BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551

SCOTT G. ALVAREZ
GENERAL COUNSEL,

OCT 19 2016

Mr. Nobuyuki Kawabata

Managing Director and Chief Executive Officer Americas Division
277 Park Avenue

New York, New York 10172

Dear Mr. Kawabata:

This responds to the request by Sumitomo Mitsui Financial Group, Inc.
(“SMFG”) and Sumitomo Mitsui Banking Corporation (“SMBC”, and together
with SMFG, “Sumitomo”), Tokyo, Japan,' for relief from certain of the U.S. risk
committee requirements for foreign banking organizations under section 252.155
of Regulation YY.

Regulation YY requires a foreign banking organization with combined U.S.
assets of greater than $50 billion but U.S. non-branch assets of less than $50
billion to comply with the requirement to maintain a U.S. risk committee either as
a committee of the global board of directors, on a standalone basis, or as a joint
committee with its enterprise-wide risk committee (“U.S. risk committee
requirements”).> Among other requirements, a foreign banking organization with
combined U.S. assets of $50 billion or more must include on its U.S. risk
committee at least one member who is not an officer or employee of the company
or its affiliates, and who is not a member of the immediate family of a person who
is an executive officer of the company or its affiliates.

Regulation YY does not prescribe the manner in which a foreign banking
organization’s risk committee risk committee must oversee the risks of its
combined U.S. operations, providing a foreign banking organization with some
flexibility in structuring its oversight function in a way that is efficient and

1 SMFG is a Japanese holding company that conducts almost all of its U.S.
operations through its wholly-owned subsidiary SMBC.

2 12 CFR 252.155.
3. 12 CER 252.155(a)(3)(ii)(A).

wwwfederalreserve.gov


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effective in light of its broader enterprise-wide risk-management structure.*
Regulation YY also requires a foreign banking organization to take appropriate
measures to ensure that its combined U.S. operations implement the foreign
banking organization’s risk-management policies and provide sufficient
information to the foreign banking organization’s risk committee to carry out its
responsibilities.

Sumitomo is a foreign banking organization that, as of July 1, 2015, had
combined U.S. assets of greater than $50 billion, but less than $50 billion in U.S.
non-branch assets. Accordingly, Sumitomo was required to comply with the U.S.
risk committee requirements by July 1, 2016.6

SMFG’s board has three committees, including an enterprise-wide risk
committee (the “SMFG Risk Committee”). Sumitomo represents that it is typical
for Japanese boards to delegate authority for particular issues to one or more
individuals, which may include board members and/or executives. The SMFG
Risk Committee is composed of six SMFG board members and one non-board
member. Under its charter, the SMFG Risk Committee is authorized to deliberate
on matters concerning risk management, and then report on those deliberations to
the full SMFG board. Under its charter, the SMFG Risk Committee is not
authorized to make decisions.

As a way to comply with the U.S. risk committee requirements, Sumitomo
has established a U.S. risk committee composed of one member that is a
management official from Sumitomo’s home office, two members that are
management officials from Sumitomo’s U.S. operations, and two independent
members that are not currently affiliated with any Sumitomo entity.

To ensure that Sumitomo is overseeing the risks of its combined U.S.
operations and to enable the U.S. risk committee and each of its members to
escalate issues directly to the SMFG board, Sumitomo has entered into
commitments that it will revise the charter of the U.S. risk committee to provide
that the chairperson of the U.S. risk committee will report the minutes of
proceedings of the U.S. risk committee and the materials used for the proceedings
of the U.S. risk committee directly to each member of the SMFG board, and the
USS. risk committee or any member of the U.S. risk committee may escalate any

4 See 79 FR 17284.
5 See 12 CFR 252.155(c).

® In order to accommodate Sumitomo’s request, consider additional information
submitted by Sumitomo, and consult with Sumitomo’s home country regulator, as
necessary, the Secretary of the Board, acting pursuant to authority delegated by the
Board, granted a three-month extension, until October 1, 2016, for Sumitomo to
establish a U.S. risk committee pursuant to the U.S. risk committee requirements.
See letter dated July 19, 2016, to Nobuyuki Kawabata.



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matter within the responsibilities of the U.S. risk committee to the attention of the
SMFG board by directly notifying any member or members of the SMFG board.
Tn order to maintain the U.S. risk committee’s character and authority, Sumitomo
has also entered into a commitment that any amendments or other alterations to
the U.S, risk committee charter in the future would not materially change or limit
the U.S. risk committee’s ability to carry out its risk-management responsibilities
for Sumitomo’s combined U.S. operations.

Based on all the facts of record in this case, and specifically conditioned on
compliance with all the representations and commitments made in connection with
the request, staff of the Legal Division, in consultation with the Division of
Banking Supervision and Regulation, believes this approach is consistent with the
U.S. risk committee requirements under section 252.155 of Regulation YY. The
representations and commitments made by Sumitomo constitute conditions
imposed in writing in connection with the findings and decisions herein and, as
such, may be enforced in proceedings under applicable law.

This opinion is based on the specific facts and representations in your letter
and in communications with Board staff. Any change in the facts or
representations should be communicated immediately to Board staff and could
result in a different opinion.

If you have any questions about this matter, please contact Julie Anthony,
Counsel (202-475-6682), or Rachel Yura, Senior Attorney (202-973-7426), of my
staff.

Sincerely,

hated. al