

713

17

Variable Rate Receivable/Fixed Rate Payable

41,54737,793(982)

Fixed Rate Receivable/Variable Rate Payable

1,604

－

3

Variable Rate Receivable/Fixed Rate Payable

10,181

8,808

(688)

Interest Rate Swaps

Total(1,651)

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

67

As of March 31, 2016
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

80,00080,0003,615

Variable Rate Receivable/Fixed Rate Payable

5,140,953

4,075,245(232,972)

Fixed Rate Receivable/Variable Rate Payable

540,000

180,000

2,400

Variable Rate Receivable/Fixed Rate Payable

1,016,539

1,016,539(95,555)

Interest Rate Swaps

Total(322,512)

Notes:
1. Most of hedged items with respect to Basic Treatment are Interest-bearing assets and liabilities such as Loans and Bills Discounted,
Other Securities (Bonds) and Deposits.
2. Hedged items with respect to Exceptional Treatments for Interest Rate Swaps are Loans and Bills Discounted, Held-to-Maturity Debt
Securities and Debentures.
3. The deferred method of hedge accounting is primarily applied to the transactions mentioned above based on the JICPA Industry Audit
Committee Report No. 24, February 13, 2002 “Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in
Banking Industry”.
4. Fair value calculation: Transactions on exchanges are valued on the basis of closing prices, mainly on the Tokyo Financial Exchange Inc.
Over the counter transactions are valued using discounted present value or calculation models for option prices, etc.
(2) Currency-Related Transactions
As of March 31, 2017
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

455,769

347,209(1,842)

340,749

－

662

－

－

－

Forward Foreign Exchange Contracts:
Sold
BoughtTotal(1,180)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

4,062

3,094

(16)

Sold

3,037

－

5

Bought－－Forward Foreign Exchange Contracts:

Total

－
(10)

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

68

As of March 31, 2016
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

508,788309,470973

454,625－

10,403－－Forward Foreign Exchange Contracts:
Sold
BoughtTotal－
11,377

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

(4) Bond-Related Transactions
Not applicable.

28. Related Party Transactions:
For the Fiscal Year Ended March 31, 2017
There were no significant related-party transactions.
For the Fiscal Year Ended March 31, 2016
There were no significant related-party transactions.

29. Segment Information:(1) Description of Reportable Segments
The Group classifies the businesses of the Bank and its consolidated subsidiaries as individual business segments. Among those businesssegments, the business of the Bank is deemed as the reportable segment.
The Bank, as an individual financial institution, provides such services as deposits, debentures, lending, market fund management, trading
operations, clearing and trust business. As the central financial institution for Shinkin Banks, the Bank complements the functions of the Shinkin
Banks and operates the shinkin bank industry’s own safety net, including the Shinkin Bank Management Reinforcement System. By doing so, theBank strives to maintain an orderly financial system within the shinkin bank industry.
The Bank started trust business in January 2017.
(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 profit attributable to owners of parent.

69

(3) Amounts by Reportable Segment
For the Fiscal Year Ended March 31, 2017
(Millions of Yen)
Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

281,257

38,124

319,381(73)

319,307

2,761

2,140

4,901

(4,901)－

Total

284,018

40,264324,283(4,975)319,307

Segment profit

41,3833,711

45,095(1,223)43,871

Segment assets

37,257,840

285,852

37,543,692(79,099)

37,464,593

Segment liabilities

35,654,367

196,41235,850,780(12,029)35,838,750

Depreciation

5,193

5,455

10,648(0)

10,647

Interest Income

201,454258

201,713(75)

201,637

Interest Expenses

122,340

49

122,390(8)

122,381

Income Taxes

6,954

1,509

8,464

(213)

8,250

Increase in Tangible andIntangible Fixed Assets

5,076

3,474

8,550

－

8,550

Inter-segment

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

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

2,506

339

2,846

(0)

2,846

24

19

43

(43)

－

2,531

358

2,890

(44)

2,846

Segment profit

368

33

401

(10)

391

Segment assets

332,095

2,547

334,643(705)

333,938

Segment liabilities

317,803

1,750

319,554(107)

319,446

Depreciation

46

48

94

(0)

94

Interest Income

1,795

2

1,797

(0)

1,797

Interest Expenses

1,090

0

1,090

(0)

1,090

Income Taxes

61

13

75

(1)

73

Increase in Tangible andIntangible Fixed Assets

45

30

76

－

76

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, asset management, consumer credit
guarantees, investment and M&A advisory operations, and data processing outsourcing.
2. Adjustment comprises the following.

70

(i) Within adjustment of segment profit, reduction of ¥1,223 million ($10 million) comprises reduction of ¥682 million ($6 million) on
profit attributable to non-controlling interests and ¥540 million ($4 million) on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥79,099 million ($705 million) comprises reduction of ¥53,114 million ($473
million) on eliminations relating to capital consolidation and ¥25,984 million ($231 million) on inter-segment eliminations, etc.
(iii) Reduction of ¥12,029 million ($107 million) on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv) The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the Consolidated Statement of Income.

