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Citibank Japan Ltd.
Annual Report For the Fiscal Year Ended March 31, 2015
Table of Contents
Message from the CEO 1
Company Overview 2
Our History 5
Management Strategy 6
Business Outline 8
Risk Management Framework 15
Compliance Framework 17
Diversity and CSR Activities 18
List of CJL's branches in Japan 19
Citibank Japan Ltd. Financial Information under Japanese GAAP 20
For the Fiscal Year Ended March 31. 2015
1. Matters Related to Principal Business
2. Financial Statements
3. Market Value Information
4. Major Shareholders
5. Disclosure Items Based on Pillar 3 of Basel III
Message from the CEO
To Our Valued Customers,
On June 1, 2015, I assumed the role of President & CEO of Citibank Japan Ltd. and I am honored to lead this company and proudly serve our clients as we have been doing over our 113 year history in Japan. Over that time Citibank Japan has built a reputation for providing innovative and high quality services to clients across all of our businesses. I am determined to work with our employees to further strengthen our business and continue to improve the quality of our products and services for our clients in Japan and around the world.
In late December 2014, Citi announced that it had reached a definitive agreement to sell Citibank Japan’s entire retail banking business to Sumitomo Mitsui Banking Corporation. Following the sale, expected to close on November 1, 2015, Citibank Japan will continue to deliver the power of Citi’s unrivalled global network to its Japanese and
non-Japanese corporate, institutional and governmental clients in Japan by focusing on its corporate banking, markets and transaction services businesses.
Citibank Japan is committed to being a bank that meets local market expectations, with a strong compliance and governance framework; to serving our clients; and to making our contribution as part of Japan's society and economy.
Thank you very much for your continued patronage and support.
July 2015
Anthony P. Della Pietra, Jr. Representative Director, President & CEO
Citibank Japan Ltd.
1
Company Overview
Company Profile Company Name Citibank Japan Ltd. (“CJL”)
Head Office Address Shin-Marunouchi Building,
5-1, Marunouch 1-Chome,
Chiyoda-ku, Tokyo, 100-6520
Bank Code 0401
Head Office Branch Code 730
Telephone Number 0120-039-104 or 03-6897-5000
Commencement of Operations July 1, 2007 (International Banking Corporation, a
predecessor to Citibank, opened its Yokohama branch
in October 1902)
Business Overview As one of Citi's core businesses in Japan, CJL is
engaged in banking services through the retail
banking business and the corporate banking
business.
Number of Employees 1,728 (As of March 31, 2015)
Number of Locations 37 (Head Office, Higashi Shinjuku, Okinawa, 32 for
Retail Banking, 2 for Corporate Banking)
Directors and Statutory Auditors*
Representative Director, President Anthony P. Della Pietra, Jr.
Representative Director Naoki Inoue
Director Shirish Apte
Director Phee Boon Kang
Director Ryozo Hayashi
Director Tatsuo Tanaka
Statutory Auditor (full-time, outside) Mamoru Sato
Statutory Auditor (outside) Toshiaki Kawashima
Statutory Auditor Hiroto Sakai
(*) Chronological order of appointment for the same title
Executive Officers
CEO Anthony P. Della Pietra, Jr.
Chief Strategy & Planning Officer and Head of
Business Strategy & Planning Division Naoki Inoue
Deputy President and Head of Retail Banking
Division Grant Carson
Deputy President and Head of Corporate Banking
Division Gerald Keefe
Head of Transaction Services Division Ravi Saxena
Head of Markets Division Kii Ko
Head of Legal Division Yasuto Hashinaga
Head of Compliance Division Koichi Tanaka
Head of Finance Division Susan Aziz
Head of Risk Management Division Rajesh Paradkar
Head of Human Resources Division Minoru Kondo
Head of Operations & Technology Division Shankar Ramasami
Chief Auditor Yuichi Ito
Deputy Head of Business Strategy & Planning
Division Hiroaki Nigo
(As of July 1, 2015 except for Number of Employees)
2
Organizational Structure
Financial Summary (From 09/2012 to 03/2015)
(Billions of Yen) 09/2012 03/2013 09/2013 03/2014 09/2014 03/2015
Ordinary income 31.7 64.6 34.7 68.3 32.1 66.3
Ordinary profit (loss) △1.6 △1.5 1.4 2.8 △2.8 △3.4
Total Assets 3,970.7 4,374.5 4,536.0 4,513.9 5,267.0 5,057.2
Deposits 3,241.9 3,541.5 3,906.9 3,636.0 3,897.4 3,924.8
Total Net Assets 263.6 262.8 262.1 256.3 254.9 252.3
Capital Stock 123.1 123.1 123.1 123.1 123.1 123.1
Capital Adequacy Ratio 29.51% 28.47% 28.62% 25.72% 23.90% 30.26%
Credit RatingsMoody's S&P Fitch
Rating Outlook Rating Outlook Rating Outlook
Citibank Japan Ltd.
Long Term A1 Stable A Stable A Positive Short Term P-1 A-1 F1
Citigroup Inc.
Long Term Baa1 Stable A- Negative A Stable
Short Term P-2 A-2 F1
Citibank,N.A.
Long Term A1 Stable A Stable A+ Stable
Short Term P-1 A-1 F1
(As of July 1, 2015) For further details, please refer to Citigroup Credit Ratings at http://www.citigroup.com/citi/investor/rate.htm
Shareholders
Meeting
Board of
Statutory AuditorsBoard of
Directors
President & CEO Management Committee
Corp
ora
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g D
ivis
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Hum
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Reso
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Com
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Bu
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trate
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Pla
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Tra
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ivis
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Inte
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Div
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Chie
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Chie
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Pla
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Ma
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Div
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Ris
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Op
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Fin
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Div
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(As of July 1, 2015)
3
Deposit Insurance
CJL has its head office located in Japan and is a member of the Deposit Insurance Corporation (DIC). Pursuant to the Deposit Insurance System, non-interest-bearing Yen deposits for payment and settlement purposes accepted by CJL are protected in full per depositor; and interest-bearing Yen deposits accepted by CJL are protected up to a maximum of 10 million yen in principal plus related interest thereon per depositor.
Bank Agency Service
Name of Bank Agent Citigroup Global Markets Japan, Inc. (“CGMJ”) Offices of Bank Agent CGMJ Tokyo Headquarters Service Coverage Intermediary of certain produces offered by CJL’s Corporate
Banking Division (yen/foreign currency deposits and remittance
services)
Foreign Bank Agency Service
Designated Dispute Resolution Organization for CJL
Japanese Bankers Association (“JBA”) Contact for consultation and exchange of views: JBA Customer Relations Center 0570-017109 or 03-5252-3772
CJL has concluded a Basic Contract for Implementation of Dispute Resolution Procedure with JBA, the Designated Dispute Resolution Organization under the Banking Act. JBA runs the JBA Customer Relations Center as a contact point to which customers can go for consultation and inquiries or to which they can direct their opinions and complaints about banks. Refer to the JBA website for more information. http://www.zenginkyo.or.jp/adr/ * JBA Customer Relations Center’s services are available only in Japanese.
Name of Affiliated ForeignBank
Citibank, N.A.
Offices of Bank Agent CJL Head Office and Osaka Branch Service Coverage -Intermediation for acceptance of deposits or installment savings
-Intermediation for making of loans or negotiation of bills/notes
-Intermediation for exchange transactions
-Intermediation for issuance of bank guarantee and acceptance of
bills/notes
-Intermediations for other ancillary services(Letter of Credit related)
4
Our History
1812 City Bank of New York established.
1902 International Banking Corporation opened its first branch in Yokohama.
1923 International Banking Corporation opened Tokyo Branch (temporarily
closed in 1941, reopened in 1946).
1973 First National City Corporation listed on Tokyo Stock Exchange (delisted in
1998 with the merger between Citicorp and Travelers Group).
1974 First National City Corporation holding company changed its name to Citicorp.
1977 Citibank N.A. launched Citicard Banking Centers, anchored by ATMs and
CitiCard. The 24-hour ATMs are for the first time used for more than emergency cash.
1980 Decades of innovation and expansion lead to Citibank operations in
90 countries.
1991 Citibank Japan launches International Cash Card.
1998 Citicorp and Travelers Group merge to form Citigroup Inc.
Citibank Japan starts internet banking.
2007 Citibank Japan Ltd. commences operations as a locally incorporated bank. Citigroup Inc.’s shares listed on the first section of the Tokyo Stock Exchange.
2011 Citi expands its Japan Desk network around the globe, opening in cities
such as Dubai and Sao Paulo (10 locations as of January 1, 2015).
2012 Citi celebrates its 200th anniversary globally and its 110th in Japan.
5
Management Strategy
Citi’s Mission: Enabling Progress
Citi works tirelessly to serve individuals, communities, institutions and nations. With 200 years of experience meeting the world's toughest challenges and seizing its greatest opportunities, we strive to create the best outcomes for our clients and customers with financial solutions that are simple, creative and responsible. An institution connecting over 1,000 cities, 160 countries and millions of people, we are your global bank; we are Citi.
The four key principles—the values that guide us as we perform our mission—are:
Citibank Japan Management Strategy
Citibank Japan Ltd. (“CJL” or “Citibank Japan”) is a 100%-owned indirect subsidiary of Citigroup Inc. (“Citigroup” or “Citi”). It was established on July 1, 2007 by succeeding the operations of the Japan Branches of Citibank, N.A., thus becoming the first foreign bank in the Japanese market to locally incorporate its banking operations. The bank’s presence in Japan dates back to 1902, when the International Banking Corporation (a predecessor to Citibank) first opened a branch office in Yokohama.
CJL’s goal, in line with global trends and the needs of client base, is to fully respond to the needs of our clients by leveraging Citi’s global network and local footprint to offer innovative products and services. CJL is uniquely positioned to connect and serve our Japanese clients that are global citizens. We strive to provide seamless global financial solutions in line with our long terms strategy of being Japan’s true global bank aligned with the three global trends of globalization, urbanization and digitization. With strategic coordination across business lines and group companies, CJL aims to continually develop its business and gain increased presence in the Japan market, leveraging its unique position as a locally incorporated foreign bank.
CJL has a long and distinguished history of over 110 years in Japan. We have a proud legacy as a bank of over 200 years of focusing our energy fully on our customers, delivering new innovations and market firsts, bringing the best of the world to our local clients, providing an excellent working environment, and investing in future growth. CJL continually looks to improve customer experience and operational excellence.
In CJL, the corporate banking business has a selected core group of relationships to which it leverages and delivers Citi's global strengths, providing high quality financial products, services and advice to help our clients succeed. For the retail banking business, on December 25, 2014, Citi announced that, as part of its strategy of further streamlining its Global Consumer Bank, it reached a definitive agreement to sell Citibank Japan Ltd.’s entire retail banking business to a trust bank subsidiary of Sumitomo Mitsui
Common Purpose One team, with one goal: serving our clients and stakeholders.
Responsible Finance Conduct that is transparent, prudent and dependable.
Ingenuity Enhancing our clients’ lives through innovation that harnesses the breadth and depth of our information, global network, and world-class products.
Leadership Talented people with the best training who thrive in a diverse meritocracy that demands excellence, initiative and courage.
6
Banking Corporation, including its Japan-wide network of retail branches, ATMs and about 740,000 customer accounts. The transaction is expected to close in late 2015, subject to regulatory approvals and other customary closing conditions.
CJL is committed to handle earnestly any consultation from Small and Medium-sized Enterprises customers related to business improvement or those related to the amendments to the existing lending conditions, etc. In addition, CJL will continue its best efforts to fulfill corporate social responsibility to local communities.
The Financial Service Agency of Japan (“FSA”) issued an administrative action against CJL on December 16, 2011. In response, CJL submitted a business improvement plan to the FSA on January 31, 2012. CJL takes this administrative action very seriously and implements the business improvement plan including all necessary measures to prevent future occurrence of the problems identified, and endeavors to sustain this improvement actions within the organization.
CJL takes seriously its obligations to confront in a resolute manner any undue demands from anti-social forces that threaten social order and safety.
CJL is committed to providing a working environment where its employees can thrive and achieve their full potential. The diversity of our workforce is a core value and a source of strength and pride for CJL and our clients. By attracting and training the best people, and providing them broad career development opportunities at every level, we aim to foster an environment where employees are able to provide our clients with outstanding financial products, services and advice that fit their needs over the long term.
CJL is proud of its contributions to a broad range of diversity and community initiatives. Our community activities focus broadly on improving access to financial education, assisting those with disabilities, promoting environmental and social sustainability, as well as development of the communities in which we operate. In addition we also continue to enhance the opportunities available to working parents through our childcare center in the office.
7
Business Outline
Retail Banking Division
In addition to using Citibank’s global platform to offer a wide variety of products and services, such as an ATM network that can be used overseas, market-leading foreign exchange transactions, and specially selected deposits, mutual funds, insurance products, bonds, and loans, the Retail Banking Division also provides customers in Japan with convenient services. Customers also think highly of the timely financial information and advice that a global financial institution can provide.
Citigold and Citigold Premium customers also have access to exclusive Citigold Centers at major bank
branches, where specially trained dedicated representatives provide advice and services that are
personally tailored to them. We work to improve our products and services to effectively meet the
diverse needs and lifestyles of our affluent customers and boost customer satisfaction.
As of January 1, 2015, Citibank’s financial network encompasses 32 branches and mini branches
(including Kansai mini office), two call centers providing services 24
hours a day, 365 days a year, an internet banking platform providing
optimal services to customers, plus 98 Citibank ATMs. We also have
an operating base of affiliated ATM network, including Japan Post
Bank locations, major banks, regional banks, and convenience stores.
Citibank also strives to improve online services, as well as the
security, product selection, functionality, and ease of use of our
Citibank Online personal banking site. We use this operating base
and the opinions of our customers to meet the needs of affluent
customers in major urban areas.
<Major Business Activities>
As part of a truly global bank in Japan, the Retail Banking Division provides a wide variety of financial services, from basic to highly specialized. These include a CD/ATM network that can be used in Japan and overseas, market-leading capabilities in foreign-currency transactions, a wide variety of investment opportunities such as specially selected deposit and investment products, insurance products, housing loans and other secured loans, and preferential customer services, such as Citigold and Citigold Premium.
In addition, to serving our customer’s needs, we offer a variety of products based on their risk tolerance. We analyze customer needs to strengthen our housing loan products and insurance products. We are working to expand the offerings of fixed-income bonds and structured notes for public issues and private placements.
Loans are one of Citibank’s primary services, and we are expanding our customer base by providing real estate investment loans, commercial real estate loans, and loans on securities to Citigold and Citigold Premium customers. And as of April 2014, in response to customer requests, we started selling low-interest housing loans with a revised fee structure.
In addition, to help meet our clients’ needs for medium and long-term investments we have continued to expand both the breadth of our Whole Life insurance product line-up denominated in both Japanese Yen and foreign currency as well as our alliance with world leading insurance companies to provide expert insurance specialists to better advise our customers regarding their insurance needs.
8
Corporate Banking Division
In corporate banking, CJL focuses on providing comprehensive global relationship management services to a targeted set of Japan’s largest multi-national companies and institutions. We coordinate and leverage Citi’s broad range of products and services, together with Citi’s unrivalled global network, in order to support the growth ambitions of our clients both here in Japan and around the globe. CJL’s Corporate Banking Division, located in Tokyo and Osaka, focuses on delivering innovative relationship-driven solutions for our clients’ needs related to both their day-to-day operations and their strategic business objectives.
Corporate Banking Division has a client group consisting of relationship managers and a product group responsible for Corporate Finance product development and offering. Citibank Japan Ltd. also has product groups in Transaction Services Division and in Markets Division. The client group and product groups together provide solutions to the diversified client needs. Each client group and product group coordinates across the respective global network within Citi, which enables us to build comprehensive relationships with our clients and their affiliates both in Japan and overseas. This has been the unique and unrivalled strength of Citi.
<Major Business Activities>
Our client coverage model consists of 5 departments: Global Industrials Dept., Global Corporates Dept., Financial Institutions Dept., Global Subsidiaries Group Dept. and Corporate Finance & Real Estate Dept. Each client coverage department is committed to serving the unique needs of their client set, by combining information and services with specialized Industry insight. By combining a deep understanding of each client’s unique needs with a view of key industry trends, we are in a position to tailor structured solutions to help our clients meet their growth ambitions. We focus on responding to our clients’ various day-to-day needs, as well as strategic business objectives by offering financing alternatives and bank capital in an effort to build and further deepen long term relationships.
Corporate Banking Division works closely with 3 product groups of Citibank Japan Ltd. - Transaction Services Division, Markets Division and Corporate Finance and Real Estate Department - to serve our clients and provide solutions that meet their needs.
<“Japan Desk”>
In coordination with "Japan Desks" within Citi's affiliates abroad, Corporate Banking Division has strengthened our capability to support our Japanese clients around the globe. "Japan Desks" are located in 10 countries and offer exclusive relationship management efforts by experienced bankers. Many of these Japan Desks provide coverage to neighboring countries and jurisdictions. Japan Desk network has become increasingly more available pan-regionally around the globe, covering North and South America, Europe, Middle East, Africa, and Asia. Citi’s Japan Desk Network is an unrivalled and unique service to our clients. Japan Desk bankers leverage their vast experiences in Japan, continue to build and further deepen great relationships with our clients and colleagues around the globe, and support our clients to meet their financial needs.
9
< Japan Desk Locations>
United Kingdom (London) Singapore
Russia (Moscow) China (Hong Kong)
India (Delhi) United States (New York)
Thailand (Bangkok) Brazil (Sao Paulo)
Indonesia (Jakarta) United Arab Emirates (Dubai)
●
●
●
●
●
●
●
●
● Japan Desk Locations
●
●
Global Markets
Financial Advice
Acquisition Finance
& Syndication Lending
Transaction Services
Managing Risks
Global Relationship Management
Investing Money Moving Money
Raising Money
Corporate Finance
Citi’s Japan Desks around the World
(As of July 1, 2015)
10
Transaction Services Division
Transaction Services Division provides various services in the Treasury and Trade Solutions (TTS) and Securities Services (SS) businesses. Our services integrate cash management, trade finance, and securities services to multinational corporations, financial institutions and public sector clients in Japan and around the world.
Transaction Services is closely aligned with three important on-going trends - globalization, urbanization and digitization – and as the business world continues to internationalize and our clients continue to expand globally, we have been stepping up support to assist our Japanese and other global clients expand.
Capability Leveraging the industry's largest proprietary network, we serve both the local and cross-border interests of clients. As Japanese companies continue the process of rapid globalization, Citi is positioned to be their partner and Global Bank. CJL Transaction Services is part of Citi’s global network servicing clients in over 100 countries and top cities in the world.
Experience Transaction Services is part of Citi’s legacy in Japan which dates back over 110 years to when we opened our first Japanese branch. We strive to be a trusted advisor on industry issues such as local securities markets, emerging markets, settlement risk, receivables and payment processes, securities infrastructure and technology integration to our clients, regulatory organizations and third-party partners.
