Capital Management

Basel 3 is an international regulatory framework that aims to secure the soundness of financial institutions through enhancement of capital. It consists of three pillars: (1) minimum capital requirements, (2) self-assessment and supervisory reviews, and (3) market discipline through enhanced information disclosure.

Based on the recognition that proactive response to Basel 3 will contribute to the enhancement of capital and risk management, Resona Holdings has established the "Basic Policy for Group Capital Management" in order to maintain sufficient capital by utilizing the regulatory framework. Resona Holdings has been working on (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 calculation of the capital adequacy ratio, as well as further enhancement of risk management.

The capital adequacy ratio is calculated accurately using the methods described in the table below, and the Group maintained a sound level of capital under the Basel 3 standards. In addition, we have set a capital adequacy ratio target under the finalized version of Basel 3 standards, which are scheduled to be applied in the future, and have incorporated it into our capital management framework, as part of our ongoing efforts to maintain sound capital levels.

Method for Calculating the Capital Adequacy Ratio

Capital Adequacy Ratio of Resona Holdings, Inc. (Consolidated)

Resona Group believes that, to maintain sound and stable business operations, securing sufficient capital to cover the risk taken is extremely important. Accordingly, the Company manages the capital of the Resona Group to maintain the appropriate level of its capital adequacy ratio.

Departments in charge of capital adequacy ratio management (Finance and Accounting Division) and departments in charge of comprehensive risk management (Risk Management Division) each play their respective rolls such as deciding the capital adequacy ratio plans and risk limits, monitoring compliance with these plans, analyzing and evaluating the actual results, and assessing the level of capital adequacy.

These departments consider policies in response when necessary, and, by conducting sufficient discussion with one another, they supervise the status of the capital and make accurate and timely reports to the management. Accordingly, as a result of these activities, the Group is able to implement flexible measures to manage its capital.

Capital Adequacy Assessment System of Resona Holdings, Inc.

Note: Group banks also established the capital management systems.

Resona Holdings evaluates the "level of capital adequacy" from two perspectives: 1) management of the capital adequacy ratio based on the capital adequacy regulations and 2) comprehensive risk management. Under the management of the capital adequacy ratio, the capital adequacy ratio is calculated and assessed by inspecting the actual result with the plan. Under the comprehensive risk management, in the assessment of the soundness of the Company's financial position, credit risk, market risk, and operational risk are measured by uniform standards based on VaR and other approaches after taking account of the features of each type of risk and the features of the operations of Resona Holdings. 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 taken into account in the first perspective under the capital adequacy regulation (such as credit concentration, interest rate risk, and other factors), we make comprehensive assessments of capital adequacy.

Under this system for capital management, Resona Holdings continues to maintain a level of capital sufficient for sustaining the sound and stable operation of their business activities.