Capital Management Systems
Resona Group’s Response to Capital Adequacy Regulations
Capital adequacy regulations are a framework aimed at securing the soundness of financial institutions through enhancement of capital. This framework has three components: namely, minimum capital requirements, self-assessment and supervisory reviews, and market discipline enhanced through information disclosure.
To maintain sufficient capital for the Resona Group, in line with the framework, Resona Holdings has established the “Basic Policy for Group Capital Management,” and all Resona Group banks have also 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 calculation of the capital adequacy ratio. The Group is also moving forward with initiatives to enhance the level of risk management.
In calculating the capital adequacy ratio, we adopt the methods shown in the box below and the figures are calculated accurately.
Method for Calculating the Capital Adequacy Ratio
- *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 in the Notification on the Consolidated Capital Adequacy and differs from the “gross operating profit” that appears on the Resona Group’s financial statements.
Capital Adequacy Ratio of Resona Holdings, Inc. (Consolidated)
Resona Group’s Capital Management
The Resona Group has worked to “maintain sufficient capital both in terms of quality and quantity” as it “provides smooth financing to its customers,” which is the most-important service that it must provide as a financial institution.
With regard to the target level of the capital adequacy ratio, we will secure sufficient capital under the Japanese domestic standard currently applied and aim for approximately 9.0% common equity Tier 1 ratio (excluding net unrealized gains on available-for-sale securities) under the international standard in light of the three points described below.
- (1)Further contributing to local community and economic development through the steady supply of funds, the provision of services, etc.
- (2)Securing capital as a trusted financial institution from a global perspective and realizing sustainable growth
- (3)Securing strategic flexibility in preparation for responding to investment opportunities and financial regulations
Governance and Implementation of the PDCA Cycle in Capital Management
Resona Holdings and all Group banks believe 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.
Specifically, 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 that are composed of a department in charge of capital management and a department in charge of comprehensive risk management.
Resona Holdings and Resona Group banks evaluate 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 Group banks. 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 in the banking book, and other factors), we make comprehensive assessments of capital adequacy.
Under this system for capital management, Resona Holdings and Resona Group banks continue to maintain a level of capital sufficient for sustaining the sound and stable operation of their business activities.