Innovation Our on-line portal, CitiDirect BE and its mobile/tablet version are examples of Citi’s investments in innovation that add to our offering of solutions in Japan. We introduced a Japanese language version of our mobile smart phone application and tablet version, and provide our clients in Japan with treasury analytics and technology tools to enhance their efforts to effectively manage their businesses.
< Major Business Activities >
Treasury and Trade Solutions Citi serves our clients as an industry leader in cash management solutions. With 232 connections to cash clearing systems across the globe, Citi has a global infrastructure providing a wide range of innovative financial solutions. Our extensive network of qualified banking professionals provides a combination of local knowledge and global expertise to help meet clients’ strategic business goals.
Citi's portfolio of global cash management products offers tailored solutions to help manage collection and payment processes by establishing interfaces between the client’s treasury system and Citi's payment systems.
Trade Finance and Services Unit provides web-based, simple and quick supplier financing services not only for domestic purchases in Japan but also for purchases in foreign countries. Various risk-hedge solutions are provided to clients’ exports to help them effectively manage their risk and supply chains.
In addition to traditional financial support for exports and investments from Japan, our Export & Agency Finance Unit has started to provide new services such as medium-long term loans for overseas Japanese subsidiaries’ exports to emerging markets and agricultural commodities imported by our clients in Japan.
Securities Services In Securities Services, CJL supports foreign investors’ investment in Japanese securities through our stable capabilities in custody services. In addition to such traditional services, the introduction of innovative Third Party Clearing offerings allow our resident intermediary clients to focus on what matters most, to grow core businesses through our clearing and settlement outsourcing solutions. Our proprietary network is the largest in the industry covering 61 markets surpassing our closest competitor by over 20 markets.
11
Recent Global and Local Accolades and Awards
Global Finance World’s Best Treasury and Cash Management Providers 2014Best Overall Bank for Cash Management – Global
Global Finance World’s Best Global Banks 2014World’s Best Bank for Cash Management; Trade Finance
Global Finance 2014 World’s Best Internet Bank AwardsBest Overall Internet Bank- Global Best Corporate/Institutional Internet Bank – Global
The Banker – Bank of the Year Awards 2013 – Global
Euromoney –Awards for Excellence 2014Best Transaction Services House in Asia
GTR Leaders in Trade 2014Best Export Finance Bank in Asia Pacific
The Banker –Innovation in Banking and Technology and Transaction Banking 2013Innovation in Cash Management Most Innovative Global Transaction Bank
The Asset Triple A, Treasury, Trade & Risk Management Awards 2014Best Treasury & Cash Management Bank in Asia
Trade Finance – Awards for Excellence 2014- Best Trade Advisor in Asia
Asiamoney –Best Foreign Cash Management Bank in Japan 2014 as voted by Large Corporates
Asiamoney -#1 Global Cash Management Bank in Asia Pacific 2014 as voted by Large Corporates
Global Outperformer in Japan in Global Custodian's Agent Banks in Major Markets Survey 2014
Category Outperformer in Japan for Asset Servicing, Relationship & Client Service, Ancillary Servicesand Value Delivered Category in Global Custodian's Agent Banks in Major Markets Survey 2014
The Asset’s Triple A Asset Servicing Awards 2014, Best Custodian – Asia Cross-Border
The Asset’s Triple A Asset Servicing Awards 2014, Best Domestic Custodian in Japan
12
Markets Division
The Markets Division has a mission to provide foreign exchange, money market and derivative products and services to the customers of the Corporate Banking Division and the Transaction Services Division. The division focuses on market trades and aims to build a more robust transaction base for customers by providing more valuable information.
The Markets Division consists of two departments, Market Sales and Markets Treasury. The Market Sales Department consists of two units, Corporate FX Sales Unit and Corporate Derivative Sales Unit, and conducts foreign exchange and derivative transactions for the customers of the Corporate Banking Division and the Transaction Services Division. The Corporate FX Sales unit leverages Citigroup’s international network and global resources to deliver real-time information to the customers. The unit also provides various types of risk-management related advice and foreign exchange transaction support, building on its well-established and powerful presence as a “market maker” in the foreign exchange market. The Corporate Derivative Sales unit offers a wide range of derivative solutions to the customers, in order to satisfy their diverse needs. The Markets Treasury Department leverages Citigroup’s extensive international network to provide money market transactions in various currencies, in order to meet the customers’ funding and investment needs. Markets Treasury also acts as a funding department in CJL. Based on the policy decisions of the Asset Liability Committee, a sub-committee of CJL’s Management Committee, Markets Treasury ensures appropriate liquidity management and conducts banking account management as part of the comprehensive risk management framework, in coordination with the Corporate Treasury Unit, which is responsible for liquidity risk management.
13
List of CJL’s Major Activities
CJL provides the following services:
1. Acceptance of Deposits
Current deposit, savings deposit, time deposit, negotiable certificate of deposit, foreign currency
deposit, etc.
2. Fund Lending etc.
Loan on bills, loan on deeds, overdraft, discount of commercial bills, etc.
3. Fund Transfer, etc.
Outward/inward remittance, fund transfer and collection of payment
4. Foreign Exchange, etc.
Foreign exchange transactions (including foreign currency sales and purchase)
5. Others
(1) Guaranty of liabilities (acceptance of payments), issuance of letter of credit and
acceptance of bills
(2) Arrangement for syndicated loan
(3) Trade finance (purchase of trade notes, etc.)
(4) Investment / Trading in securities (Japanese government bonds, etc.)
(5) Acquisition or transfer of monetary claims, and securitization related services
(6) Handling of receipt of money and other affairs pertaining to money of Government of Japan,
local public authorities, and companies, etc.
(7) Dealing in financial derivatives (interest rate, currency, etc.)
(8) Over-the-counter sales of mutual funds and insurance products
(9) Safekeeping and transfer of securities, etc.
(10) Brokerage for clearing of securities, etc.
(11) Handling of private placement of securities
(12) Financial instruments intermediary service
(13) Money exchange
(14) Foreign Bank Agency Service
(15) Transaction service for electronically recorded monetary claims
14
Risk Management Framework
Risk Management Structure
CJL’s risk management framework balances strong corporate oversight by the Board of Directors with
well defined oversight roles and responsibilities amongst the Control functions covering the various
risk types.
CJL has the following three layers of risk management or control:
1) Risk ownership by the business divisions
2) Oversight by the control functions
3) Independent Assessment by Internal Audit
All three layers of control work together to achieve CJL’s shared goals with the following particular
items:
To maintain a highly effective control environment and to establish efficient, proactive risk
management; and
To foster appropriate solutions for our customers and to facilitate business growth in
accordance with agreed strategic goals and with the risk management capacity of CJL
CJL establishes a fundamental principle “Comprehensive Risk Management Policy” which is approved by Board of Directors and it defines its risk management structure. Additionally, CJL establishes “Comprehensive Risk Management Rules” to define its risk management procedures. CJL adopts a comprehensive risk management approach and a Comprehensive Risk Manager who oversees risks will ensure that Management Committee and the Board of Directors are kept advised of the risks of and to CJL in a comprehensive management.
Type of risk to be managed
CJL identifies credit risk, market risk, liquidity risk, and operational risk as major risks and those are
subjected to manage.
Credit Risk
1. Structure of Credit Risk Management:
Credit risk is the risk of loss arising from decline in asset value attributable to deterioration of
obligor’s credit condition. It includes the risk of difficulty to collect principal and interest due
to default of obligor and decline in credit value due to increase of reserves arising from
deterioration of obligor’s credit condition.
CJL establishes “Credit Risk Management Policies” which defines the fundamental principle
to comprehensively manage its credit risk in Corporate Banking Division and Retail Banking
Division.
In terms of credit management in each division, CJL also follows “Institutional Client Group
Risk Management Manual”, “Global Consumer Credit and Fraud Risk Policies” and “Global
Commercial Credit Policies” in order to set and govern credit risk management structure.
Furthermore, Credit Risk Management Committee (“CRMC”) is established and managed
by Head of the Risk Management Division to oversee CJL’s credit risk including the
management of self-assessment of assets with further involvement of management.
2. Procedure of Credit Risk Management:
CJL manages credit risk based on obligor analysis and whole portfolio analysis, monitoring
concentration of credit to certain industries, ratings, obligors on relationship basis and
delinquency trend of a portfolio. Such portfolio view of our credit exposures is reviewed and
reported to the Credit Risk Management Committee in a timely manner.
15
Market Risk / Liquidity Risk
1. Structure of Market Risk / Liquidity Risk Management:
Market risk is the risk of loss resulting from fluctuating value of financial asset and debt
position which CJL possesses or executes, reflecting market trend.
Liquidity risk is the risk of loss resulting from unavailability to secure sufficient asset liquidity
against debt due to rising financing costs or mismatch of use of funds and source of funds.
In CJL, market risk and liquidity risk management structures are established and operated in
accordance with the “Liquidity Risk Management Policy”, the “Market Risk Management
Policy” or related management policies. Furthermore, CJL has established Asset Liability
Committee (“ALCO”) which is chaired by President to oversee market risk and liquidity risk,
monitoring accrual portfolio and trading portfolio of CJL and managing balance sheet as well
as capital adequacy.
2. Procedure of Market / Liquidity Risk Management:
CJL Market Risk Management captures consolidated profiles of interest rates and durations
of the financial assets and liabilities, performs risk monitoring process using gap analysis
and interest rate factor sensitivity analysis, and reports the result to the ALCO meeting on a
monthly basis.
CJL’s market risk amount is measured by Value-at-Risk (“VaR”) method quantitatively and
its regulated compliance status is monitored.
ALCO is managing Liquidity Risk by monitoring various liquidity ratios such as Large Fund
Provider concentration ratio, Total Customer Deposits / Total Customer Loans ratio. ALCO is
also monitoring whether there is sufficient liquidity to meet all maturing obligations within 12
months under the Highly Stressed Market Disruption stress scenario.
Operational Risk
1. Structure of Operational Risk Management:
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
systems, or human factors, or from external events. It includes reputation and franchise
risks associated with CJL’s business practices or market conduct. It also includes the risk of
failing to comply with laws, regulations, ethical standards, regulatory administrative actions
or Citigroup policies.
To comprehensively manage operational risk, CJL establishes policies and rules for
operational risk which clearly defines risks, the control environment, as well as assessment
and reporting procedures. CJL separately manages its Jimu risk and System risk in
accordance with the established policies and standards. Moreover, CJL has established
Operational Risk Management Unit under Risk Management Division as a responsible unit
for comprehensive operational risk management. The status update of operational risk
management is reported to Business Risk, Compliance & Control Committee (“BRCC”), and
Jimu risk and System risk are reported to System and Operations Committee (“SOC”), with
further involvement of management.
2. Procedure of Operational Risk Management:
CJL adopts a Manager’s Control Assessment (“MCA”) program as a tool to manage
‘significant’ operational risks. The MCA is used to self-assess key operational risks and
controls and identify and address weaknesses in the design and/or effectiveness of internal
controls that mitigate significant operational risks. Corrective actions are monitored
continuously for full implementation. Results of MCA are reported to managements through
BRCC at quarter end.
Critical operational processes of each business department are reviewed periodically in
consideration of changes to the operational processes and regulatory environment, and
latest information shall be reflected into MCA.
16
Compliance Framework
Basic Policy
As a bank, CJL fully recognizes the importance of its social responsibilities and the public nature of its
business. We understand that conducting business with fairness and integrity based on the Code of
Conduct and in compliance with laws and regulations, etc. is the basic principle of our management.
Compliance Management Framework
CJL’s Compliance Division covers compliance related matters and is independent from businesses. The
Division consists of 5 units under the Head of Compliance Division; (i) Retail Banking Compliance Unit,
(ii) Corporate Banking Compliance Unit, (iii) Anti-Money Laundering Compliance Unit, (iv) Infrastructure
Unit and (v) Compliance Testing Unit. The first two units are responsible for compliance matters relevant
to businesses, AML Compliance Unit covers matters relevant to anti-social forces and the prevention of
money laundering, and Infrastructure Unit is responsible for matters relevant to overall banking
operations. Compliance Testing Unit has responsibility for testing to assure that controls over
compliance matters are reasonably designed and functioning effectively. The Compliance Division owns
the Code of Conduct and, in accordance with Compliance Policy, promotes compliance and cultivates a
compliance mindset, through following activities.
The Compliance Division reports compliance related issues and compliance status to the Business Risk,
Compliance and Control Committee and the Management Committee on a regular and ad-hoc basis.
Material issues are to be escalated to the Board of Director through the Management Committee.
Preventive Measures against Anti-Social Forces and Money Laundering
CJL considers that preventive measures against anti-social forces and money laundering are one of the
most important parts of legal compliance as a financial institution with public nature, and has continued
its efforts to establish a proper prevention framework.
Measures against the Breach of Legal Compliance
It is the responsibility of each of the directors and the employees to comply with the Code of Conduct that provides an overview of some of the key policies of which all need to be aware. We strongly encourage employees to raise concerns or questions regarding ethics and applicable laws, regulations and policies, and to report violations and suspected violations in accordance with the relevant internal policies. We believe that it is critical to identify issues at an early stage and proactively resolve those issues in order to maintain the highest standards of conduct required at a financial institution. CJL has established, in addition to the standard reporting procedures, an Ethics Hotline in order to properly take measures for a violation or a suspected violation of legal compliance.
Advice and support related to Compliance
Creation and execution of internal rules related to Compliance
Oversees the development and maintenance of adequate risk management systems related toCompliance
Education and training related to Compliance
Monitors legal and regulatory development that affect the Bank
Oversees the development and maintenance of adequate risk management systems related toAnti-Money Laundering activities, including customer identification and matters related to AntiSocial Forces
Conducts Compliance Testing
17
Diversity and CSR Activities
CJL pursues Corporate Social Responsibility (“CSR”) activities in alignment with Citi’s global policies
and priorities. We embrace the responsibility, as a socially responsible financial group, to make a
difference in the community and to promote environmental and social sustainability by building positive
relationships with customers, employees and their families, the community, and stakeholders. Through
our CSR activities, we respond to corporate governance and compliance initiatives and also reinforce
our commitment to Financial Education, Community Development, the Environment, Disaster Relief,
and Diversity with employees from various backgrounds and nationalities.
Financial Education
Citi's philosophy provides that, with financial education, everyone has the chance to make their dreams come true. Citi feels that this creates a need for financial education programs so that the next generation of children can learn not just about money and the economy, but also how to think effectively, and ultimately plan their careers and lives in order to realize their dreams.
Environment
We undertake various environmental activities by mobilizing our employees to act for the benefit of the earth and future generations. We aim to reduce our environmental footprint by embedding eco-friendly practices into our business and implementing green building practices.
Citi supports the environment in three key areas
Environment Conservation Activities
Environmental andSocial RiskManagement
EnvironmentallySustainableOperations
Community Development Disaster Relief
Citi places value on its relationship with the community where its employees and their families live and work. Through participating in running and fundraising events and helping out with community bazaars, we foster our relationship with the community. We fulfill our social responsibility by committing not only money but also by participating in programs physically.
Children in Need
Community in General
People with Disabilities
Tohoku
In addition to on-going philanthropic efforts, when disaster strikes, Citi strives to support the victims of natural catastrophes in a timely and compassionate manner. In support of relief activities both locally and in conjunction with global efforts, Citi employees give their own time and resources to bring some order to the lives of those affected. Citi in Japan supports employee efforts by matching monetary donations and helping organize non-monetary relief.
Diversity
We see diversity as a source of strength. Therefore, we have made it a priority to foster a culture where the best
people want to work, where people are promoted on their merits, where we value and respect others and where
opportunities to develop are widely available to all - regardless of differences. We encourage our employees to
participate and take responsibility for their engagement in diversity activities, internally and externally, which adds to
the richness of the society in which we live.
<Major Activities>
Improving career development for women;
Celebrating women’s success, International Women’s day 2015
Work-Life Balance
Encourage the hiring of people with disabilities
18
<List of CJL's locations in Japan>
As of July 2015
Locations (Head Office, Higashi-Shinjuku, Okinawa, 32 for Retail Banking, 2 for Corporate Banking) Total:37 (■ Retail Banking Manned Branch)
Head Office Shin-Marunouchi Building, 5-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo
Retail Banking
■Aoyama BranchAo, 3-11-7 Kita-Aoyama,
Minato-ku, Tokyo
■Akasaka BranchPrudential Plaza, 2-13-10 Nagata-cho, Chiyoda-ku, Tokyo
■Ikebukuro BranchG-Bldg. Minami Ikebukuro 01, 1-19-5 Minami-Ikebukuro,
Toshima-ku, Tokyo
■Ohtemachi BranchOte Center Bldg., 1-1-3 Ohtemachi, Chiyoda-ku, Tokyo
■Ginza BranchKurosawa Bldg.,6-9-2 Ginza, Chuo-ku, Tokyo
■Gotanda BranchGotanda Hata Bldg., 2-2-3
Higashi-Gotanda, Shinagawa-ku, Tokyo
■Shibuya BranchDogenzaka Kabuto Bldg., 2-25-12 Dogenzaka, Shibuya-ku, Tokyo
■Jiyugaoka Mini BranchOkuzumi Bldg., 1-26-14
Jiyugaoka, Meguro-ku, Tokyo
■Shinjuku Higashiguchi BranchCitibank Shinjuku Bldg., 3-19-4 Shinjuku, Shinjuku-ku, Tokyo
■Shinjuku Minamiguchi BranchKubo Bldg., 2-9-2 Yoyogi,
Shibuya-ku, Tokyo
■Shinjuku Minamiguchi BranchConsulting Center Shinjuku Maynds Tower, 2-1-1 Yoyogi, Shibuya-ku, Tokyo
■Kichijoji Mini BranchIwasaki Kichijoji Bldg., 1-15-9
Kichijoji-Honcho, Musashino-shi, Tokyo
■Tachikawa BranchSuzuharu Bldg., 2-7-16 Akebono-cho, Tachikawa-shi, Tokyo
■Nihonbashi BranchNihonbashi Kato Bldg., 2-1-14 Nihonbashi, Chuo-ku, Tokyo
■Hiroo BranchHIROO REEPLEX B’s, 5-15-27
Minami-Azabu, Minato-ku, Tokyo
■Yokohama BranchYokohama First Bldg., 1-6-1 Kita-Saiwai, Nishi-ku, Yokohama-shi, Kanagawa
■Aobadai Mini BranchAobadai Tokyu Square South-2, 1-7-1
Aobadai, Aoba-ku, Yokohama-shi, Kanagawa
■Fujisawa Mini Branch2002. K&S Bldg., 2-8 Minami-Fujisawa, Fujisawa-shi, Kanagawa
■Chiba BranchSencity Tower, 1000 Shinmachi,
Chuo-ku, Chiba-shi, Chiba
■Urawa BranchUrawa Nikko Bldg., 2-1-23 Takasago, Urawa-ku, Saitama-shi, Saitama
■Umeda BranchABC-MART Umeda Bldg., 1-27 Chayamachi, Kita-ku, Osaka-shi, Osaka
■Osaka Ekimae BranchOsaka Dai-ichi Seimei Bldg., 1-8-17
Umeda, Kita-ku, Osaka-shi, Osaka
■Shinsaibashi BranchMidosuji Diamond Bldg., 2-1-2 Nishi-Shinsaibashi, Chuo-ku, Osaka-shi, Osaka
■Ashiya BranchHotel Takezono Ashiya, 10-1
Ohara-cho, Ashiya-shi, Hyogo
■Kobe BranchS.Yoshimatsu Bldg., 8-1-17 Gokodori, Chuo-ku, Kobe-shi, Hyogo
■Kyoto BranchK・I Shijo Bldg., 88 Kankoboko-cho,
Shijodori-Muromachi-Higashiiru, Shimogyo-ku, Kyoto-shi, Kyoto
■Nagoya BranchSakae Parkside Place, 3-16-27
Nishiki, Naka-ku, Nagoya-shi, Aichi
■Nagoya Station Mini BranchOffice Tower, JR Central Towers, 1-1-4 Meieki, Nakamura-ku, Nagoya-shi, Aichi
■Sapporo BranchHokkaido Bldg., 1-banchi, Kita 2-jo, Nishi 4-chome, Chuo-ku, Sapporo-shi,
Hokkaido
■Fukuoka BranchTenjin-nishidori Business Center 2-8-30 Tenjin, Chuo-ku, Fukuoka-shi, Fukuoka
Internet Branch Shinjuku Eastside Square, 6-27-30
Shinjuku, Shinjuku-ku, Tokyo
Kansai Mini Office Midosuji Diamond Bldg., 2-1-2 Nishi-Shinsaibashi, Chuo-ku, Osaka-shi, Osaka
Corporate Banking ・ Others
Osaka Branch Midosuji Diamond Bldg., 2-1-2
Nishi-Shinsaibashi, Chuo-ku, Osaka-shi, Osaka
Yamabuki Branch Shinjuku Eastside Square, 6-27-30 Shinjuku, Shinjuku-ku, Tokyo
Higashi-Shinjuku Sub-Branch Shinjuku Eastside Square, 6-27-30 Shinjuku, Shinjuku-ku, Tokyo
Okinawa Sub-Branch Tomari Port Terminal Bldg.,3-25-1
Maejima, Naha-shi, Okinawa
19
Citibank Japan Ltd.