For the Fiscal Year Ended March 31, 2016
(Millions of Yen)
Reportable segment
Shinkin Central Bank
business

Other

Total

Adjustment

Amount presented
in the consolidated
financial statements

IncomeExternal customers

267,048

35,186302,234(80)

302,154

2,627

2,268

4,895

(4,895)－

Total

269,675

37,454

307,130(4,975)

302,154

Segment profit

40,8752,942

43,818(1,037)42,781

Segment assets

34,887,645

280,959

35,168,605(75,699)

35,092,905

Segment liabilities

33,274,483

193,591

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

Depreciation

3,910

5,074

8,984

(0)

8,984

Interest Income

204,650370

205,021(148)

204,873

Interest Expenses

127,242

110

127,353(21)

127,331

Income Taxes

15,002

1,633

16,635(4)

16,631

Increase in Tangible andIntangible Fixed Assets

4,865

1,728

6,594

－

6,594

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, asset management, consumer credit
guarantees, investment and M&A advisory operations, and data processing outsourcing.
2. Adjustment comprises the following.
(i) Within adjustment of segment profit, reduction of ¥1,037 million comprises reduction of ¥643 million on profit attributable tonon-controlling interests and ¥393 million on inter-segment eliminations, etc.
(ii) Within adjustment of segment assets, reduction of ¥75,699 million comprises reduction of ¥53,114 million on eliminations relating tocapital consolidation and ¥22,584 million on inter-segment eliminations, etc.
(iii) Reduction of ¥8,138 million on the adjustment of segment liabilities comprises inter-segment eliminations, etc.
(iv) The adjustment for other items comprises inter-segment eliminations, etc.
3. Segment profit has been adjusted from profit attributable to owners of parent presented in the Consolidated Statement of Income.

71

(Related Information)
For the Fiscal Year Ended March 31, 2017
1. Information by service(Millions of Yen)
Securities investment
operations
Income from externalcustomers

Lending operations

239,956

Other

17,868

Total
61,482

319,307(Millions of U.S. Dollars)

Securities investment
operations
Income from externalcustomers

Lending operations

2,138

Other

Total

159

548

2,846

2. Information by geographic region(1) Income
Japan
184,019

Japan

United States
33,242EuropeUnited States

Europe

1,640

Other
14,016296

88,029Other
124(Millions of Yen)
Total
319,307(Millions of U.S. Dollars)
Total
784
2,846

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

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

IncomeName of customer
The Government of Japan

Income63,524(Millions of Yen)
Related segment
Shinkin Central Bank business

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

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

72

210,601

Lending operations
23,783

Other

Total
67,731

302,116

2. Information by geographic region(1) IncomeJapan
179,169

United States
28,410EuropeOther
12,50582,031(Millions of Yen)
Total
302,116

Note:
Income from derivative transactions and Trading income are 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

Income71,912(Millions of Yen)
Related segment
Shinkin Central Bank business(Information related to Impairment losses of Fixed Assets by Reportable Segment)
Not applicable.
(Information related to Amortization of Goodwill and Balance of Unamortized Goodwill by Reportable Segment)
Not applicable.
(Information related to Accrual of Income from Negative Goodwill by Reportable Segment)
Not applicable.

30. Business Combinations:
Transactions under common control, etc.
(1) Outline of transaction(i) Name and details of business to be transferred
Name: Trust business, banking business, and operation as a registered financial institution at Shinkin Trust Bank, Ltd., the Bank’s consolidated
subsidiary
Details: All businesses excluding business relating to securities investment trust services(ii) Date of business combination
March 22, 2017
The Bank plans to take over the trust business as follows: business relating to asset securitization on April 3, 2017; business relating to banking
on September 19, 2017; and business relating to operation as a registered financial institution in the period between completion of the takeover ofbusiness relating to asset securitization and the merger date.
(iii) Legal form of business combination
A business transfer wherein Shinkin Trust Bank, Ltd. is the transferring company and the Bank is the transferee company.
(iv) Name of bank after combination
Shinkin Central Bank(v) Other matters relating to the outline of transaction
In line with the commencement of the concurrent operation of trust business with the aim of strengthening its trust business capabilities, the Bank
decided to take over all businesses excluding that relating to securities investment trust services from its wholly owned consolidated subsidiary
Shinkin Trust Bank, Ltd. by means of a business transfer.
(2) Outline of accounting treatment applied
The transaction was accounted for as a transaction under common control in accordance with the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, September 13, 2013) and the “Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures” (ASBJ Guidance No. 10, September 13, 2013).

