Capital Management System
Resona Group's Response to Basel II
Japanese banks adopted the Basel II capital adequacy standards, which are a framework aimed at securing the soundness of banks through enhancement of capital, from the fiscal year ended March 31, 2007.
To secure sufficient capital for the Resona Group, in line with the Basel II framework, Resona Holdings has established a "Basic Policy for Group Capital Management," while all Resona Group banks have established their own basic policies for capital management. These policies set forth (1) taking actions for maintaining a sufficient level of capital, (2) taking actions for the proper capital assessment, and (3) taking initiatives for the accurate computation of the capital adequacy ratio. The Group is also moving forward with initiatives to enhance the level of risk management. Please note that the following methods were adopted in calculating the capital adequacy ratio for the year ended March 31, 2009.
* Since an exceptional treatment is applicable to all above-mentioned entities, the amount equivalent to market risk is not included.
(1) The Capital Adequacy Ratio of Resona Holdings, Inc., is calculated on a consolidated basis under BIS Domestic Standards, defined in "Standards for Bank Holding Companies to Examine the Adequacy of its Capital Based on Assets, Etc. held by it and its subsidiaries pursuant to Article 52-25 of the Banking Law" (Notification 20, issued in 2006 by the Japanese Financial Services Agency). The capital adequacy ratio of each subsidiary bank is calculated on a consolidated and/or non-consolidated basis under BIS Domestic Standards, defined in "Standards for Banks to Examine the Adequacy of its Capital Based on Assets, Etc. held by it and its subsidiaries pursuant to Article 14-2 of the Banking Law" (Notification 19, issued in 2006 by the Japanese Financial Services Agency). For the period ending December 31, 2008 to March 31, 2012, the capital adequacy ratio is calculated based on "Exceptional Standards for Banks to Examine the Adequacy of its Capital Based on Assets, Etc. held by it and its subsidiaries pursuant to Article 14-2 of the Banking Law" (Notification 79, issued in 2008 by the Japanese Financial Services Agency).
(2) The Kinki Osaka Bank, Ltd., is currently preparing for transition to the Foundation Internal Ratings-Based (F-IRB) Approach in calculating the credit risk assets (phased roll-out of F-IRB).
(3) Under the Standardized Approach, the amount equivalent to operational risk is calculated based on "gross profit" for the previous three years. The "gross profit" is defined under the Notification on Consolidated Capital Adequacy and differs from the "gross operating profit" that appears on the Resona Group's financial statements.
Resona's Capital Management System
Resona Holdings and all Group banks believes that, to maintain sound and stable business operations, securing sufficient capital to cover the risk level is extremely important. Accordingly, the Company manages the capital of the Resona Group to maintain the appropriate level of capital adequacy ratio.
Specifically, we have developed a system in which dedicated departments in charge of managing the capital adequacy ratio and departments in charge of comprehensive risk management play their respective rolls and work together organically. Each department in charge implements dynamic and responsive management processes that include planning for capital adequacy and risk limits, monitoring compliance with these plans, analyzing and evaluating the actual results, evaluating the level of capital adequacy, and implementing policies in response when necessary. Departments in charge also make timely reports to management.
Methods for Assessment of Capital Adequacy
Resona Holdings and Resona Group banks evaluates the "level of capital adequacy" from two perspectives: 1) management of the capital adequacy ratio based on the Basel II regulations and 2) comprehensive risk management. In addition, to prepare for risks that may emerge under unforeseen conditions, we conduct a range of stress tests to measure the impact under various scenarios, and, by taking account of the principal risks that are not included in pillar 1 of the Basel II capital adequacy calculations (such as credit concentration risk, interest rate risk in the banking book, and other risks), we make comprehensive assessments of capital adequacy.
During the fiscal year ended March 31, 2009, Resona Holdings and Resona Group banks maintained sufficient capital to maintain the sound and stable operation of their business activities.