Financial Information under Japanese GAAP For the fiscal year ended March 31, 2015
20
1. Matters Related to Principal Business
< Business Overview>
Results of Operations for Fiscal Year ended March 31, 2015
We had a net loss of 4.4 billion yen for the year ended March 31, 2015 compared to net income of 1.3billion yen for the prior fiscal year.
Ordinary income totaled 66.3 billion yen, down by 2.0 billion yen from the prior fiscal year.
Interest income totaled 27.9 billion yen, down by 2.3 billion yen from the prior fiscal year. Fees and commissions totaled 20.9 billion yen, down by 0.5 billion yen from the prior fiscal year. Other ordinary income totaled 16.6 billion yen, up by 1.4 billion yen from the prior fiscal year. Other income totaled 0.5 billion yen, down by 0.6 billion yen from the prior fiscal year.
Ordinary expenses totaled 69.7 billion yen, up by 4.3 billion yen from the prior fiscal year.
Interest expense totaled 4.5 billion yen, up by 1.0 billion yen from the prior fiscal year. Fees and commissions paid totaled 2.5 billion yen, up by 0.3 billion yen from the prior fiscal year. Trading losses totaled 0.2 billion yen, down by 0.1 billion yen from the prior fiscal year. General and administrative expenses totaled 61.4 billion yen, up by 2.7 billion yen from the prior
fiscal year. Other expenses totaled 0.8 billion yen, up by 0.5 billion yen from the prior fiscal year.
Ordinary loss was 3.4 billion yen compared to ordinary profit of 2.8 billion yen in the prior fiscal year.
Extraordinary loss of 2.5 billion yen represents write-off of certain software pertaining the retailbusiness divestiture.
Loss before income taxes (including extraordinary income and loss) was 6.0 billion yen compared toincome before income taxes of 2.8 billion yen in the prior fiscal year.
Assets, liabilities, net assets, cash flows, and capital adequacy ratio were as follows;
As of March 31, 2015, total assets were 5,057.2 billion yen, up by 543.2 billion yen compared toMarch 31, 2014.
Cash and deposits to other banks (due from banks) totaled 3,093.5 billion yen, up by 1,251.6billion yen from the prior fiscal year end.
Call loans were 3.3 billion yen, down by 236.8 billion yen from the prior fiscal year end. Receivables under resale agreements were 468.8 billion yen, down by 262.8 billion yen from the
prior fiscal year end. Trading assets were 36.1 billion yen, down by 145.3 billion yen from the prior fiscal year end. Available for sales securities (“AFS securities”) were 500.9 billion yen, down by 284.3 billion yen
from the prior fiscal year end. Loans and bills discounted totaled 485.1 billion yen, up by 128.8 billion yen from the prior fiscal
year end.
As of March 31, 2015, total liabilities were 4,804.9 billion yen, up by 547.3 billion yen compared toMarch 31, 2014.
Deposits totaled 3,924.8 billion yen, up by 288.8 billion yen from the prior fiscal year end. Negotiable certificates of deposit totaled zero, down by 6.0 billion yen from the prior fiscal year end. Foreign exchanges totaled 523.0 billion yen, up by 176.7 billion yen from the prior fiscal year end.
21
As of March 31, 2015, total net assets were 252.3 billion yen, down by 4.0 billion yen from the priorfiscal year end.
Cash flows from operating activities in the year totaled 814.5 billion yen (Inflow). Cash from investingactivities was 281.8 billion yen (Inflow). As a result, cash and cash equivalents as of the end of theperiod totaled 2,376.8 billion yen.
The capital adequacy ratio (Basel3 National standards) at the end of the period was 30.26%.(Basel3 National standards as of March 31, 2014 25.72%).
22
<Summary of Principal Business/Financial Indicators> (Millions of Yen)
Ordinary income 96,399 75,908 64,668 68,305 66,302
Ordinary profit (loss) 18,132 5,847 (1,541) 2,867 (3,478)
Net income (loss) 12,509 1,796 (1,983) 1,339 (4,454)
Capital stock 123,100 123,100 123,100 123,100 123,100
Total Net assets 262,022 265,083 262,823 256,350 252,315
Total assets 4,244,847 4,336,501 4,374,568 4,513,946 5,057,241
Deposits 3,399,295 3,510,460 3,541,504 3,636,024 3,924,867
Loans and bills discounted 250,088 299,056 330,614 356,243 485,111
Available for sale (AFS) securities 756,974 826,775 858,729 785,273 500,962
Total shares issued (thousand shares) 244,200,000 244,200,000 244,200,000 244,200,000 244,200,000
Capital adequacy ratio (National standard) 25.16% 28.77% 28.47% 25.72% 30.26%
Dividend payment ratio 487.64% - - 477.77% -
Number of employees 1,676 1,796 1,852 1,835 1,728
March 2015
Year end
(Apr. 1, 2014
- Mar. 31, 2015)
March 2011
Year end
(Apr. 1, 2010
- Mar. 31, 2011)
March 2012
Year end
(Apr. 1, 2011
- Mar. 31, 2012)
March 2013
Year end
(Apr. 1, 2012
- Mar. 31, 2013)
March 2014
Year end
(Apr. 1, 2013
- Mar. 31, 2014)
23
<Principal Business/Financial Indicators>
Gross operating profit (Millions of Yen)
Domestic International Total Domestic International Total
Interest income 6,126 24,180 30,306 5,888 22,021 27,909
Interest expenses 156 3,361 3,517 133 4,455 4,588
Fees and commissions 12,488 9,033 21,522 13,308 7,659 20,968
Fees and commissions paid 1,569 721 2,291 1,698 899 2,598
Trading income - - - 383 (201) 182
Trading losses (423) 858 434 (15) 315 299
Other ordinary income 369 14,898 15,267 731 15,967 16,699
Other ordinary expenses 254 - 254 2 11 13
17,428 43,170 60,599 18,494 39,765 58,259
0.74% 2.48% 1.49% 0.63% 2.35% 1.26%
Gross operating profit
Gross operating profit ratio
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Interest income and expenses
Fees and commission
Trading income and losses
Other ordinary income and
expenses
(Notes)
1. Domestic operations are yen-denominated transactions and international operations are foreign currency-denominated transactions
conducted in Japan. However, non-resident yen-denominated transactions and offshore account transactions, etc. are included in the international operations.
2. Gross operating profit ratio =(gross operating profit / average balance of interest-earning assets) x 100 ÷ (the number of days of
the period / 365)
24
Average balance, Interest and Yield of Interest-Earning Assets / Interest-Bearing Liabilities (Millions of Yen)
Domestic
operations
International
operations Total
Domestic
operations
International
operations Total
Average balance 2,325,595 1,735,540 4,061,136 2,926,124 1,688,220 4,614,345
Interest 6,126 24,180 30,306 5,888 22,021 27,909
Yield (%) 0.26 1.39 0.74 0.20 1.30 0.60
Average balance 168,665 182,506 351,172 152,565 336,380 488,946
Interest 1,929 2,462 4,391 1,681 5,742 7,423
Yield (%) 1.14 1.34 1.25 1.10 1.70 1.51
AFS securities Average balance 887,739 5,852 893,591 685,877 5,759 691,636
Interest 2,883 120 3,004 2,184 120 2,304
Yield (%) 0.32 2.06 0.33 0.31 2.09 0.33
Call loans Average balance 12,087 177,520 189,607 10,373 88,614 98,988
Interest 10 546 557 8 324 333
Yield (%) 0.08 0.30 0.29 0.08 0.36 0.33
Average balance 383,691 367,692 751,383 293,042 428,577 721,620
Interest 323 4,835 5,159 167 5,487 5,654
Yield (%) 0.08 1.31 0.68 0.05 1.28 0.78
Average balance 3,428 49 3,478 4,910 6 4,916
Interest 54 0 55 68 0 68
Yield (%) 1.59 1.07 1.58 1.39 1.02 1.39
Average balance 868,896 821,516 1,690,412 1,777,874 653,676 2,431,551
Interest 888 15,503 16,392 1,757 9,732 11,490
Yield (%) 0.10 1.88 0.96 0.09 1.48 0.47
Average balance 1,884,837 2,127,235 4,012,073 2,071,235 2,403,316 4,474,552
Interest 156 3,361 3,517 133 4,455 4,588
Yield (%) 0.00 0.15 0.08 0.00 0.18 0.10
Deposits Average balance 1,858,314 1,995,174 3,853,489 2,057,527 1,824,182 3,881,710
Interest 138 3,342 3,481 125 4,427 4,552
Yield (%) 0.00 0.16 0.09 0.00 0.24 0.11
Average balance 22,604 - 22,604 2,115 - 2,115
Interest 14 - 14 0 - 0
Yield (%) 0.06 - 0.06 0.04 - 0.04
Call money Average balance - 166 166 378 1,355 1,733
Interest - 0 0 0 1 1
Yield (%) - 0.08 0.08 0.00 0.09 0.07
Borrowed money Average balance 11 - 11 8 - 8
Interest 0 - 0 0 - 0
Yield (%) 0.20 - 0.20 0.09 - 0.09
Negotiable certificates
of deposit
Loans and bills
discounted
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Interest-earning assets
Interest-bearing liabilities
Due from banks with
interest
Monetary claims
bought
Receivables under
resale agreements
(Notes)
1. Average balance of foreign currency-denominated transactions in Japan, which are classified as international operations, iscalculated based on the daily basis.
2. Average balance of and interest accrued from borrowing and lending between domestic and international operations are offset.
3. Due from bank without interest is excluded from Interest-earning assets and the amount equivalent to Money held in trust isexcluded from Interest-bearing liabilities.
25
Analysis of interest received / paid (Millions of Yen)
Domestic
operations
International
operationsTotal
Domestic
operations
International
operationsTotal
Volume-related increase (decrease) 1,889 522 4,610 1,582 (659) 4,093
Rate-related increase (decrease) (3,703) (3,048) (8,951) (1,821) (1,499) (6,491)
Net increase (decrease) (1,814) (2,526) (4,340) (238) (2,158) (2,397)
Volume-related increase (decrease) (142) 454 291 (183) 2,061 1,722
Rate-related increase (decrease) (244) (51) (274) (65) 1,218 1,309
Net increase (decrease) (386) 402 16 (248) 3,280 3,031
AFS Securities Volume-related increase (decrease) 338 (1) 343 (645) (1) (666)
Rate-related increase (decrease) (2,148) 1 (2,153) (53) 1 (33)
Net increase (decrease) (1,810) - (1,810) (699) - (699)
Call loans Volume-related increase (decrease) 0 282 258 (1) (266) (262)
Rate-related increase (decrease) (1) (77) (55) (1) 45 38
Net increase (decrease) (1) 204 202 (2) (221) (223)
Volume-related increase (decrease) (3) 4,222 624 (72) 797 (202)
Rate-related increase (decrease) (54) 165 3,705 (84) (146) 697
Net increase (decrease) (57) 4,387 4,330 (156) 651 494
Volume-related increase (decrease) 1 0 1 23 0 22
Rate-related increase (decrease) 0 - (1) (9) 0 (9)
Net increase (decrease) 0 0 0 13 0 13
Volume-related increase (decrease) 360 (8,279) (831) 908 (3,155) 7,114
Rate-related increase (decrease) 89 793 (6,205) (39) (2,615) (12,016)
Net increase (decrease) 449 (7,486) (7,037) 869 (5,771) (4,902)
Volume-related increase (decrease) 18 742 527 15 436 369
Rate-related increase (decrease) (201) (1,749) (1,716) (38) 657 700
Net increase (decrease) (182) (1,006) (1,189) (23) 1,093 1,070
Deposits Volume-related increase (decrease) 16 704 583 14 (273) 25
Rate-related increase (decrease) (151) (1,695) (1,709) (28) 1,358 1,045
Net increase (decrease) (135) (991) (1,126) (13) 1,084 1,071
Volume-related increase (decrease) (44) - (44) (12) - (12)
Rate-related increase (decrease) (3) - (3) (1) - (1)
Net increase (decrease) (48) - (48) (14) - (14)
Call money Volume-related increase (decrease) - 0 0 0 0 1
Rate-related increase (decrease) - 0 0 - 0 0
Net increase (decrease) - 0 0 0 1 1
Borrowed Money Volume-related increase (decrease) 0 (7) (7) 0 - 0
Rate-related increase (decrease) 0 - 0 0 - 0
Net increase (decrease) 0 (7) (7) 0 - 0
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Negotiable
certificates of
deposit
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
Interest received
Interest paid
Loans and bills
discounted
Receivables under
resale agreements
Due from banks
with interest
Monetary claims
bought
(Note)Changes due to a combination of volume - and rate - related increase (decrease) have been included in rate - related
increase (decrease).