73

31. Amounts per Share:
Yen
2017

Net Assets per ShareNet Income per Share

U.S. Dollars
2017

2016

299,542.84

301,512.71

2,669.96

6,223.20

7,115.71

55.47

－

－

－

Net Income per Share after Adjustment for Common
Share equivalents
Notes:
1. The basis for calculation of net assets per share is as follows:
2017

2016

2017

Total Net Assets

Millions of Yen

1,625,842

1,632,969

Millions of U.S.
dollars

14,491

Amount Deducted from Total Net Assets

Millions of Yen

215,528

213,380

Millions of U.S.
dollars

1,921

Non-controlling interests

Millions of Yen

10,403

9,743

Millions of U.S.
dollars

92

Preferred Dividends

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

18

Dividend attributable to specificcommon shares

Millions of Yen

3,000

1,512

Millions of U.S.
dollars

26

Distribution of residual assets
attributable to specific common shares

Millions of Yen

200,000

200,000

Millions of U.S.
dollars

1,782

Millions of Yen

1,410,314

1,419,588

Millions of U.S.
dollars

12,570Unit

4,708,222

4,708,222－－

Number of General Common
Share Units

Unit

4,000,000

4,000,000－－

Number of Preferred
Share UnitsUnit

708,222708,222－－

Net Assets at Fiscal Year-end Used to
Calculate Net Assets per Share
Number of Share Units at Fiscal Year-end
Used to Calculate Net Assets per Share* When calculating net assets per share, of dividend attributable to preferred shares, preferred dividends are deducted from total net assets
whereas participating dividends are not deducted from total net assets.
Dividend attributable to specific common shares and distribution of residual assets attributable to specific common shares are
deducted from total net assets, and the number of specific common shares is not included within the number of shares.
2. The basis for calculation of net income per share is as follows:
2017

2017

Millions of Yen

43,87142,781Millions of U.S.
dollars

Amount Deducted from Profit attributable
Millions of Yen
to owners of parent

2,124

2,124

Millions of U.S.
dollars

18

Millions of Yen

2,124

2,124

Millions of U.S.
dollars

18

Profit attributable to owners of parent Used
Millions of Yen
to Calculate Net Income per share

41,74640,656

Millions of U.S.
dollars

372

Profit attributable to owners of parent

Preferred Dividend

74

2016

391

Average Number of Share Units for the
fiscal year

Unit

6,708,222

5,713,686－－

Average Number of General Common
Share Units

Unit

4,000,000

4,000,000－－

Average Number of Specific Common
Share Units

Unit

2,000,000

1,005,464－－

Average Number of Preferred
Share UnitsUnit

708,222708,222－－

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

32. Subsequent Events:
Not applicable.

75

76

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

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

2017

2016

2017

10,591,676
362,234
19,99977,522
178,977
205,696
17,204,776
7,995,390
20,514484,467
70,0548,000
83,632(45,103)37,257,840

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

94,408
3,228
178
690
1,595
1,833
153,353
71,266
182
4,318
624
71
745
(402)
332,095

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

29,176,129
2,952,900
76,413
1,203,870
24,821
188,4021,602,791
368
74
227,760
1,311
83
20,337389
88,974
6,109
83,63235,654,367

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

260,059
26,320681
10,730221
1,679
14,286
3
0
2,030
11
0
181
3
793
54
745
317,803

Total Net Assets
Total Liabilities and Net Assets

1,603,472
37,257,840

1,613,161
34,887,645

14,292332,095

77

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

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

Millions of
U.S. Dollars

Millions of Yen
2017

2017

2016

201,454
17,868
8,431
753
0
133
173,730
536
0
8,263
4,738
59,434
10,127
284,018

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

1,795
159
75
6
0
1
1,548
4
0
73
42
529
90
2,531

122,340
39,690
8,005
8,244
254
1,062
9,265
52,831
2,985
6,605
4
74,76829,234
2,728
235,680

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

1,090
353
71
73
2
9
82
470
26
58
0
666
260
24
2,100

48,33855,878430

10,555(3,601)
6,954
41,383

15,259(257)
15,00240,875

94
(32)
61
368

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

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

78

2017

5,852.33
3,000.00
1,500.00
6,500.00

U.S. Dollars
2016

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

2017

52.16
26.74
13.37
57.93

Statement of Trust Account (Consolidated)
Millions of
U.S. Dollars

Millions of Yen

Shinkin Central Bank

As of March 31

AssetsSecurities
Beneficiary Rights
Securities Held in Custody Accounts
Monetary Claims
Other Claims
Due from Banking AccountCash and Due from Banks
Total assets