26
Yield on interest-earning assets, Yield on interest-bearing liabilities, Net yield/Interest rate (%)
Domestic International Total Domestic International Total
Yield on interest-earning
assets0.26 1.39 0.74 0.20 1.30 0.60
Yield on interest-bearing
liabilities including
general expenses
1.73 1.35 1.53 1.59 1.31 1.44
Net yield / Interest rate (1.47) 0.04 (0.79) (1.39) (0.01) (0.84)
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Fees and commissions (Millions of Yen)
Domestic International Total Domestic International Total
12,488 9,033 21,522 13,308 7,659 20,968
Fees and commissions on fund
transfer1,671 4,391 6,062 1,771 3,677 5,448
Other fees and commissions 10,816 4,642 15,459 11,537 3,982 15,520
1,569 721 2,291 1,698 899 2,598
Fees and commissions on fund
transfer436 307 744 459 311 771
Other fees and commissions 1,133 413 1,546 1,238 587 1,826
10,918 8,312 19,231 11,610 6,759 18,370Fees and commissions profit
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Fees and commissions
Fees and commissions paid
27
Trading income and losses (Millions of Yen)
Domestic International Total Domestic International Total
Trading income - - - 383 (201) 182
Gains on trading account
securities transactions- - - - - -
Gains on securities and
derivatives related to
trading transactions
- - - 383 (201) 182
Gains on trading-related
derivatives transactions- - - - - -
Other trading income - - - - - -
Trading losses (423) 858 434 (15) 315 299
Losses on trading
securities and Derivatives- - - - - -
Losses on securities and
derivatives related to
trading transactions
(386) 603 217 - - -
Losses on trading-related
derivatives transactions(37) 255 217 (15) 315 299
Other trading losses - - - - - -
Trading profit 423 (858) (434) 399 (516) (117)
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
28
Other ordinary income and expenses (Millions of Yen)
Domestic International Total Domestic International Total
Other ordinary income 369 14,898 15,267 731 15,967 16,699
Gains on foreign
exchange transactions- 13,930 13,930 - 14,092 14,092
Gains on sales of bonds 351 - 351 725 - 725
Gains on redemption of
bonds- - - - - -
Income from derivatives
other than for trading or
hedging
- - - - - -
Others 17 968 986 5 1,875 1,881
Other ordinary expenses 254 - 254 2 11 13
Losses on foreign
exchange transactions- - - - - -
Losses on sales of
bonds254 - 254 2 - 2
Losses on redemption of
bonds- - - - - -
Losses on devaluation of
bonds- - - - - -
Expenses on derivatives
other than for trading or
hedging
- - - - - -
Others - - - 0 11 11
Other ordinary profit 115 14,898 15,013 729 15,956 16,685
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
29
General and administrative expenses (Millions of Yen)
Salary 20,680 20,950
Accrued pension cost 3,457 4,562
Welfare expenses 137 94
Depreciation cost 1,758 1,215
Rental fees on land, buildings, and machinery 5,348 5,660
Maintenance cost 131 215
Supplies cost 315 370
Utilities cost 134 134
Expenses of business trip 240 190
Communication charge 1,071 964
Advertising expenses 967 910
Membership, Contribution and Business promotion 187 188
Tax and public charges 1,239 1,635
Others 22,975 24,344
Total 58,645 61,437
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Profit ratio (%)
Ordinary profit to total assets 0.06 (0.06)
Ordinary profit to capital (net assets) 1.10 (1.36)
Net income to total assets 0.02 (0.08)
Net income to capital (net assets) 0.51 (1.74)
March 2014 Year end
(Apr. 1, 2013 - Mar. 31, 2014)
March 2015 Year end
(Apr. 1, 2014 - Mar. 31, 2015)
Ordinary profit / (Number of days of the period / 365)
Average balance of total assets (excl. customers' liabilities for acceptances and guarantees)
Ordinary profit / (Number of days of the period / 365)
(Beginning net assets + net assets)/2
Net income / (Number of days of the period / 365)
Average balance of total assets (excl. customers' liabilities for acceptances and guarantees)
Net income / (Number of days of the period / 365)
(Beginning net assets + net assets)/2
×100
= ×100
×100
×100
=
=
=
Ordinary profit to total assets
Ordinary profit to capital (net assets)
Net income to total assets
Net income to capital (net assets)
30
<Indicators for Deposits>
Average balance by deposit type (Millions of Yen)
Domestic International Total Domestic International Total
Liquid deposits 1,744,069 - 1,744,069 1,953,558 - 1,953,558
Time deposits 108,068 - 108,068 97,020 - 97,020
Negotiable certificates of
deposit22,604 - 22,604 2,115 - 2,115
Others 6,176 1,995,174 2,001,351 6,948 1,824,182 1,831,131
Total 1,880,919 1,995,174 3,876,094 2,059,642 1,824,182 3,883,825
As of Mar. 31, 2014 As of Mar. 31, 2015
(Note) Liquid deposits = current deposits + ordinary deposits + saving deposits + deposits at notice
Time deposits balance by remaining tenor (Millions of Yen)
Less
than
3 months
Over 3
months
,
less
than 6
months
Over 6
months
,
less
than 1
year
Over 1
year,
less
than 2
years
Over 2
years,
less
than 3
years
Over 3
yearsTotal
Less
than
3 months
Over 3
months
,
less
than 6
months
Over 6
months
,
less
than 1
year
Over 1
year,
less
than 2
years
Over 2
years,
less
than 3
years
Over 3
yearsTotal
Fixed interest
time deposits62,911 14,527 11,471 1,416 408 4 90,739 70,496 12,205 9,649 1,210 338 7 93,907
Floating
interest time
deposits
- - - - 125 - 125 - - - 125 - - 125
Others - - - - - - - - - - - - - -
Total 62,911 14,527 11,471 1,416 534 4 90,865 70,496 12,205 9,649 1,336 338 7 94,033
As of Mar. 31, 2014 As of Mar. 31, 2015
31
<Indicators for Loans and Bills Discounted>
Balance by loan type
(1) Balance at the end of period
Domestic International Total Domestic International Total
Loans on bills 8,318 1,287 9,605 10,565 1,645 12,210
Loans on deeds 116,585 198,057 314,642 116,084 288,810 404,894
Overdrafts 20,479 10,816 31,295 14,959 52,412 67,372
Bills discounted 699 - 699 632 - 632
Total 146,082 210,161 356,243 142,243 342,867 485,111
(Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
(2) Average balance
Domestic International Total Domestic International Total
Loans on bills 22,588 601 23,189 9,864 1,432 11,297
Loans on deeds 123,322 170,823 294,145 119,617 290,993 410,610
Overdrafts 22,400 11,082 33,482 22,343 43,955 66,299
Bills discounted 354 - 354 739 - 739
Total 168,665 182,506 351,172 152,565 336,380 488,946
(Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Balance of loans and bills discounted by remaining tenor (Millions of Yen)
Less
than
1 year
Over 1
year,
less
than 3
years
Over 3
years,
less
than 5
years
Over 5
years,
less
than 7
years
Over 7
yearsTotal
Less
than
1 year
Over 1
year,
less
than 3
years
Over 3
years,
less
than 5
years
Over 5
years,
less
than 7
years
Over 7
yearsTotal
Fixed interest
loans and bills discounted17,834 15,559 15,125 85 456 49,061 17,508 15,138 14,073 98 124 46,943
Floating interest
loans and bills discounted121,921 36,348 30,802 20,078 98,031 307,182 118,315 68,819 73,738 57,439 119,854 438,168
Total 139,755 51,908 45,927 20,164 98,487 356,243 135,823 83,957 87,812 57,538 119,979 485,111
As of Mar. 31, 2014 As of Mar. 31, 2015
32
Balance of loans and bills discounted by collateral type (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Type of collateral pledged Loans and bills discounted Loans and bills discounted
Deposits 7,087 6,325
Securities 3,311 3,908
Claims - -
Commodities - -
Real estates 55,441 63,090
Foundations - -
Others 6,780 18,700
Sub-total 72,620 92,025
Guarantees 82,538 78,831
Clean credits 201,084 314,254
Total 356,243 485,111
Balance of customers’ liabilities for acceptances and guarantees by collateral type (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Deposits 10,358 8,068
Securities 41,838 72,198
Claims - -
Commodities - -
Real estates - -
Foundations - -
Others - -
Sub-total 52,197 80,267
Guarantees - -
Clean credits 48,433 58,848
Total 100,630 139,115
Type of collateral pledgedCustomers' liabilities for acceptances
and guarantees
Customers' liabilities for acceptances
and guarantees
Balance of loans and bills discounted by use (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Lending for equipments 140,475 154,321
Lending for operations 215,767 330,789
Total 356,243 485,111
33
Balance of loans and bills discounted by industry (Millions of Yen)
Amount (%) Amount (%)
Domestic
Manufacturing 17,834 5.01% 59,582 12.28%
Agriculture / Forestry - - - -
Fishery - - - -
Mining - - - -
Construction - - - -
Electric/gas/heat supply/water - - - -
Information and telecommunications 6,757 1.90% 540 0.11%
Shipping / transportation 7,000 1.96% 18,864 3.89%
Wholesale / retail 51,420 14.43% 43,752 9.01%
Finance / insurance 70,277 19.72% 73,257 15.10%
Real estate 8,795 2.47% 13,122 2.71%
Other Services 4,255 1.21% 1,152 0.23%
Central / Local government - - - -
Individuals 63,729 17.89% 65,942 13.60%
Overseas 126,174 35.41% 208,896 43.07%
Total 356,243 100% 485,111 100%
As of Mar. 31, 2014 As of Mar. 31, 2015
Balance of loans and bills discounted for small and medium size businesses (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Total loans and bills discounted (A) 356,243 485,111
Balance of loans for small and medium size
corporations etc. (B)163,742 262,659
(B) / (A) 45.96% 54.14%
(Note) Small and medium size corporation etc. refers as followings; - companies with its capital less than or equal to 300 million yen (100 million yen for wholesale businesses and 50 million yen
for retail sale and services businesses), or - companies with its full-time employees less than or equal to 300 on the payroll (100 for wholesale, 50 for retail sale and 100
for services), or
- individuals.
Balance of specified overseas claims
None
34
Loans - to - deposits ratio(%)
Domestic International Total Domestic International Total
Balance at the end of period 7.85 11.79 9.78 7.10 17.82 12.35
Average balance 8.96 9.14 9.05 7.40 18.44 12.58
As of Mar. 31, 2014 As of Mar. 31, 2015
(Note) Negotiable certificates of deposit are included in “deposits”.
Allowance for loan losses (Millions of Yen)
CategoryBeginning
balanceIncreased Decreased
Ending
Balance
Beginning
balanceIncreased Decreased
Ending
Balance
Allowance for general loan
losses1,159 1,014 1,159 1,014 1,014 1,245 1,014 1,245
Allowance for specific loan
losses2,266 913 2,266 913 913 1,044 913 1,044
Specified overseas claim
reserve account- - - - - - - -
Total 3,426 1,928 3,426 1,928 1,928 2,290 1,928 2,290
As of Mar. 31, 2014 As of Mar. 31, 2015
Loan write-offs
None
Risk management Loans (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Bankrupt loans - 4
Past due loans/non-accrual loans 1,264 1,902
Past due loans (3 months or more) 1,181 459
Restructured loans 36 175
Total 2,482 2,542
(Notes)
1. “Bankrupt loans” are loans on which accrued interest income is not recognized as there is substantial doubt about the ultimatecollectability of either principal or interest because they are past due for a considerable period of time or for other reasons (excluding write-offs, hereinafter “non-accrual loans”), and as defined in Article 96-1-3 and 96-1-4 of the Enforcement Ordinance
of the Japanese Corporate Tax Law. 2. “Past due loans/non-accrual loans” are loans on which accrued interest income is not recognized, excluding “Bankrupt loans” and
loans on which interest payments are deferred in order to support the borrowers’ recovery from financial difficulties.
3. “Past due loans (3 months or more)” are loans on which the principal or interest is past due for three months or more from the next day of prescribed payment date, excluding “bankrupt loans” and “Past due loans/non-accrual loans”.
4. “Restructured loans” are loans on which terms and conditions have been amended in favor of the borrowers (e.g., reduction of
the original interest rate, deferral of interest payments, extension of principal repayments or debt forgiveness) in order to support the borrowers’ recovery from financial difficulties, excluding “bankrupt loans,” “past due loans/non-accrual loans” and “past due loans (3 months or more)”.
35
Claims under the Financial Reconstruction Law (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Bankrupt / De facto Bankrupt 769 911
In Danger of Bankrupt 495 995
Need attention 1,217 635
Subtotal (A) 2,483 2,542
Normal 571,122 754,372
Total (B) 573,605 756,915
(A) / (B) 0.43% 0.33%
(Notes) 1. “Bankrupt / De facto Bankrupt” are claims to bankrupt borrowers in the event of filing for commencement of bankruptcy,
corporate reorganization, rehabilitation proceedings and loans pursuant to these proceedings.
2. “In Danger of Bankrupt” are claims of which borrowers are not in bankruptcy but their financial status and business performancedeteriorate, with a low collectability of principal and interest under the terms and conditions of the contract.
3. “Need attention” are Past due loans (3 months or more) and Restructured loans from “Risk management loans”.
4. “Normal” are claims classified as other than the credit listed in 1 to 3 above, with no problems seen with borrowers ’ financialstatus and business performance.
36
<Indicators for Securities >
Average balance of securities related to trading transactions (Millions of Yen)
As of Mar. 31, 2014 As of Mar. 31, 2015
Trading Japanese government bonds 176,956 79,526
Trading municipal bonds - -
Trading government guaranteed bonds - -
Other trading securities 17,555 16,916
Total 194,512 96,442
Balance of AFS securities by remaining tenor (Millions of Yen)
CategoryUp to 1
year
1 - 5
years
5 - 10
years
Over 10
years
Indefinite
termTotal
Up to 1
year
1 - 5
years
5 - 10
years
Over 10
years
Indefinite
termTotal
Japanese
government bonds85,167 641,130 38,147 - - 764,446 120,408 358,983 2,093 - - 481,484
Municipal bonds - - - - - - - - - - - -
Corporate bonds - - - 15,022 - 15,022 - - - 13,779 - 13,779
Stocks - - - - - - - - - - - -
Foreign bonds - 5,804 - - - 5,804 - 5,698 - - - 5,698
Foreign stocks - - - - - - - - - - - -
Others - - - - - - - - - - - -
Total 85,167 646,935 38,147 15,022 - 785,273 120,408 364,681 2,093 13,779 - 500,962
As of Mar. 31, 2014 As of Mar. 31, 2015
Average balance of AFS securities (Millions of Yen)
Domestic International Total Domestic International Total
Japanese government bonds 872,297 - 872,297 671,459 - 671,459
Municipal bonds - - - - - -
Corporate bonds 15,441 - 15,441 14,418 - 14,418
Stocks - - - - - -
Foreign bonds - 5,852 5,852 - 5,759 5,759
Foreign stocks - - - - - -
Others - - - - - -
Total 887,739 5,852 893,591 685,877 5,759 691,636
As of Mar. 31, 2014 As of Mar. 31, 2015
37
AFS securities - to - deposits ratio (%)
Domestic International Total Domestic International Total
Balance at the end of period 41.90 0.32 21.56 24.74 0.29 12.76
Average balance 47.19 0.29 23.05 33.30 0.31 17.80
As of Mar. 31, 2014 As of Mar. 31, 2015
(Note) Negotiable certificates of deposit are included in “deposits.”
38
2. Financial Statements Financial figures has been audited by KPMG AZSA LLC based on article 396, paragraph 1 of the Corporation Act. <Balance Sheet>
(Millions of Yen)
As of March 31, 2014 As of March 31, 2015
Amount AmountAsset
Cash and due from banks 1,841,877 3,093,519
Cash 6,878 7,707
Due from banks 1,834,999 3,085,811
Call loans 240,203 3,365
Receivables under resale agreements 731,656 468,825
Monetary claims bought 4,281 4,675
Trading assets 181,452 36,121
Securities related to trading transactions 155,602 21,377
Derivatives of securities related to trading transactions 0 -
Trading-related f inancial derivatives 25,849 14,744
Securities 785,273 500,962
Government bonds 764,446 481,484
Corporate bonds 15,022 13,779
Other securities 5,804 5,698
Loans and bills discounted 356,243 485,111
Bills discounted 699 632
Loans on bills 9,605 12,210
Loans on deeds 314,642 404,894
Overdrafts 31,295 67,372
Foreign exchanges 111,584 127,098
Due from foreign banks (our accounts) 19,597 28,111
Due from foreign banks (their accounts) 17,086 26,541
Foreign bills bought 73,441 70,541
Foreign bills receivable 1,459 1,903
Other assets 155,896 194,637
Prepaid expenses 1,690 1,292
Accrued income 5,177 5,344
Accrued income tax refunds - 635
Initial margins of futures markets 57 109
Variation margins of futures markets 4 56
Derivatives other than for trading-assets 126,282 158,513
Cash collateral paid for f inancial instruments 12,686 21,262
Others 9,996 7,423
Tangible f ixed assets 2,463 2,090
Buildings 1,780 1,381
Construction in progress - 275
Other tangible f ixed assets 682 433
Intangible f ixed assets 2,074 573
Softw are 2,074 573
Prepaid pension costs 398 -
Deferred tax assets 1,835 3,435
Customers’ liabilities for acceptances and guarantees 100,630 139,115
Allow ance for loan losses (1,928) (2,290)
Total assets 4,513,946 5,057,241
Account Name
39
(Millions of Yen)
As of March 31, 2014 As of March 31, 2015
Amount AmountLiabilities
Deposits 3,636,024 3,924,867
Current deposits 273,435 285,034
Ordinary deposits 1,479,005 1,609,135
Time deposits 90,865 94,033
Other deposits 1,792,717 1,936,663
Negotiable certif icates of deposit 6,000 -
Call money - 1,803
Trading liabilities 26,155 14,865
Derivatives of securities related to trading transactions 2 18
Trading-related f inancial derivatives 26,153 14,847
Borrow ed money 4 7
Borrow ings from other banks 4 7
Foreign exchanges 346,211 523,010
Due to foreign banks (their accounts) 339,263 523,010
Due to foreign banks (our accounts) 6,948 -
Foreign bills payable 0 -
Other liabilities 140,701 197,861
Domestic exchange settlement account (credit) 339 297
Income taxes payable 1,417 218
Accrued expenses 2,965 3,775
Unearned revenue 1,279 1,259
Variation margins of futures markets 0 -
Derivatives other than for trading-liabilities 125,322 165,130
Cash collateral received for f inancail instruments 3,995 19,481
Asset retirement obligations 719 683
Others 4,663 7,013
Provision for bonuses 447 459
Provision for directors' bonuses 94 77
Provision for retirement benefits 1,044 2,481
Provision for directors' retirement benefits 51 50
Other provision 229 325Acceptances and guarantees 100,630 139,115
Total liabilities 4,257,595 4,804,926
Net AssetsCapital stock 123,100 123,100Capital surplus 121,100 121,100
Legal capital surplus 121,100 121,100Retained earnings 9,396 5,503
Legal retained earnings 2,000 2,000Other retained earnings 7,396 3,503
Retained earnings brought forw ard 7,396 3,503Total shareholders' equity 253,596 249,703
Valuation difference on AFS securities 2,753 2,612Total valuation and translation adjustments 2,753 2,612
Total net assets 256,350 252,315Total liabilities and net assets 4,513,946 5,057,241
Account Name
40
< Statement of Income >
(Millions of Yen)
68,305 66,302
Interest income 30,306 27,909
Interest on loans and bills discounted 4,391 7,423
Interest and dividends on securities 3,004 2,304
Interest on call loans 557 333
Interest on receivables under resale agreements 5,159 5,654
Interest on deposits with banks 16,392 11,490
Other interest income 801 702
Fees and commissions 21,522 20,968
Fees and commissions on fund transfer 6,062 5,448
Other fees and commissions 15,459 15,520
Trading income - 182
Gains on securities and derivatives related to trading transactions - 182
Other ordinary income 15,267 16,699
Gains on foreign exchange transactions 13,930 14,092
Gains on sales of bonds 351 725
Others 986 1,881
Other income 1,208 542
Reversal of allowance for loan losses 653 -
Recoveries of written-off claims 6 4
Gain on investments in money held in trust 0 -
Others 548 537
65,437 69,780
Interest expenses 3,517 4,588
Interest on deposits 3,481 4,552
Interest on negotiable certificates of deposit 14 0
Interest on call money 0 1
Interest on borrowings and rediscounts 0 0
Interest on interest swaps 1 -
Other interest expenses 19 33
Fees and commissions paid 2,291 2,598
Fees and commissions on fund transfer 744 771
Other fees and commissions 1,546 1,826
Trading Losses 434 299
Losses on securities and derivatives related to trading transactions 217 -
Losses on trading-related derivatives transactions 217 299
Other ordinary expenses 254 13
Losses on sales of bonds 254 2
Others - 11
General and administrative expenses 58,645 61,437
Other expenses 294 842
Provision of allowance for loan losses - 396
Others 294 445
2,867 (3,478)
- -
28 2,557
Losses on disposal of fixed assets 28 1,174
Others - 1,382
2,839 (6,036)
Income taxes - current 1,624 54
Income taxes - deferred (124) (1,636)
Total income taxes 1,499 (1,582)
1,339 (4,454)
Account NameFrom April 1, 2013
to March 31, 2014
From April 1, 2014
to March 31, 2015
Ordinary income
Income (loss) before income taxes
Net income (loss)
Ordinary expenses
Ordinary profit (loss)Extraordinary incomeExtraordinary loss
41
<Statement of Changes in Net Assets>
From April 1, 2013 to March 31, 2014
(Millions of Yen)
Other retained
earnings
Retained
earnings
brought forward
Balance at beginning
of the period123,100 121,100 121,100 2,000 12,457 14,457 258,657 4,170 (3) 4,166 262,823
Changes in amounts
during the period
Dividends of
retained earnings(6,400) (6,400) (6,400) (6,400)
Net income 1,339 1,339 1,339 1,339
Net changes in
amounts other
than
shareholders'
equity
(1,416) 3 (1,412) (1,412)
Total changes in
amounts during the
period
- - - - (5,060) (5,060) (5,060) (1,416) 3 (1,412) (6,472)
Balance at the end
of the current period123,100 121,100 121,100 2,000 7,396 9,396 253,596 2,753 - 2,753 256,350
Legal
retained
earnings
Shareholders' equity
Capital stock Total
shareholders'
equity
Valuation
difference on
AFS securities
Deferred gains
or losses on
hedges
Capital surplus Retained earnings
Valuation and translation adjustments
Total valuation
and translation
adjustments
Total net
assets
Legal capital
surplus
Total Capital
surplus
Total retained
earnings
From April 1, 2014 to March 31, 2015
(Millions of Yen)
Other retained
earnings
Retained
earnings brought
forward
Balance at beginning
of the period123,100 121,100 121,100 2,000 7,396 9,396 253,596 2,753 - 2,753 256,350
Cumulative effects
of changes in
accounting policies
560 560 560 560
Restated balance 123,100 121,100 121,100 2,000 7,957 9,957 254,157 2,753 - 2,753 256,911
Changes in amounts
during the period
Net loss (4,454) (4,454) (4,454) (4,454)
Net changes in
amounts other
than
shareholders'
equity
(141) (141) (141)
Total changes in
amounts during the
period
- - - - (4,454) (4,454) (4,454) (141) - (141) (4,595)
Balance at the end
of the current period123,100 121,100 121,100 2,000 3,503 5,503 249,703 2,612 - 2,612 252,315
Deferred gains
or losses on
hedges
Total valuation
and translation
adjustments
Legal capital
surplus
Total Capital
surplus
Shareholders' equity Valuation and translation adjustments Total net
assetsCapital stock Capital surplus Retained earnings Total
shareholders'
equity
Valuation
difference on
AFS securities
Legal
retained
earnings
Total retained
earnings
42
< Statement of Cash Flows >
(Millions of Yen)
Cash flows from operating activities
Income (loss) before income taxes 2,839 (6,036)
Depreciation 1,758 1,215
Increase (decrease) in allowance for loan losses (1,497) 361
Increase (decrease) in provision for bonuses (93) 11
Increase (decrease) in provision for retirement benefits (46) 1,437
Interest income (30,306) (27,909)
Interest expenses 3,517 4,588
Losses (gains) on sales of AFS securities (97) (723)
Losses (gains) on foreign exchanges (110) (33)
Losses (gains) on dispositions of fixed assets 28 1,174
Net decrease (increase) in trading assets (45,923) 145,331
Net increase (decrease) in trading liabilities (25,192) (11,289)
Net decrease (increase) in money held in trust 10 -
Net decrease (increase) in loans and bills discounted (25,628) (128,867)
Net increase (decrease) in deposits 94,519 288,843
Net increase (decrease) in negotiable certificates of deposit (29,000) (6,000)
Net decrease (increase) in due from banks (excluding cash equivalents) 627,970 (155,269)
Net decrease (increase) in call loans (68,165) 236,838
Net increase (decrease) in call money - 1,803
Net increase (decrease) in borrowed money 2 2
Net decrease (increase) in foreign exchanges - assets 6,437 (15,513)
Net increase (decrease) in foreign exchanges - liabilities 240,071 176,799
Interest received - cash basis 35,559 30,124
Interest paid - cash basis (3,521) (3,842)
Net increase (decrease) in reserve for others (107) 77
Net decrease (increase) in receivables under resale agreements (42,818) 262,831
Net decrease (increase) in monetary claims bought (899) (393)
Net decrease (increase) in other assets 87,701 (36,797)
Net increase (decrease) in other liabilities (147,643) 57,613
Others, net 1 (10)
Sub-total 679,365 816,367
Income taxes paid - cash basis (1,022) (1,855)
Income taxes refunded - cash basis 364 -
Net cash provided by (used in) operating activities 678,707 814,512
Cash flows from investing activities
Purchases of AFS securities (420,914) (102,755)
Proceeds from sales of AFS securities 199,177 348,826
Proceeds from redemption of AFS securities 290,696 36,299
Purchases of tangible fixed assets (253) (346)
Proceeds from sales of tangible fixed assets 1 -
Purchases of intangible fixed assets (530) (158)
Others, net - (39)
Net cash provided by (used in) investing activities 68,176 281,826
Cash flows from financing activities
Dividend paid (6,400) -
Net cash provided by (used in) financing activities (6,400) -
Effect of foreign exchange rate changes on cash and cash equivalents 110 33
Net increase (decrease) in cash and cash equivalents 740,595 1,096,371
Cash and cash equivalents at the beginning of the fiscal year 539,843 1,280,438
Cash and cash equivalents at the end of the fiscal year 1,280,438 2,376,810
Account NameFrom April 1, 2014
to March 31, 2015
From April 1, 2013
to March 31, 2014
43
Amounts less than one million yen have been omitted.
Accounting Policies 1. Standard for valuation of trading assets and trading liabilities / booking of income and losses for trading
purposes transaction
Transactions for trading purposes, such as seeking gains arising from short-term changes in interest rates, foreign
exchange rates, or securities prices and other market related indices or from variation among markets (hereinafter
referred to as “Trading Purposes”), are included in “Trading assets” or “Trading liabilities” on the balance sheet on a
trade date basis. Income and Expenses on trading-purpose transactions are recognized on a trading date basis,
and recorded as “Trading income” and “Trading losses”.
Securities and monetary claims purchased for trading purposes are stated at the fiscal year-end market value, and
financial derivatives such as swaps, futures and options are stated at amounts that would be settled if the
transactions were terminated at the fiscal year-end.
“Trading income” and “Trading losses” include interest received or paid during the fiscal year. The year-on-year
valuation differences of securities and money claims are also recorded in the above-mentioned accounts. As for the
derivatives, assuming that the settlement will be made in cash, the year-on-year valuation differences are also
recorded in the above-mentioned accounts.
2. Standard and method for valuation of AFS securitiesAFS securities that have market prices are carried at their balance sheet date market prices (cost of securities sold
is calculated using primarily the moving-average method). Net unrealized gains/losses on AFS securities, net of
income taxes, are included in “Net assets”.
3. Standard and method for valuation of derivative transactionDerivative transactions (excluding those for trading purposes) are carried at fair value.
4. Depreciation method for fixed assets (1) Tangible fixed assets
Tangible fixed assets are depreciated using the declining-balance method.
The estimated useful lives are as follows:
Buildings: 3 to 18 years
Others: 3 to 20 years
(2) Intangible fixed assets
Intangible fixed assets are depreciated using the straight-line method. Capitalized software for internal use is
depreciated over its estimated useful life (mainly 5 years).
5. Standard for the translation into Japanese yenAssets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate
prevailing at the balance sheet date.
6. Standard for Allowance(1) Allowance for loan losses
Allowance for loan losses is provided as detailed below in accordance with the internal standards for write-offs
and provisioning.
For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal
proceedings (“bankrupt borrowers”) or borrowers that are not legally or formally insolvent but are regarded as
substantially in the same situation (“effectively bankrupt borrowers”), an allowance is provided based on the
amount of claims, after the write-off stated in the additional paragraph below, net of the expected amount of
recoveries from collateral and guarantees. For claims on borrowers that are not currently bankrupt but are
perceived to have a high risk of falling into bankruptcy, an allowance is provided in the amount deemed
necessary based on an overall solvency assessment of the claims, net of the expected amount of recoveries
from collateral and guarantees. For other claims, an allowance is provided based on the expected loan-loss
ratio assigned to each risk rating.
Responsible divisions for Self-Assessment and Front office mutually conduct assessment of all claims in
accordance with the internal rules for self-assessment of assets, and the Internal Audit Division, independently
audits their assessment. The allowance is provided based on the results of these assessments.
(2) Provision for bonuses
Provision for bonuses is reported in preparation for the payment of bonuses to the employees at the amount
estimated for the payment of bonuses to the employees during the fiscal year.
44
(3) Provision for directors’ bonuses
Provision for directors’ bonuses is reported in preparation for the payment of bonuses to the directors at the
amount estimated for the payment of bonuses to the directors during the fiscal year.
(4) Provision for retirement benefits
Provision for retirement benefits is reported in preparation for the payment of employee retirement allowance in
the amount deemed accrued at the period, based on the projected retirement benefit obligation and the fair
value of plan assets at the fiscal year-end. The basis for period recognition for the estimated retirement benefits
adopts the benefit formula prorates approach. The unrecognized prior service cost and actuarial differences are
recognized as profit and loss as follows;
Unrecognized prior service cost:
Amortized using the straight-line method for a period, primarily over 7 years, within the employees’
average remaining service period, commencing on the fiscal year in which the services are provided.
Actuarial differences:
Amortized using the straight-line method, primarily over 7 years, within the employees’ average
remaining service period, commencing from the next fiscal year of incurrence.
(5) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is reported in preparation for the payment of director retirement
allowance out of directors’ estimated allowance for the amount allocable to the period.
7. Method for hedge accountingThe exceptional method is applied to certain interest rate swaps that meet the criteria for the exceptional
treatments. No assessment is performed for hedge effectiveness of qualifying interest rate swaps accounted for by
the exceptional treatments, as it is ascertained that the criteria for the exceptional treatments are continually met.
8. Accounting for consumption taxesNational and Local Consumption Taxes are excluded from transaction amounts.
Changes in Accounting policies (Accounting Standard for Retirement Benefits)
CJL has adopted the body of Paragraph 35 of the “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, May 17, 2012) and the body of Paragraph 67 of the “Application Guideline for Accounting Standard Related to Retirement Benefits” (ASBJ Guideline No. 25, May 17, 2012) from this fiscal year. The calculation method for retirement benefit obligation and service costs were changed, where the basis for period recognition for the estimated retirement benefits was changed from the total service prorate approach to the benefit formula prorate approach. In addition, the method for determining the discount rate was changed from a method based on the expected average years of the future benefit payment for the plan to a method based on the single weighted average discount rate that reflects the estimated period and amount of benefit payment in each period.
As for the application of the Accounting Standard for Retirement Benefits, etc., in accordance with Paragraph 37 of the same Standard that specifies transitional arrangements, the amount of financial impact resulting from the change in calculation method of retirement benefit obligations and service costs were added to or deducted from retained earnings at the beginning of this fiscal year.
As a result, the amount of Prepaid pension costs increased by 871 million yen and the amount of Retained earnings increased by 560 million yen at the beginning of fiscal year. The impacts on Ordinary loss and Loss before income taxes for this fiscal year are immaterial.
45
Notes to Balance Sheet
1. For securities held as collateral under “receivables under resale agreements” and “derivative transactions” which
can be sold or pledged without restrictions, 10,410 million yen were pledged and 492,994 million yen were held by
CJL as of March 31, 2015.
2. Bankrupt loans were 4 million yen and Past due loans/non-accrual loans were 1,902 million yen.
“Bankrupt loans” are loans on which accrued interest income is not recognized as there is substantial doubt aboutthe ultimate collectability of either principal or interest because they are past due for a considerable period of timeor for other reasons (excluding write-offs, hereinafter “non-accrual loans”), and as defined in Article 96-1-3 and 96-1-4 of the Enforcement Ordinance of the Japanese Corporate Tax Law.
“Past due loans/non-accrual loans” are loans on which accrued interest income is not recognized, excluding
“Bankrupt loans” and loans on which interest payments are deferred in order to support the borrowers’ recovery
from financial difficulties.
3. Past due loans (3 months or more) totaled 459 million yen.
“Past due loans (3 months or more)” are loans on which the principal or interest is past due for three months or
more, excluding “Bankrupt loans” and “Past due loans/non-accrual loans”.
4. Restructured loans totaled 175 million yen.
“Restructured loans” are loans on which terms and conditions have been amended in favor of the borrowers (e.g.
reduction of the original interest rate, deferral of interest payments, extension of principal repayments or debt
forgiveness) in order to support the borrowers’ recovery from financial difficulties, excluding “Bankrupt loans,” “Past
due loans/non-accrual loans” and “Past due loans (3 months or more)”.
5. The total amount of “Bankrupt loans”, “Past due loans/non-accrual loans”, “Past due loans (3 months or more)” and
“Restructured loans” were 2,542 million yen.
Claims shown from 2 to 5 are the amounts before the appropriate allowance.
6. Bills discounted are treated as financial transactions in accordance with JICPA Industry Audit Committee Report
No.24. CJL has rights to sell or pledge bank acceptance bought, commercial bills discounted, documentary bills and
foreign bills bought without restrictions. The total face value was 71,174 million yen.
7. AFS securities of 481,484 million yen and Trading assets of 3,348 million yen were pledged as collateral for
settlements of FX transactions. In addition, other assets include Cash collateral paid for financial instruments of
21,262 million yen, initial margins of futures markets 109 million yen and other guarantee deposits of 4,350 million
yen.
8. Overdraft facilities and commitment line contracts on loans are agreements to lend to customers up to a prescribed
amount, as long as there is no violation of any condition established in the contracts.
The amount of unused commitments was 392,000 million yen and the amount of those with remaining period within
one year was 311,377 million yen.
Since many of these commitments are expected to expire without being drawn upon, the total amount of unused
commitments does not necessarily represent actual future cash flow requirements. Many of these commitments
include clauses under which we can reject an application from customers or reduce the contract amounts in the
event that economic conditions change, we need to secure claims, or other events occur. In addition, we may
request the customers to pledge collateral such as premises and securities at the time of the contracts, and take
necessary measures such as monitoring customers’ financial positions, revising contracts when need arises and
securing claims after contracts are made on a periodic basis.
9. Accumulated depreciation on tangible fixed assets: 6,960 million yen.
10. Non-cancellable operating lease is as follows;
Future minimum rental payments;
Within one year 721 million yen
Over one year 333 million yen
11. Monetary assets to affiliates amounted to 850,444 million yen.
12. Monetary liabilities to affiliates amounted to 1,010,997 million yen.
46
13. Dividend is subject to the limitation of article 18 of the Banking law. Under the Banking law of Japan, 20% of the
retained earnings decreased by dividends shall be appropriated as a Legal retained earnings until the aggregate
amount of Legal capital surplus and Legal retained earnings equals the amount of Capital stock.
47
Notes to Statement of Income
1. Others shown in Extraordinary loss is mainly software related expenses derived from retail business divestiture.
2. Income from transactions with affiliates
Total income of funding transaction 9,658 million yen
Total income of fees and commissions 1,665 million yen
Total income of other ordinary transactions 14,264 million yen
Total income of other transactions 5,440 million yen
Expenses from transactions with affiliates
Total expenses of funding transaction 2,242 million yen
Total expenses of fees and commissions 292 million yen
Total expenses of other ordinary transactions 11 million yen
Total expenses of other transactions 5,870 million yen
3. Information with respect to related party transaction is as follows.
Settlement of
foreign exchange
489,084
(*2)
Due to
foreign banks
(their accounts)
441,958
Guarantees
&
fee
―
4
Fx
&
Derivative
91,649
(*3)
Other
liabilities91,649
Business
transaction
&
interest
348,086
(*2)
2,218
Deposit
Accrued
expenses
459,754
860
Business
transaction
&
interest
611,057
(*2)
9,404
Due from banks
Accrued
income
701,855
2,108
Funding /
Lending―
100%
(indirect)Banking
USD 751
Million
South
Dakota,
United
States of
America
Citibank, N.A.Parent
Amount
(million yen)
Name of
account
Balance at
Year end
(million yen)Directors Business
BusinessPercentage of
stocks owned
Content of relationsDescription of
transactionRelation Name Address Capital
Fx
&
Derivative
87,218
(*3)
Other
Assets87,218
Customers’
liabilities for
acceptances and
guarantees
Unearned
revenue
9,565
14
*1 Condition of transactions and its policy are decided as same as third party transactions.*2 Average balance for amount of transaction*3 Valuation difference based on year end market rate.
48
Notes to Statement of Changes in Net Assets
The types and number of our shares outstanding are as follows:
(Thousands of Shares)
Number of shares
at beginning of the
period
Number of shares
increased during
the period
Number of shares
decreased during
the period
Number of shares
at end of the
period
Memo
Common stock 244,200,000 - - 244,200,000
Total 244,200,000 - - 244,200,000
Notes to Statement of Cash flow
Cash and Cash Equivalents consist of cash and due from Bank of Japan included in Cash and Due from Banks on the
balance sheet.
As of March 31, 2015 (Millions of Yen)
Cash and Due from Banks 3,093,519
Due from Banks excluding Bank of Japan (716,708)
Cash and Cash Equivalents 2,376,810
49
Notes related to Financial Instruments
1.Disclosure on Financial Instruments
(1) Policy on Financial Instruments
CJL is engaged in banking operations such as taking deposits, extending credits such as loans, fund transfer
and cash clearing in the Yen and foreign currencies and investment of funds in such assets as marketable
securities. For the Banking Book Portfolio arising across these business activities, CJL conducts Asset and
Liability Management (“ALM”), that is comprehensive management of its assets and liabilities, with the objective
of management of liquidity risk arising from mismatch of the duration of assets and liabilities, reduction of funding
cost and enhancement of efficiency in the investment activities. As part of this effort, CJL enters into certain
derivative transactions. In its management of the Banking Book Portfolio, CJL’s principal source of funding is
deposits from its retail and institutional customers. The funds acquired from these sources are invested primarily
in securities (mainly in Japanese government bonds), loans to customers and deposits to Citibank, N.A. entities.
(2) Types of and Risks associated with Financial Instruments
Financial assets CJL holds are principally loans to institutional and retail customers in Japan and overseas,
marketable securities and placements to the bank subsidiaries of Citigroup Inc. to which CJL belongs. Of these
financial assets, loans exposes CJL to credit risk as well as risks arising from material adverse changes in
economic, political, and social environments.
Marketable securities are mainly in Japanese government bonds with low credit risk. These are exposed to
interest rate risk and market price risk.
As to funding, CJL’s funding sources are stable, consisting of deposits from retail and institutional customers,
and group companies. These funding activities associate liquidity risk in which CJL may not be able to repay
timely on maturities and interest rate risk.
Derivative contracts include interest rate swaps, currency swaps, and forward FX for ALM purposes.
In addition, we have trading bonds as well as trading positions that include interest rate related derivatives and
currency related derivatives. These financial products expose CJL to such risks as interest rate risk, foreign
exchange rate risk, price risk and credit risk.
(3) Risk Management System relating to Financial Instruments
① Credit Risk Management
CJL establishes consistent risk management framework and controls credit risks related to loans etc. by credit
analysis conducted on transaction basis, controlling credit line, credit information, internal obligor risk rating,
pledge of guarantee and collateral and managing classified or delinquent accounts, in accordance with Credit
Risk Management Policy and related standards and procedures.
Credit risk management is undertaken by Risk Management Division and the status is reported periodically to
Credit Risk Management Committee (“CRMC”, as a sub-committee of the Management Committee) and
Board of Directors’ meeting (“BOD”). In addition, the status of the credit management is reviewed by internal
auditors periodically.
Issuer credit risk and credit risk of derivatives counterparties are managed through Credit Risk Management
Services Unit and Portfolio Management Unit in Risk Management Division obtaining credit information and
marked-to market exposures periodically
② Market Risk Management
(A) Risk Management of Banking Book
CJL manages interest-rate risks on banking book through ALM. The risk management methods and
procedures are clearly described in the "Market Risk Management for Accrual Portfolios Policy and
Standards". CJL monitors and reviews its activity implementation status, also discusses action plans in the
monthly Asset Liability Committee (“ALCO”) meeting as per the ALCO Regulation which has been
approved by the Management Committee.
On a day to day basis, Market Risk Management Unit captures consolidated profiles of interest rates and
durations of the financial assets and liabilities, performs risk monitoring process using the gap analysis and
interest rate factor sensitivity analysis, and reports the results to the ALCO meeting on a monthly basis. For
the purpose of hedging interest rate risks, CJL transacts some derivative trades such as interest rate swaps.
50
(B) Risk Management of Trading Book
CJL mainly manages interest-rate risks and foreign exchange price risks on trading book following the
Market Risk Management Policy and ALCO Regulation approved by Management Committee. CJL's
market risk amount is measured by Value-at-Risk (“VaR”) method and its regulated compliance status is
monitored and reported to ALCO meeting on a monthly basis.