2017
8,507
1,694,135
63,00064,1638360
28,986
1,859,161

2016
19,923
1,751,012
263,000
101,930
18
3,324
42,0772,181,287

2017
75
15,100
561
571
0
3
258
16,571

Liabilities
Money Trusts
196,320
81,360725
Investment Trusts
1,293,242
1,450,501
12,928
Securities Trusts
427,100
116,300
1,036
Monetary Claims Trusts
102,990
65,149580
Composite Trusts
161,634
145,849
1,300
2,181,287
Total liabilities
1,859,161
16,571(Note1) The figures in this statement are calculated by means of simple aggregation of trust accounts for each consolidated company conducting trust businesspursuant to the "Act on Engagement in Trust Business Activities by Financial Institutions." Consolidated companies conducting such trust business comprised the
Bank and Shinkin Trust Bank, Ltd. in the fiscal year ended March 31, 2017, and comprised Shinkin Trust Bank, Ltd. in the fiscal year ended March 31, 2016.
(Note2) No trust assets were entrusted to other trust banks for asset administration as of March 31, 2017 and 2016.

79Organization (As of July 31, 2017)
General Meeting of Members
Corporate Auditors
Board of Directors
Chairman of the Board of Directors (part-time)
President and Chief Executive Officer
Deputy Presidents
Senior Managing Director
Managing Directors
Directors

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

Hokuriku Branch
Shizuoka Branch
Nagoya Branch
Osaka Branch

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

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

The SCB Group (As of July 31, 2017)
The SCB Group
Trust
banking

Shinkin
Trust Bank
■

■
■

80

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

Asset
management

Personal loan
guarantees

Investment and
M&A advisory

Data processing
consignment

Consigned
clerical work

Shinkin AssetManagement

Shinkin
Guarantee

Shinkin
CapitalThe Shinkin Banks
Information
System Center

Shinkin
ChukinBusiness

Securities

Shinkin
Securities■

Dealing■

Brokerage■

Underwriting

ShinkinInternational
■

■

■

■

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

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

■

■

■

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

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

Investment banking

■

■

M&A
brokering

Data processing
consignment(handles SCB
administrative work)■

Softwaredevelopment■

Computing■

Promissory
note exchange■

Branch,dormitory, andother property
management■¥70mn in capital(100% ownership)■■■¥1.0bn in capital(100% ownership)

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, 2017)
Deputy President(in charge of Treasury Operations)Katsuo Akiyama
Managing Director(in charge of Treasury Business)
Norihiro Takano
Managing Director(in charge of Strategic Planning/
International Business Solution/Treasury/
Credit & Alternative Investment/
Overseas Offices)
Hiroshi Sudo
Strategic Planning Division(including International Planning)
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7624
Facsimile: +81-3-3278-7033
General Manager: Yuuji Takahashi
International Business Solution Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7703
Facsimile: +81-3-3278-7035
General Manager: Takehiro Suzuki
International Operations Center(including Correspondent Banking)Address: 8-1, Kyoubashi 3-chome,
Chuo-ku, Tokyo 104-0031
Telephone: +81-3-5250-1700
Facsimile: +81-3-5250-1780
SWIFT: ZENB JPJT
General Manager: Hideo Okada
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
Director: Naoki Hemmi
Treasury Business Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7642
Facsimile: +81-3-3278-7040
SWIFT: ZENB JPJT
General Manager: Kengo Kaji
Treasury Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7660
Facsimile: +81-3-3278-7043
SWIFT: ZENB JPJT
General Manager: Kenji Tanaka
Credit & Alternative Investment Division
Address: 3-7, Yaesu 1-chome,
Chuo-ku, Tokyo 103-0028
Telephone: +81-3-5202-7664
Facsimile: +81-3-3278-7044
General Manager: Daigo Morishita

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

New York

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

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

ShanghaiHong Kong
BangkokHong Kong
Hong Kong Representative Office
Address: Suite 4008, 40/F, Central Plaza, 18
Harbour Road, Wan Chai, Hong Kong, P.R. of China
Telephone: +852-2537-3777
Facsimile: +852-2537-4002
Chief Representative: Kozo Harada
Shanghai
Shanghai Representative Office
Address: Room 508, Shanghai International Trade
Center, 2201 Yan-An Xi Road
Shanghai, P.R. of China
Telephone: +86-21-6270-3091
Facsimile: +86-21-6270-3095
Chief Representative: Hiroyuki Niwa
Bangkok
Bangkok Representative Office
Address: 19th Floor ,1903, Athenee Tower, 63
Wireless Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
Telephone: +66-2-168-8796
Facsimile: +66-2-168-8799
Chief Representative: Naoto Seita

Hokkaido(Sapporo)

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

Tohoku(Sendai)

Hokuriku(Kanazawa)
Chugoku(Hiroshima)

Okayama Kobe
Osaka
Shikoku(Takamatsu)

FukuokaMinami-Kyushu(Kumamoto)Head Office

NagoyaShizuokaHead Office
BranchOffice/subsidiary

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

81

Shinkin Central Bank

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