(C) Quantitative information on Market Risks
a) Trading purpose financial instruments
CJL adopted the Monte Carlo Method that simulates variance and covariance estimated from the historical
times series data for VaR calculation (holding period of one day, with the confidence level of 99%) for
trading purpose securities and trading purpose derivative products.
CJL market risk amount for trading activities (probable loss amount) as of March 31, 2015 was 64 million
yen.
CJL also conducts VaR back testing which is a comparative analysis of the VaR result calculated by the
validated model against the actual profit and loss (P&L). As per the VaR back testing result for the period of
April 2014 through March 2015, no exception was observed. However, VaR still may not pick up all
probability of event under unpredictable market conditions so long as it is based on the certain probability
calculated by statistical method using historical market movement.
b) Non-trading purpose financial instruments
In CJL, the main financial instruments which to be influenced by interest rates as one of the key risk
variables are, “Placements”, "Loans and bills discounted", "AFS securities", "Deposits", “Negotiable
certificate of deposits”, "Borrowings" and "Reverse Repo". On the financial Assets and Liabilities, CJL
calculates the effect amounts on profits and losses in the next one year when simulating reasonably
expected moving range in the quantitative analysis for the purpose of managing interest rate risks. With
respect to the revenue effect amount calculation, CJL splits respective financial asset and liability balances
into groups of fixed or floating rate groups by tenor buckets responding to holding maturities and applies the
interest rate moves by tenors. CJL has exercised results that the net income before taxes would increase
by 1,941 million yen on the scenario that interest rate to increase by 100 basis points (1%) for total portfolio,
by 3,726 million yen on the scenario that benchmark JPY interest rate to increase by 100 basis points (1%)
as of March 31, 2015. On the same basis, CJL's net income before taxes would decrease by 1,938 million
yen on the scenario that benchmark USD interest rate to increase by 100 basis points (1%). These results
are based on the stable risk variables excluding interest rates, and no correlation between interest rates
and other risk variables are considered in the calculation. In case of any unexpected moves over the 100
basis points (1%) moving range, there can be larger effect than the reported effect amounts on P&L.
③ Management of Liquidity Risk associated with Funding Activities
Liquidity risk management has been regulated by related policies and procedures. ALCO, which is subject to
supervision of the Management Committee, has been constituted to ensure that CJL maintains adequate
liquidity, has sufficient capital to meet regulatory and business needs, has appropriate funding for business
growth. ALCO's monitoring and reviewing of capital, liquidity, balance sheet and the banking account
management is an integral part of the overall risk management framework of CJL.
(4) Supplement Explanation for Fair Value of Financial Instruments
Fair value of financial instruments includes market prices as well as reasonably calculated prices in cases where
there are no market prices available. Since the calculations of such prices are implemented under certain
conditions and assumptions, the result of calculations may vary if different assumptions are used.
51
2.Fair Value of Financial Instruments
Fair value and balance sheet amount of financial instruments as of March 31, 2015 are shown below.
(Millions of Yen)
Balance sheet
amountFair value Difference
(1) Cash and due from banks 3,093,519 3,097,614 4,095
(2) Call loans 3,365 3,365 -
(3) Receivables under resale agreements 468,825 467,718 (1,106)
(4) Monetary claims bought (*1) 4,666 4,666 -
(5) Trading assets
Trading securities 21,377 21,377 -
(6) Securities (*1)
Other securities 500,962 500,962 -
(7) Loans and bills discounted 485,111
Allowance for loan losses (*1) (1,941)
483,169 493,391 10,222
(8) Foreign exchange (*1) 127,029 127,029 -
Total Assets 4,702,914 4,716,125 13,210
(1) Deposits 3,924,867 3,925,946 1,078
(2) Call money 1,803 1,803 -
(3) Foreign exchange 523,010 523,010 -
Total Liabilities 4,449,682 4,450,760 1,078
Derivative transactions (*2)
Trading (6,682) (6,682) -
Total derivative transactions (6,682) (6,682) -
Others Contract amount Fair value
Overdraft facilities and commitment line(*3) 392,000 1,428
(*1) General allowance for loan losses and specific allowance for loan losses provided to “Loans and bills discounted”
are separately shown in the above table. Allowance for loan losses provided to “Monetary claims bought”,
“Securities” and “Foreign exchange” are directly deducted from the book value due to immateriality.
(*2) Derivatives included in “Trading assets”, “Trading liabilities”, “Other assets” and “Other liabilities” are shown
together. Negative amount indicates in case of liabilities exceeding the assets. (*3) Contract amount of Overdraft facilities and commitment line are unused amount.
(Notes) Valuation method of financial instruments
(Assets)
(1) Cash and due from banks
For due from banks without maturity, the carrying amount is presented as the fair value, as the fair value
approximates such carrying amount. For due from banks with maturity, fair value is determined as present value
of total future cash flows, discounted by interest rate that would be applied to new acceptances. Total future cash
flows are contractual payment of principal and interest. For due from banks with short remaining period (within 1
year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.
(2) Call loans
For Call loans, the carrying amount is presented as the fair value, as the fair value approximates such carrying
amount because they have short remaining period (within 1 year).
(3) Receivables under resale agreements
For Receivables under resale agreements with remaining period exceeding 1 year, fair value is determined as
present future cash flows, discounted by interest rate that would be applied to new acceptance. Total future cash
flows are contractual payment of principal and interest.
For Receivables under resale agreements with short remaining period (within 1 year), the carrying amount is
presented as the fair value, as the fair value approximates such carrying amount.
52
(4) Monetary claims bought
For monetary claims bought, the carrying amount is presented as the fair value, as the fair value approximates
such carrying amount because they have short remaining period (within 1 year).
(5) Trading assets
For securities such as bonds that are held for trading, the fair value is calculated based on their market prices.
(6) Securities
For securities such as bonds that are available for sale, the fair value is calculated based on their market prices.
(7) Loans and bills discounted
For loans without maturity, the carrying amount is presented as the fair value, as the fair value approximates
such carrying amount because of their estimated maturity length and the interest rate conditions. For loans with
short remaining period (within 1 year), the carrying amount is presented as the fair value, as the fair value
approximates such carrying amount.
For loan with remaining period exceeding 1 year, fair value is determined as present value of total future cash
flows, discounted by interest rate that would be applied to newly accepted loans. Total future cash flows are
contractual payment of principal and interest.
As for the loans to bankrupt, de facto bankrupt, and potentially bankrupt borrowers, credit loss is estimated
based on factors such as the present value of expected future cash flow or the expected amount to be collected
from collaterals and guarantees. Since the fair value of these items approximates the carrying amount net of the
currently expected credit loss amount, such carrying amount is presented as the fair value.
(8) Foreign exchange
Foreign exchanges consist of foreign currency deposits with other banks (due from other foreign banks), short-
term loans involving foreign currencies (due from other foreign banks), export bills etc. (purchased foreign bills),
and loans on notes using import bills (foreign bills receivables). For these items, the carrying amount is
presented as the fair value, as the fair value approximates such carrying amount because most of these items
are deposits without maturity or have short contract term (within 1 year).
(Liabilities)
(1) Deposits
For demand deposits, the amount payable on demand as of balance sheet date is considered to be the fair value.
Time deposits are grouped by certain maturity lengths. The fair value of such deposits is the present value
discounted by expected future cash flow. The discount rate is the risk free rates adjusted with funding spread of
CJL as of balance sheet date. For deposits with short remaining period (within 6 months), the carrying amount is
presented as the fair value as the fair value approximates such carrying amount.
(2) Call money
For Call money, the carrying amount is presented as the fair value, as the fair value approximates such carrying
amount because they have short remaining period (within 1 year).
(3) Foreign exchange
Among foreign exchange contracts, foreign currency deposits accepted from other banks and non-resident yen
deposits are deposits without maturity. Furthermore, foreign currency short-term borrowing have no maturity.
Thus, for the foreign exchanges, the carrying amount is presented as the fair value as the fair value
approximates such carrying amount.
53
(Derivative transactions)
Derivatives include interest rate related instruments (interest rate futures, interest rate options, interest rate swaps,
etc.), currency related instruments (forward foreign exchange, currency options, currency swaps, etc.) and bond
related instruments (bond futures, bonds future options, etc.). Fair value of these derivatives are based on market
prices at exchanges, discounted present values, or amount calculated under the option pricing model. Derivative
for hedge accounting is interest rate swap with exceptional treatment and the fair value of this hedging swap is
included in the hedged loan.
(Others)
For overdraft facilities and commitment line, fair value is the present value discounted by the difference between
the expected future cash flow calculated by contractual rate and fee rate that would be applied to newly
acceptance at the balance sheet date for the contract with remaining period exceeding 1 year.
54
Notes related to Deferred tax accounting 1. The main causes for the deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets (Millions of Yen)
Loss carry forward 1,033
Provision for retirement benefits 807
Allowance for loan losses 758
Accrued expense 573
Fixed Assets 459
Unearned Commission 251
Asset Retirement Obligations 204
Other 584
Deferred tax assets total 4,672
Deferred tax liabilities
Valuation difference on AFS securities 1,218
Other 18
Deferred tax liabilities total 1,237
Net deferred tax assets 3,435
2. A reconciliation of the actual ratio of income taxes reflected in income statement to the effective statutory tax rate
Omitted as loss before income taxes was recorded.
3. According to the promulgation of the “Law for Partial Amendment of the Income Tax Law, etc.” (Law No. 9, 2015)
and the “Law for Partial Amendment of the Local Tax Law, etc.” (Law No. 2, 2015) on March 31, 2015, the corporate
income tax rate will be lowered from the fiscal years beginning on and after April 1, 2015. In conjunction with this
change, the effective statutory tax rate used to measure deferred tax assets and deferred tax liabilities have
changed for the timing differences expected to be resolved on the fiscal year beginning on April 1, 2015, and for the
timing differences expected to be resolved on and after the fiscal years beginning on April 1, 2016, from the former
35.64% to 33.10% and 32.34%, respectively. As a result of this change, the amount of deferred tax assets has
decreased by 256 million yen and the amount of valuation difference on AFS securities has increased by 126 million
yen and the amount of income taxes-deferred has increased by 382 million yen.
Indicators by Share 1. Net assets per share: 1.03 yen
2. Net income per share: 0.01 yen
55
Major subsequent events
Major subsequent events, etc. concerning the business divestiture
Outline of the business divestiture
(1) Name of the company to which the business was divested
SMBC Trust Bank Ltd., a 100% subsidiary of Sumitomo Mitsui Banking Corporation
(2) Businesses to be divested
CJL's retail banking business
(3) Main reason for the divestiture
Citigroup Inc. (“Citigroup”), the parent company which is the 100% indirect owner of CJL, announced strategic
actions to transform its Global Consumer Banking ("GCB") business by streamlining the GCB's footprint to 24
markets on October 14, 2014. As a result, Citigroup intends to exit from its consumer businesses in 11
markets including Japan. The sale of CJL's retail banking business represents another step in this strategy.
(4) Date of business divestiture
November 1, 2015 (Scheduled)
(5) Other information of the divestiture including its legal form
The business divestiture will be conducted subject to the approvals of the relevant authorities, etc. under
applicable laws and regulations. The divestiture will be effected in a transaction that involves an absorption-
type corporate demerger of the business.
56
3. Market Value Information
<Securities> Matters concerning securities market value, valuation difference, etc. are as follows. As well as “Securities“ in balance sheet and “Securities related to trading transactions” under “Trading assets” are included.
(1) Securities classified as trading purpose
(Millions of Yen)
Balance sheet
amounts
Valuations gains (losses)
included in P/L during the
Previous Period
Balance sheet
amounts
Valuations gains (losses)
included in P/L during the
Current Period
Securities classified as
trading purposes155,602 104 21,377 56
As of Mar. 31, 2014 As of Mar. 31, 2015
(2) Other securities (Millions of Yen)
TypeBalance sheet
amounts
Acquisition
cost
Valuations
gains/(losses)
Balance sheet
amounts
Acquisition
cost
Valuations
gains/(losses)
Bonds 670,572 666,560 4,012 495,264 491,599 3,664
Japanese
Government Bonds655,550 652,435 3,115 481,484 478,774 2,710
Corporate Bonds 15,022 14,125 896 13,779 12,825 954
Others 5,804 5,500 304 5,698 5,500 198
Sub total 676,377 672,060 4,316 500,962 497,099 3,863
Bonds 108,896 108,933 (37) - - -
Japanese
Government Bonds108,896 108,933 (37) - - -
Sub total 108,896 108,933 (37) - - -
785,273 780,994 4,278 500,962 497,009 3,863
As of Mar. 31, 2015
Total
As of Mar. 31, 2014
Balance sheet
amounts
exceeding
acquisition cost
Balance sheet
amounts
equal or
less than
acquisition cost
(Note) The figures are based on market value.
(3) Other securities sold during the fiscal year
(Millions of Yen)
Sold amount Gains on sales Losses on sales Sold amount Gains on sales Losses on sales
Bonds 199,177 351 254 348,826 725 2
Japanese
Government Bonds199,177 351 254 348,826 725 2
Total 199,177 351 254 348,826 725 2
March 2014 Year end
(Apr 1, 2013 - Mar 31, 2014)
March 2015 Year end
(Apr 1, 2014 - Mar 31, 2015)
57
<Derivatives Market Value Information>
(1) Interest rate-related transactions (Millions of Yen)
Category TypeContract
amount
Over 1 year
in contract
amount
Market
value
Revaluation
gains/losses
Contract
amount
Over 1 year
in contract
amount
Market
value
Revaluation
gains/losses
Exchange-
tradedFutures 205,955 - (2) (2) 120,211 - (37) (37)
Sell 102,977 - (9) (9) 120,211 - (37) (37)
Buy 102,977 - 6 6 - - - -
Future Options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Over-the -
counterForward rate agreements - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Interest rate swaps 535,619 535,619 (300) (300) 405,192 405,192 (65) (65)
Receive fixed
/ pay floating swaps167,544 167,544 9,238 9,238 137,606 137,606 8,093 8,093
Receive floating
/ pay fixed swaps367,601 367,601 (9,539) (9,539) 267,586 267,586 (8,158) (8,158)
Receive floating
/ pay floating swaps473 473 - - - - - -
Receive fixed
/pay fixed swaps- - - - - - - -
Interest rate options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Total - - (303) (303) - - (102) (102)
As of Mar. 31, 2014 As of Mar. 31, 2015
(Notes) 1. These transactions were marked to market, and revaluation gains and losses are reported on the statement of income. In
accordance with “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments inBanking Industry” (JICPA Industry Audit Committee Report No. 24), derivatives transactions to which the hedge accountingmethod is applied are excluded.
2. Calculation of market valueMarket value is calculated based on closing/final price of the Tokyo International Financial Futures Exchange (TIFFE) etc. for exchange-traded transactions, and on discounted cash flow method or option price calculation models for over-the-counter
(OTC) transactions.
58
(2) Currency-related transactions (Millions of Yen)
CategoryContract
amount
Over 1 year
in contract
amount
Market
value
Revaluation
gains/losses
Contract
amount
Over 1 year
in contract
amount
Market
value
Revaluation
gains/losses
Futures - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Currency Swaps 379,977 359,939 (0) (0) 215,127 196,753 0 0
Forward contracts 14,889,180 399,424 958 958 17,105,124 362,322 (6,622) (6,622)
Sell 8,868,197 226,518 (68,167) (68,167) 9,945,759 203,358 (14,094) (14,094)
Buy 6,020,983 172,905 69,126 69,126 7,159,365 158,964 7,471 7,471
Currency options 629,918 216,635 (0) 32 685,434 273,318 5 33
Sell 314,959 108,317 (6,947) 545 342,717 136,659 (10,069) (6,472)
Buy 314,959 108,317 6,947 (513) 342,717 136,659 10,074 6,505
Total - - 958 991 - - (6,617) (6,589)
Over-the -
counter
As of Mar. 31, 2014 As of Mar. 31, 2015
Type
Exchange-
traded
(Notes) 1. These transactions were marked to market, and revaluation gains and losses are reported on the statement of income. In
accordance with “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in
Banking Industry” (JICPA Industry Audit Committee Report No. 24), derivatives transactions to which the hedge accountingmethod is applied are excluded.
2. Calculation of market value
Market value is calculated based on discounted cash flow method or option price calculation models for over-the-counter (OTC)transactions.
(3) Stock-related transactions
None
59
(4) Bond-related transactions
(Millions of Yen)
CategoryContract
amount
Over 1
year
in contract
amount
Market
value
Revaluation
gains/losses
Contract
amount
Over 1
year
in contract
amount
Market
value
Revaluation
gains/losses
Exchange-
tradedBond futures 10,951 - (1) (1) 3,606 - (18) (18)
Sell 10,951 - (1) (1) 3,606 - (18) (18)
Buy - - - - - - - -
Bond future options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Over-the -
counterBond OTC options - - - - - - - -
Sell - - - - - - - -
Buy - - - - - - - -
Total - - (1) (1) - - (18) (18)
As of Mar. 31, 2014 As of Mar. 31, 2015
Type
(Notes) 1. These transactions were marked to market, and revaluation gains and losses are reported on the statement of income. In
accordance with “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in
Banking Industry” (JICPA Industry Audit Committee Report No. 24), derivatives transactions to which the hedge accounting method is applied are excluded.
2. Calculation of market value
Market value is calculated based on closing/final price of the Tokyo Stock Exchange (TSE) etc. for exchange-traded transactions.
(5) Commodity-related transactions
None
(6) Credit derivatives transactions
None
60
4. Major Shareholders
<Major Shareholders> (As of March 31, 2015)
Name of shareholder Numbers of shares Shareholding ratio
Citibank Overseas Investment Corporation 244,200,000 thousand shares 100%
Total 244,200,000 thousand shares 100%
61
5. Disclosure Items Based on Pillar 3 of Basel lll
This section describes the information consistent with FSA Notification Number 7 based on Article 19.2.1.5d of the Bank Law Enforcement Rule (Refer to Ministry of Finance Ordinance Number 10).
With regard to the calculation of the capital adequacy ratio, KPMG AZSA LLC conducted certain procedures as an independent audit firm in accordance with “Treatment in implementing examination by agreed-upon procedures for calculating capital adequacy ratio”(Industry Committee Practical Guideline No. 30 of the Japanese Institute of Certified Public Accountants).
The certain procedures performed on our internal control framework for calculating the capital ratio are based on procedures agreed upon by CJL and the external auditor. This agreed-upon procedures engagement does not constitute an audit engagement for the audit of the financial statements and are not a validation of appropriateness of the capital ratio itself or opinion on the internal controls related to the capital ratio calculation.
COMPOSITION OF CAPITAL DISCLOSURE
As of March 31, 2015 Basel lll (Millions of Yen)
249,703 253,596
244,200 244,200
5,503 9,396
- -
- -
- -
- -
1,245 1,014
1,245 1,014
- -
- -
- -
- -
- -
250,948 254,611
573 - 2,074 -
- - - -
573 - 2,074 -
1,028 - - -
- - - -
- - - -
- - - -
- - 256 -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
as of Mar.31,
2014
Amounts excluded
under transitional
arrangements
of w hich: mortgage servicing rights
Directly issued qualifying common share or mandatory convertible preference share plus related capital
surplus and retained earnings
Shortfall of eligible provisions to expected losses
Core Capital Adjustments (2)
Amount exceeding the 10% threshold on specif ied items
of w hich : other intangibles other than goodw ill and mortgage servicing rights
(net of related tax liability)
of w hich : goodw ill (net of related tax liability)
Amount of Core Capital Basic Components (A)
Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net
of related tax liability)
of w hich : treasury stock (-)
of w hich : national specif ic regulatory adjustments (earnings to be distributed) (-)
of w hich : other than above
Total of general allow ance for loan losses and eligible provisions included in Core Capital Basic Components
Core Capital Basic Components (1)
Qualifying non-cumulative perpetual preferred stock subject to transitional arrangements included in Core
Capital Basic Components
Eligible capital instruments subject to transitional arrangements included in Core Capital Basic Components
Subscription rights to common shares or mandatory convertible preference shares
of w hich: eligible provisions
of w hich: general allow ance for loan losses
of w hich : capital and capital surplus
of w hich : retained earnings
45% equivalent of the difference betw een the revaluated amount of the land and the book value immediately
prior to revaluation included in Core Capital Basic Components
Capital instruments issued by public agency under capital enhancement action included in Core Capital
Basic Components
Investments in ow n shares (excluding those reported in the Net assets section)
Reciprocal cross-holdings in common equity
Total intangible assets
(net of related tax liability, excluding those relating to mortgage servicing rights)
Securitization gain on sale
Gains and losses due to changes in ow n credit risk on fair valued liabilities
Defined-benefit pension fund net assets (prepaid pension costs)
of w hich: deferred tax assets arising from temporary differences (net of related tax liability)
Itemas of Mar.31,
2015
Amounts excluded
under transitional
arrangements
Investments in the capital of banking, f inancial and insurance entities that are outside the scope of
regulatory consolidation, net of eligible short positions, w here the bank does not ow n more than 10% of the
issued share capital (amount above 10% threshold)
of w hich: signif icant investments in the common stock of f inancials
62
(Millions of Yen)
- - - -
- - - -
- - - -
- - - -
1,602 2,331
249,345 252,280
699,381 819,725
of w hich: Total of items in risk w eighted assets subject to transitional arrangements - -
of w hich: intangible assets (net of related tax liability, excluding those relating to mortgage
servicing rights) - -
of w hich: deferred tax assets that rely on future profitability excluding those arising from
temporary differences ( net of related tax liability) - -
of w hich: defined-benefit pension fund net assets (prepaid pension costs) - -
of w hich: investments in the capital banking, f inancial and insurance entities - -
none of the above - -
11,430 43,001
113,041 117,867
- -
- -
823,854 980,594
30.26% 25.72%
Itemas of Mar.31,
2015
Amounts excluded
under transitional
arrangements
as of Mar.31,
2014
Amounts excluded
under transitional
arrangements
Total amount of Risk w eighted assets (D)
Capital Adequacy Ratio
Total Capital Adequacy Ratio ((C) / (D))
Risk w eighted assets (3)
Credit risk w eighted assets
Total amount of Market Risk equivalent divided by 8%
Total amount of Operational Risk equivalent divided by 8%
Credit risk w eighted assets adjustments
Operational risk w eighted assets adjustments
of w hich: signif icant investments in the common stock of f inancials
of w hich: mortgage servicing rights
of w hich: deferred tax assets arising from temporary differences (net of related tax liability)
Amount of Core Capital Adjustments (B)
Capital
Capital amount ((A)-(B)) (C)
Amount exceeding the 15% threshold on specif ied items
63
QUALITATIVE DISCLOSURE
(1) Types of Capital Instruments
CJL’s capital is solely funded through issuance of common stocks.
(2) Capital Adequacy Assessment Process
Regulatory capital and risk assets are reported to Management on a monthly basis for verification of the appropriateness of CJL’s capital adequacy. We believe the current level of CJL’s capital adequacy to be sufficiently high. We aim to maintain our regulatory capital ratio above 10.5%, in accordance with the capital plan approved by the Board of Directors (“BOD”).
(3) Credit Risk Management Policies and Procedures
1. Overview of risk management policies and procedure
CJL manages its credit risk in accordance with the established “Credit Risk Management Policies.” We manage credit risk based on credit risk analysis of each customer and also manage credit risk on a portfolio basis, monitoring concentration of credit to certain industries, ratings, clients or industrial groups and delinquency trend of a portfolio. Such a portfolio view of our credit exposures is reviewed and discussed at the Credit Risk
Management Committee (“CRMC”) on a monthly basis, and reported to the MC and BOD. CJL may sell loans
(risk participation) when there is a client’s needs in excess of the “Limit of Granting of Credit, etc to One Person” provided in the Article 13 of the Banking Act take, sell loans once CJL provided as is the case with loan syndication, or sell loans or obtain bank guarantee in order to reduce the amount of risk capital, however, CJL is not involved in any of measures such as exchange of portfolio or securitization of its own assets at present. For details, please refer to Quantitative Disclosure (1) for Capital Adequacy and (2) for Credit Risk Exposure as of the fiscal year-end.
CJL applies the Standardized Approach for the Basel III calculation of credit risk assets.
(Corporate Banking Division)
On all the customers to whom credit is extended, CJL assigns Obligor Risk Ratings (“ORR”). On all the credit facilities established, a Facility Risk Rating (“FRR”) is assigned based on the types or nature of a transaction. An FRR can differ from the ORR of the customer in case there is a credit enhancement on that credit facility, etc.
The assignment of ORR and establishment of credit facilities are done at the time of initiating a credit relationship. After the credit relationship is initiated, ORR and credit facilities are reviewed at least once a year. For approval of credit facilities (“Credit Approval”), the Credit Policy requires sign off by at least two Credit Officers (“CO”s) or Senior Credit Officers (“SCO”s).
COs and SCOs are Bank officers who are given the authority to approve credit. SCOs are appointed by the CRMC and COs are appointed by an SCO. The appointment to CO/SCO is based on Risk Management Department’s assessment on working experience in credit-related job functions, experience in credit risk training, credit judgment skills, knowledge, and aptitude.
The amount of credit an SCO can approve depends on the authorized “Approval Level”. CRMC determines the Approval Level based on each officer’s experience and past record.
The Level required for Credit Approval is determined by the matrix of the risk rating assigned to the customer and the amount of credit facilities proposed. The lower (worse) the risk rating and the larger the proposed credit facilities amount, the higher the required Approval Level.
Of the minimum two credit officers required for Credit Approval, at least one must be a Business Sponsoring Officer of the client, who is the account officer for the customer, and the other must be a Risk Management CO/SCO who is independent from business divisions. This requirement is aimed to establish and maintain check and balance mechanism within CJL.
(Retail Banking Division)
In the Retail Banking Division, the credit approval authority is determined on a product-by-product basis. Credit extension must be approved by COs/SCOs. At least one of the credit officers approving the credit must hold the Approval Level for the amount of the proposed credit. Credit approval authority is not granted to officers belonging to Sales, Marketing, Management Control or bank branches.
64
COs and SCOs are Bank officers who are given the authority to approve credit. SCOs are appointed by the CRMC and COs are appointed by a SCO. The appointment to CO/SCO is based on the Retail Banking Credit Risk Management’s assessment on working experience in credit-related job functions, experience in credit risk training, credit judgment skills, knowledge, and aptitude.
The Approval Level that is required for Credit Approval is determined by the loan amount and the deviation of a transaction from the prescript credit criteria. The higher the loan amount and the larger the deviation, the higher the required Approval Level.
As a part of portfolio level risk management, risk profile of applications and loan disbursements, credit performance are being monitored.
Standard for Allowance for loan losses is described in (1) Allowance for loan losses, Article 6. Standard Allowance, under Accounting Policies of Section 2. Financial Statements, Financial Information for the fiscal year ended March 31, 2015.
2. The following items on portfolios are subject to the standardized approach
A. Name of the eligible credit rating agency, etc. used to calculate the risk weights
Standard & Poor’s Ratings Services (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) and Organization for Economic Co-operation and Development (“OECD”)
B. Relationship between the type of exposure and eligible credit rating agency, etc., used by type of exposure.
The eligible External Credit Assessment Institutions (“ECAI”) etc., we use by the type of credit exposure are as shown below.
i. OECD - Country Risk Score- Exposures to the central government and central bank- Exposures to the Government of Japan and the Bank of Japan- Exposures to financial institution and regulatory security firm that apply to the standards of capital ratioprovided by Basel Committee on Banking Supervision or similar standards to this.
ii. External Rating of S&P and Moody’s- Exposures to corporates- Exposures to financial institutions and regulatory security firm that don't apply to the standards ofcapital ratio provided by Basel Committee on Banking Supervision or similar standards to this.
(4) Credit Risk Mitigation Policies and Procedures
1. Overall Credit Risk Mitigation
CJL applies a comprehensive Credit Risk Mitigation approach based on the Standardized Approach for the Basel III calculation of credit risk assets. Its credit risk assets and regulatory capital ratio are calculated based on the risk weights and the net exposures, reflected the revaluation of exposures and the devaluation of collaterals. These evaluations are utilized by the haircut value reflecting its volatility risks.
2. Overall Credit Risk Mitigation Control Process
CJL reviews credit facilities at least once a year, and collaterals and ability to perform guarantees are also evaluated periodically for securing its portfolio. Types of collaterals and guarantees are shown in 3. Risk Mitigation Techniques below. At present, CJL does not use credit derivatives in its calculation of its risk assets and regulatory capital ratio. CJL takes into account bilateral netting agreements as risk mitigation measures for derivatives and repo transactions, if they are effective in light of the regulation, etc. of the jurisdiction where the counterparty of the transaction is domiciled.
3. Risk Mitigation Techniques
A. Eligible financial assets as collaterals
The following assets that satisfy all the conditions stipulated by the FSA Notice No.19 of 2006 Article 89 and 90 are used as eligible collateral to reduce risk assets.
Cash, deposits with CJL, gold, debt securities and equity securities.
65
B. Guarantees
The guarantee provided by the government, the central bank, government agencies which meet all the conditions stipulated by the FSA Notice No.19 of 2006 Article 118, 119, and 122 must be met.
C. On-balance netting
Exposures that are used to calculate capital ratio shall be netted with deposits if whose exposures meet all the conditions stipulated by the FSA Notice No.19 of 2006 Article 117.
(5) Policies and Procedures for Counterparties of Derivative Products and Transactions with a Long-Horizon Settlement Period
1. Credit risks of counterparties
Credit risk of a counterparty of derivative transactions, etc. is defined as the sum of current replacement costs based on mark-to-market and a simulated amount of potential increase due to the future fluctuation of market value until settlement date.
2. Management of credit facilities
Counterparty credit facilities for derivative transactions, etc. are managed as part of total credit facilities, together with all credit facilities on-balance sheet transactions.
3. Protection by collateral and policy for loss reserve
CJL has ISDA Credit Support Annex (“CSA”) concluded with a number of financial institutions. CJL carries Derivative Transactions at fair value, for which CJL does not establish loss reserve. CJL does not have Transactions with a Long-Horizon Settlement Period.
(6) Securitization Exposure Risk Management Policies and Procedures
1. CJL’s engagement for securitization transactions
CJL’s engagement in securitization transactions can be described as follows:
A. Originator
CJL is not engaged in any securitization transaction of loan receivables for its own funding purposes or balance sheet management.
B. Investor
CJL has a framework to hold securitization exposure through arranging and providing funds to various securitization transactions (ABL, Asset Backed Commercial Paper (“ABCP”), etc.) that its clients undertake for funding purpose.
C. Swap provider
CJL may provide foreign exchange forwards or interest rate swaps to mitigate the issuer’s foreign exchange
or interest rate in the securitization transactions arranged by CJL.
D. Others
CJL provides certain types of commitment lines related to liquidity facilities covering securitization transactions arranged by CJL, in connection with the ABCP business, etc.
2. Overview of risk management policies, risk characteristics, and monitoring system (including itsoperational status)
With regard to holding securitization exposure, CJL applies internal ratings and makes evaluations by assessing each such transactions and carefully managing the exposure together with other direct loan assets, in addition to capturing accurate understanding of the actual risk profile through due diligence from the viewpoint of investors. CJL will analyze and periodically monitor the credit risk amount of securitization transaction in the same manner as with other standard credit exposures.
66
Also, CJL recognizes that credit risks related to CJL’s securitization transactions include those associated with
committed facilities, in case CJL commits to supply funds when funding through the ABCP market becomes unavailable for certain reasons. In the case of such committed facilities provided to securitization transactions, the primary source of repayment is cash, etc to be collected from the securitized assets. Therefore, the credit risk of committed facilities provided to securitization transactions is defined as the risk of being unable to recover the amount of credit extended from the securitized assets in the full amount.
CJL manages credit risk in the case of committed facilities provided to securitization transactions through: (1) setting the ratio of the future cash flows from the securitized assets to the securitization exposure amount sufficiently high to cover expected credit loss (over-collateralization); (2) ensuring any other necessary credit enhancement; and (3) monitoring appropriately after the execution. Such risk management procedures are the same for the loans extended to securitization transactions arranged by CJL
CJL mainly uses special purpose companies (SPC) or Japanese Trusts as the securitization conduit when undertaking securitization transactions associated with third party assets.
As to credit risk management of foreign exchange forwards or interest rate swaps associated with securitization transactions, the policies and procedures are the same as for those transactions not associated with securitization transactions
3. Name of the approach used by CJL to calculate the amount of credit risk assets in securitizationexposures
The Standardized Approach
4. Accounting policies for securitization transactions
CJL complies with Accounting Standard Board of Japan Statement No. 10, Accounting Standard for Financial Instruments (Business Accounting Council, January 22, 1999) in recognizing, evaluating, and booking the occurrence or extinguishment of financial assets or liabilities related to securitization transactions.
5. Names of the eligible credit rating agency used in the assessment of risk weight in securitizationexposures (the reason if there has been a change in the eligible credit rating agency used) and therelationship between the type of securitization exposure and the eligible credit rating agency used
As for the eligible external credit agencies, CJL refer to S&P, Moody’s and Fitch Ratings Ltd. in determining securitization exposure risk weight.
(7) Market Risk Management Policies and Procedures
1. Overview of risk management policies and procedures
The Market Risk Management Unit (“MRM”), is independent from the business divisions and is given control
authority by the Board to identify interest rate, foreign exchange rate or other types of risk factors which impact assets and liabilities (including off-balance sheet assets and liabilities) in the banking and trading books; establish evaluation methods (factor sensitivity or VaR etc.); and monitor risk exposures (including stress tests and market risk limit utilization) based on the defined CJL “Market Risk Management Policy”. MRM also coordinates management reporting to Asset-Liability Committee (“ALCO"), in addition to providing recommendations in risk analysis on a regular and timely basis.
2. Name of the approach used to calculate the market-risk-equivalent amount. Range of portfoliosusing each model where the standardized approach or internal model approach is used.
Standardized method
3. Methodology on Mark-to-Market calculation for Trading products based on its nature consideringexpected holding period and the possibility of exceeding expected holding period.
CJL limits trading products to highly liquid securities, foreign exchange or derivative transactions, and performs mark-to-market evaluation by applying theoretical prices based on market prices and other market data for the trading book. Target transactions and the method of the mark-to-market evaluation are defined by internal procedures.
4. Assumptions and valuation method for internal evaluation of capital adequacy on market risk
67
Risk Capital is calculated based on VaR and Stress test, and Capital Adequacy is measured together with Operational Risk and Credit Risk.
(8) Operational Risk Management Policies and Procedure
1. General Description of Operational Risk Management Policy and Procedures
Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, systems, human factors or from external events. As with other risk types, operational risk is managed through an overall framework with checks and balances that includes:
• Recognized ownership of the risk by the business divisions;• Oversight by Control Functions; and• Independent review by the Internal Audit Division.
CJL’s approach to operational risk is defined in the CJL “Operational Risk Management Policy”. Specific operational risks - IT Risk, Jimu Risk, and Continuity of Business Risk - are subject to additional specialized policies and regulations. The objective of the Policy is to establish a consistent, value-added framework for assessing and communicating operational risk and the overall effectiveness of the internal control environment.
CJL adopts Manager’s Control Assessment (“MCA”) as a comprehensive tool to identify, evaluate qualitatively and monitor operational risk. MCA was established as the process whereby ‘significant’ risks inherent in business activities are identified by senior business and functional managers and the effectiveness of the key controls over those risks are evaluated and monitored. In MCA processes, Annual Risk Assessment is conducted to identify significant processes; define significant risks and controls; identify optimum monitoring methods and assessment activities to assess the extent to which processes and control continue to operate effectively. These significant processes are reviewed periodically in consideration of changes to the operational processes and regulatory environment, and latest information shall be reflected in to MCA. On a quarterly basis, the results of assessment of overall effectiveness of internal controls are reviewed and approved at Business Risk, Compliance & Control (“BRCC”) Committee, and including in periodic management reporting.
Since operational risk is inherent throughout the activities of CJL, all activities are subject to the Operational Risk process. Operational risk issues and trends are reported at the CJL Risk Oversight Committees responsible for operational risk management – BRCC and System and Operations Committee (“SOC”).
2. Methodology to Calculate Operational Risk
Basic Indicator Approach
(9) Equity Exposure Risk Management Policies and Procedures
There is no Equity Exposure.
(10) Banking Book Interest Rate Risk Management
1. Overview of risk management policies and procedures
The Market Risk Management Unit (“MRM”), is independent from the business divisions and is given control authority by the Board to manage interest rate risk in the banking; and based on the defined CJL “Market Risk Management Policy”. MRM also coordinates management reporting to Asset-Liability Committee (“ALCO"), in addition to providing recommendations in risk analysis on a regular and timely basis.
2. Banking book interest rate risk calculation method for internal management purpose
CJL measures interest rate risks in the banking book on a daily basis by applying the re-pricing ladder method, and considers changes of economic value per 1% interest rate increase for each currency as an index for internal control. CJL’s holding assets and liabilities are constructed into ladders sorted by the remaining durations for fixed rate items and by the durations till next re-pricing period for variable rate items, respectively. Liquid deposits, which do not have a clearly defined re-pricing period, or prepayment of housing loans require practical assumptions on runoff tenors and balances, and the independent market risk manager approves their relevancy. The monitored amount of interest rate risks for internal control purpose is not necessarily identical with the total amount of interest rate risks calculated in a form of the outlier ratio as per the Standardized Approach.
68
QUANTITATIVE DISCLOSURE
(1) Outline of means of Raising Equity Capital
Amount of Required Capital for Credit Risk
On balance sheet asset items
Cash - - - -
Exposures to Japanese government and central bank - - - -
Exposures to foreign government and central bank 624 24 600 24
Exposures to the Bank for International Settlements - - - -
Exposures to Local Authorities - - - -
Exposures to overseas public sectors other than central
government 3,076 123 3,339 133
Exposures to the International Bank for Reconstruction and
Development - - - -
Exposures to Japan Finance Organization for Municipal
Enterprises - - - -
Exposures to Japan Government-affiliated organization 2,828 113 2,567 102
Exposures to land development corporation, local housing
corporations, Local Public Road Corporations - - - -
Exposures to financial institutions and Regulated securities
companies 177,164 7,086 125,122 5,004
Corporate exposures 221,632 8,865 238,543 9,541
Exposures to small and medium size enterprises and
individuals - - - -
Residential Mortgage Exposures 15,245 609 16,553 662
Retail Exposures related to real-estate acquisition 9,101 364 13,440 537
Exposures three months or more in arrears 2,020 80 2,300 92
Bills before collection 82 3 - -
Exposures to the Credit Guarantee Association - - - -
Exposures guaranteed by Industrial Revitalization Corporation
of Japan - - - -
Exposures to Investment - - - -
Securitization exposures (originator) - - - -
Securitization exposures (other than the originator) - - 16,502 660
Assets backed up with several assets (so-called funds) which
individual asset is ungraspable - - - -
Others 36,464 1,458 31,790 1,271
On-balance sheet asset items total 468,241 18,729 450,762 18,030
Off-balance sheet asset items
Derivative transactions 99,748 3,989 103,644 4,145
Others 102,109 4,084 96,192 3,847
Off-balance sheet asset items total 201,858 8,074 199,837 7,993
CVA risk asset 149,622 5,984 48,775 1,951
CCP 2 0 6 0
Total 819,725 32,789 699,381 27,975
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
Risk weighted
exposure
Required
CapitalRisk weighted
exposure
Required
Capital
Amount of Required Capital for exposures relating to funds
None
69
Amount of Required Capital for Market Risk
Standardized method of which
Interest Rate Risk - 35,902 1,436 - 9,317 372
Equity Risk - - - - - -
Foreign Exchange Risk - 7,098 283 - 2,113 84
Commodity Risk - - - - - -
Options - - - - - -
Total - 43,001 1,720 - 11,430 457
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
Specific
Risk
General
Market Risk
Required
Capital
Specific
Risk
General
Market Risk
Required
Capital
Amount of Required Capital for Operational Risk
117,867 4,714 113,041 4,521Basic Indicator Approach
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
Operational Risk Required Capital Operational Risk Required Capital
Total Amount of Required Capital
Risk assets
Credit Risk exposure 819,725 699,381
Market Risk exposure divided by 8% 43,001 11,430
Operational Risk exposure divided by 8% 117,867 113,041
Total of items in risk weighted assets subject to transitional arrangements - -
Total (A) 980,594 823,854
Total required Capital (National Standard) (E)×4% 39,223 32,954
(Million of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
70
(2) Credit Exposure (Millions of Yen)
Loans etc. Derivatives Loans etc. Derivatives
Domestic
Manufacturing 75,846 - 9,146 84,993 111,340 - 6,558 117,899
Agriculture and
Forestry- - - - - - - -
Fishery - - - - - - - -
Mining - - - - - - - -
Construction 19 - 381 400 21 - 2,381 2,402
Electric power, gas,
water supply- - - - - - - -
Information and
communication14,492 - 31 14,523 11,727 - 182 11,910
Transportation 7,282 - 329 7,611 19,286 - 593 19,879
Wholesale and retail 136,192 - 4,481 140,673 132,600 - 4,413 137,014
Financial Institutions
and Insurance1,134,186 14,141 97,102 1,245,429 638,510 12,839 80,463 731,813
Real estate 12,788 - - 12,788 17,086 - - 17,086
Other Services 5,250 - 669 5,920 2,251 - 301 2,553
Central, Local
government1,273,560 762,111 - 2,035,672 2,369,103 479,285 25 2,848,414
Individuals 63,676 - 660 64,337 66,138 - 487 66,626
Others 25,873 - - 25,873 22,338 - - 22,338
Overseas
Sovereign 48,913 5,504 - 54,418 50,451 5,504 - 55,956
Financial Institutions 594,975 - 43,952 638,927 799,722 - 58,288 858,010
Others 90,589 - 167 90,757 95,852 - 498 96,351
Total 3,483,648 781,757 156,921 4,422,327 4,336,432 497,629 154,195 4,988,257
Loans etc. Securities Derivatives Total Loans etc. Securities Derivatives Total
To 1 year 2,393,811 85,183 146,778 2,625,774 2,955,999 120,387 138,233 3,214,620
1 to 3 years 399,744 475,349 6,184 881,277 727,682 224,474 8,905 961,062
3 to 5 years 461,677 168,913 654 631,244 338,851 137,940 2,750 479,542
Over 5 years 152,303 52,311 3,304 207,918 190,259 14,828 4,306 209,394
Undefined 76,111 - - 76,111 123,637 - - 123,637
Total 3,483,648 781,757 156,921 4,422,327 4,336,432 497,629 154,195 4,988,257
(by Remaining Tenor)
as of Mar. 31, 2014 as of Mar. 31, 2015
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
Securities Total Securities Total
(Note) 1. Figures are without taking into account the effects of credit risk mitigation techniques. Furthermore, figures do not include
any securitization exposure, exposures relating to funds or exposures relating to central clearing funds. 2. Loans etc. include loans, commitments and other non-derivative off balance sheet exposure.
Past-due over 3 months or Default Exposure
Domestic
Corporate 9 645
Individuals 344 219
Overseas 4,867 4,625
Total 5,221 5,491
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
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(Note) 1. Figures are without taking into account the effects of credit risk mitigation techniques. Furthermore, figures do not include any securitization exposure, exposures relating to funds or exposures relating to central clearing funds.
2. "Past-due over 3 months or default exposure" is the exposure either in principal or interest payment is delayed more than 3months or risk weight is 150% before the consideration of loan loss reserve.
Allowance for Loan Losses
Specific Reserve
Corporate 1,147 (1,141) 5 5 (5) - 5 342 347
Individuals 1,078 (172) 905 905 (122) 783 905 (210) 694
Others 41 (38) 2 2 - 2 2 - 2
General Reserve 1,159 (144) 1,014 1,014 263 1,278 1,014 230 1,245
Loan loss reserve for restructuring country
(Millions of Yen)
Fiscal Year ended Mar. 2014 Interim Fiscal Period ended Sep. 2014 Fiscal Year ended Mar. 2015
Not applicable
Beginning Change Ending Beginning EndingChange Ending Beginning Change
Credit Risk Exposure after Credit Risk Mitigation by Risk weight under Standardized Approach (Millions of Yen)
Rated Unrated Rated Unrated
0% 28 2,047,792 - 2,856,146
20% 708,747 126,621 515,006 11,595
35% - 43,563 - 47,294
50% 115,503 17,359 149,420 11,896
75% - - - -
100% 77,366 302,483 49,931 349,542
150% - 648 - 542
250% - 3,467 - 3,625
1250% - - - -
Deduction from Capital - - - -
Total 901,646 2,541,935 714,358 3,280,641
as of Mar. 31, 2014 as of Mar. 31, 2015
(Note) 1. Figures are taking into account the effects of credit risk mitigation techniques and do not include any securitization exposure.
(3) Credit Risk Mitigation
Eligible Financial Collateral
Cash 119,123 347,528
Bonds 754,636 534,532
Stocks 210 163
Others - -
Guarantee and Credit Derivatives
Guarantee 104,775 111,033
Credit Derivatives - -
Total 978,745 993,257
as of Mar. 31, 2014 as of Mar. 31, 2015
(Millions of Yen)
(Note) On-balance netting was adopted for the interbank Money Market transaction with Citibank, N.A. overseas main branches.
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(4) Counterparty Credit Risk of OTC Derivatives
i.Measurement of Credit exposure Current Exposure Method
ii.Total amount of gross positive fair value 145,457 166,342
iii.Credit exposure before Credit Risk Mitigation
FX related 152,678 153,994
Interest rate related 4,243 201
Total 156,921 154,195
iv.The amount deducting iii from sum of ii and gross add-on
(Reduction by Netting agreements)
138,217 182,450
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
v. Collateral typeNone
vi. Credit exposure after Credit Risk MitigationSame as iii
vii. Notional amount of credit derivatives which have counterparty riskNone
viii. Notional amount of credit derivatives which cover exposures by Credit Risk MitigationNone
(5) Securitization
i.Securitization exposure as Originator
None
ⅱ. Securitization exposure as Investor
a. Information by Type of Underlying Assets
There was no re-securitization exposure as of March 31, 2014 and 2015.
as of Mar. 31, 2014 as of Mar. 31, 2015
Claims on corporate customers - -
Residential Mortgage Loan - -
Claims on individual customers
(ex. Residential Mortgage Loan)- 82,513
Others - -
Total - 82,513
(Millions of Yen)
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b. Exposure by Risk Weight Category and Amount of Required Capital
Exposure Required Capital Exposure Required Capital
20% - - 82,513 660
50% - - - -
100% - - - -
350% - - - -
1250% - - - -
Deduction from Capital - - - -
Total - - 82,513 660
(Millions of Yen)
as of Mar. 31, 2014 as of Mar. 31, 2015
There was no re-securitization exposure as of March 31, 2014 and 2015.
c. Amount of securitization exposure and type of underlying asset which 1250% risk weight should be adopted in accordance with
Paragraph 1, Article 247 of FSA Notice No.19 None
d.Credit risk mitigation for resecuritization exposure. None
e. Credit Risk-Weighted Assets Calculated Pursuant to Article 15 of Supplementary Provisions of the FSA Capital Adequacy Ratio
NotificationNone
ⅲ. Securitization exposure subject to measurement of comprehensive risk (as Originator)
None
ⅳ. Securitization exposure subject to measurement of comprehensive risk (as Investor)
None
(6) Market Risk (under Internal Model Approach)
None
(7) Equity Exposure in Banking Book
None
(8) Amount in regarded exposure under the Accord article 167
None
(9) Interest Rate Risk in the Banking Book - the increase/(decrease) in economic value for 1% upward rate shocks according to internal management's method.
as of Mar. 31, 2014 as of Mar. 31, 2015
Japanese Yen 16,114 11,603
US Dollar 2,340 (6,280)
Euro 336 1,003
Others (356) (409)
Total 18,434 5,917
(Millions of Yen)
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DISCLOSURE OF REMUNERATIONS
(1) Matters relating to the development of the remuneration and other systems of the Subject Officer and Employee of Citibank Japan Ltd. (hereafter, “CJL”)
1. The scope of “Subject Officer and Employee”
The scope of "Subject Officer" and "Subject Employee, etc." (collectively, "Subject Officer and Employee") forwhich the remuneration announcement stipulates the disclosure is as below.
A. The scope of “Subject Officer”
Subject Officers are Directors and Statutory Auditors of CJL, excluding Outside Directors, Outside Statutory Auditors, and part-time Directors not receiving remuneration or other payments.
B. The scope of “Subject Employee, etc.”
Among (a) officers other than Subject Officers, (b) employees of CJL, and (c) officers and employees of the major consolidated subsidiaries, etc, who are categorized into either "those who receive a large remuneration, etc.” and “those who have a significant influence on the management and the status of the property of CJL and the major consolidated subsidiaries, etc” are disclosed as "Subject Employees, etc.”
i The scope of “major consolidated subsidiaries, etc ”
CJL has no consolidated subsidiaries.
ii The scope of “those who receive a large remuneration, etc”
"Those who receive a large remuneration, etc.” are persons who receive remuneration more than the “average of the Subject Officers’ remunerations” calculated by dividing the total amount of the remunerations the “Subject Officers” received for the fiscal year by “the number of the Subject Officers”. For this calculation, “Subject Officers” who newly-appointed and retires during fiscal year are excluded.
iii The scope of “those who have a significant influence on the management and the status of the property of CJL ”
The scope of “those who have a significant influence on the management and the status of the property of CJL” is designated as the same criteria as “Covered Employees” which is determined by Citi’s Independent Risk. The Covered Employees are comprised of “Individual Covered Employees” and “Group Covered Employees”. “Individual Covered Employees” are employees who, acting individually, have influence over the material risks of CJL or Business Units of Citi. “Group Covered Employees” are other employees who are compensated similarly and who acting together could have influence over the material risks of CJL or the material risks of a material business unit. Covered Employees can include Subject Officers, Subject Employees and persons in charge of the Risk Management Division and Markets Treasury. For the purpose of this section iii only, “Covered Employees” excluding Subject Officers is considered to be “those who have a significant influence on the management and the status of the property of CJL”.
2. Determination of the remuneration for the Subject Officer
A. Determination of the remuneration for the Subject Officer
The total amount of Director and Statutory Auditors remunerations (the maximum limited amount) is determined at the general meeting of shareholders. As for the remuneration for the Subject Officer, determination is made according to the Rules Concerning Remuneration for Officers (Yakuin). Additionally, all Directors’ annual remuneration (basic annual remuneration, bonus and equity compensation) is reviewed in respect of the appropriateness of the amount by the Chief Executive Officer, Compliance Head and Human Resources Head of CJL.
B. Determination of the remuneration for the Subject Employee, etc.
The remuneration for an employee of CJL is determined and paid according to our remuneration rules. For the rules, their system design and documentation have been conducted by Human Resources Division, which is independent from Unit/department responsible for business execution. Additionally, any employee with an annual remuneration (basic annual remuneration, bonus and stocks) exceeding 30-million yen or 300-thousand US dollar is reviewed in respect of the appropriateness of the amount by the Chief Executive Officer, Compliance Head and Human Resources Head of CJL.
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3. Determination of the remunerations for the employees in Risk Management Division andCompliance Division
The remunerations for the employees in Risk Management Division and Compliance Division are determinedaccording to the remuneration rules of CJL and each payment amount is fixed according to the performanceappraisal ultimately decided by the each division head. In that way, their remunerations are decided independentlyfrom Unit/department responsible for business execution.
4. The total remuneration amount paid to the Remuneration Committee members and the number ofmeetings held
There is not Remuneration Committee or an equivalent organization within CJL.
(2) Matters relating to the assessment of the appropriateness of the design and operation of the remuneration and other systems of the Subject Officer and Employee of CJL
1. Remuneration policy
A. Policy of the remuneration for the “Subject Officer”
With respect to the remunerations for Officers, Officer Remuneration Plan has been established according to the Rules Concerning Remuneration for Officers (Yakuin). Specifically, the Plan determines the composition of the remuneration:
・ Annual base remuneration
・ Bonus
・ Various allowances
・ Equity Compensation (or options to purchase shares) of Citigroup stock
・ Retirement benefits
・ Cash denominated awards (that earn notional investment returns).
Annual base remuneration is determined based on the roles, profile, performance, etc. as an officer, while bonus is determined based on the performance of CJL. Stocks (shares of Citigroup Inc. listed in the United States) are provided to align officer’s or employee’s interests with those of shareholders, clients and other stakeholders.
B. Policy of the remuneration for the “Subject Employee, etc.”
The remuneration for an officer or an employee of CJL is determined depending on the role, personnel evaluation, ability and performance according to the remuneration rules of CJL.
2. Significant change in the remuneration system design and operation
There is no significant change in the remuneration system design and operation.
(3) Consistency of the remuneration system of the Subject Officer and Employee and the risk management, and matters relating to linkage of the remuneration and performance
1. Methodology to take the risk into account for determining the compensation
For Individual Covered Employees, there is an annual control function review process pursuant to which the controlfunctions (Compliance, Finance, Independent Risk, Internal Audit, and Legal) provide an evaluation of riskbehaviors.
2. Performance-linked portion to determine the remuneration for the Subject Officer and Employee
A. Calculation method for the performance-linked portion
The rating from the independent review process is included in the performance evaluation system to inform the performance review conducted by the employees’ manager. The performance evaluation system includes formal risk goals for covered senior managers as well as a formal manager-provided risk rating. When incentive compensation recommendations are made, both the individual goals and risk performance goals are included in the compensation worksheet for consideration.
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B. Methodology to make adjustment to the performance linked portion
For Covered Employees, provisions also allow for the cancellation of deferred incentive compensation awarded in the event of serious financial or reputational harm to Citi, and can allow for cancellation if a failure to supervise or monitor risks results in such significant responsibility. Separately if the global reference business of a Covered Employee has pre-tax losses in any year of the deferral period, the portion of the deferred stock award that is scheduled to vest in the year following the loss year will be reduced.
C. Confirmation as to whether the compensation system is not too focused on the linkage to the short-term performance
It is confirmed that the compensation system is not too focused on the linkage to the short-term performance as the structure of annual incentive awards made to Covered Employees discourages imprudent risk-taking. Also the risk mitigates include substantial deferrals; vesting periods, broad-based clawbacks, and management discretion to clawback nonvested deferred compensation for improper risk-taking behavior.
D. Ensuring effective controls and risk-adjustment procedures including monitoring individual manipulation of risk when determining compensation
Compensation is determined based on year-end performance evaluations that focus on mission-critical goals with an emphasis on risk management. Performance evaluations reflect multiple inputs including multi-perspective feedback; review of performance against key business financial, risk and client metrics as well as qualitative and/or non-financial elements of performance; manager’s review of qualitative risk behavior; and independent review of qualitative risk behavior conducted by the Control Functions (Independent Risk, Compliance, Internal Audit, Legal and Finance)
3. Adjustment of the deferred payment
Please refer to 2B “Methodology to make adjustment to the performance linked portion”.
(4) Matters such as the categories of the remunerations for the Subject Officer and Employee of CJL and the amounts and payment methods.
The total amount of remunerations for the Subject Officers and Employees (from April 1, 2014 to March 31, 2015)
(Millions of Yen)
Categories Head
Count
Remunerati
on, etc. in
total Fixed
Remuneration
Variable
Remunera
tion
Retirement
Benefits Basic
Remuneration
Stocks/
Stock
Option
Other Basic
Remuneration Bonus Other
Subject
Officers
(excluding
outside
officers,etc
.)
6 703 366 155 0 211 321 0 313 8 16
Subject
Employees
, etc.
1 140 57 44 0 13 83 0 83 0 0
(Note)
1. Other fixed remuneration includes housing or other allowances provided to the expatriated from Citigroup entities overseas .Subject Officers HC 6 includes one director who retired at middle of fiscal year.
2. Other variable remuneration includes deferred remunerations, Equity Compensation, etc.
(5) Other information relevant to the remuneration and other systems of the Subject Officers and Employees of CJL.
There is not reportable information other than the above.
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Confirmation
July 31, 2015
Representative Director, President & CEO Anthony P. Della Pietra, Jr.
I confirm, to the best of my knowledge, the following matters concerning the Citibank Japan Ltd. financial statements for the Period from April 1, 2014 to March 31, 2015:
1. Matters concerning the financial statements are in conformity with “The Regulations regardingTerminology, Format and Method of Preparation of Financial Statements, etc” and “Enforcement Regulation of the Banking Law” and others, and the financials present fairly in all material respects.
2. Citibank Japan Ltd. establishes and maintains the appropriate internal control systems as below,and fairly presents financial statements based on it.
(1) Assignment of duties and the corresponding units in charge are clearly defined, and the system for accomplishment of operation is appropriately established.
(2) Internal Audit Division assesses the appropriateness and effectiveness of internal control systems for each responsible unit, and reports the material matters to the Management and Board of Statutory Auditors.
(3) All material information concerning Citibank Japan Ltd. is adequately reported to the Management and Board of Directors as necessary.
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