CAPITAL MANAGEMENT SYSTEM
In July 1988, the G10 nations accepted and began to
4% or higher. In contrast, under Basel II, banks are
implement the first of the Basel Accords, which set capital
required to give sufficient consideration to having enough
adequacy standards for financial institutions engaged in
capital to cover risks not reflected in the computation of
international operations (commonly known as the “Bank
the capital adequacy ratio. These risks include interest-
for International Settlements (BIS) Capital Adequacy
rate risk in the banking account, concentration of risks in
Standards). Subsequently, there was movement toward
lending, liquidity risk, reputational risk, and business strat-
reviewing these standards internationally, and in June
egy risk (“Second Pillar” in the Basel II framework).
2004, the Basel Committee on Banking Supervision made
Moreover, Basel II strongly requires a more-proactive atti-
public a final version of a new set of capital adequacy
tude toward information disclosure than in the past, requir-
standards (referred to here as “Basel II”). In Japan, the
ing self-assessments of capital adequacy by banks
Basel II capital adequacy standards were applied from the
themselves and the prompt, accurate disclosure of useful
fiscal year ended March 31, 2007.
information related to risk management systems and relat-
The three principal features of Basel II are: (1) calcula-
ed matters to gain the proper evaluation and the confi-
tion of risk-weighted assets based on a more-detailed
dence of the market. (“Third Pillar” in the Basel II
grasp of credit risk, (2) additional capital required for oper-
framework)
ational risk, and (3) “self-regulation on the part of banks
[ The Basel II Framework ]
and regulatory supervision” combined with “market discipline.”
Basel II
(1) More-Detailed Grasp of Credit Risk
Enhancing Soundness
of Bank Management
Compared with the previous BIS standards, Basel II
enables banks to gain a more-precise and detailed grasp
of credit risk. In addition, Basel II requires a proper under-
First Pillar
Second Pillar
Third Pillar
Capital
adequacy
requirements
Self-regulation
by banks
and
regulatory
supervision
Market
discipline
standing of the assets included in funds and investment
trusts. For securitized products, Basel II requires moresophisticated credit management than before and recommends securing a senior right to cash flows from the
underlying assets and obtaining ratings from external
agencies, thus making due caution for a level of possible
capital charges that the intended securitized product
requires.
(2) Capital Requirements for Operational Risk
Resona Group’s Response to Basel II
The previous standards did not take account of economic
Resona Holdings has formulated a “Basic Policy for Group
losses that may arise from clerical errors, misconduct, and
Capital Management,” while all Resona Group banks have
similar circumstances. In Basel II, these losses have been
formulated their own basic policies for capital manage-
defined as operational risk, and 12.5 times the amount
ment. These policies set forth (1) implementation of poli-
corresponding to operational risk is included in the
cies for maintaining a sufficient level of capital, (2) the
denominator in calculating the capital adequacy ratio.
proper assessment of capital adequacy, and (3) initiatives
for the accurate computation of the capital adequacy ratio.
(3) Self-Regulation of Banks and Regulatory
Supervision Combined with Market Discipline
The Group is also moving forward with initiatives to
increase the sophistication of risk management activities.
As specified under the previous BIS regulation, the mini-
Please note that the following methods were employed in
mum requirement for banks engaged in international bank-
calculating the capital adequacy ratio for the year ended
ing operations is to have a capital adequacy ratio of 8% or
March 31, 2008.
39
Capital Management System
higher, while the domestic requirement is to have a ratio of
RESONA HOLDINGS, INC.
Basel II Defined
RESONA HOLDINGS, INC.
40
Company Name
Risk Categories
Resona Holdings, Inc.
Resona Bank, Ltd.
Saitama Resona Bank, Ltd.
Credit risk
The Kinki Osaka Bank, Ltd. (Note 1)
Resona Trust & Banking Co., Ltd.
Methods
F-IRB Approach
Operational risk
The Standardized Approach (Note 2)
Market risk
Exemption applicable under the Notification of the Consolidated Capital Adequacy
Credit risk
Standardized Approach
Operational risk
The Standardized Approach (Note 2)
Market risk
Exemption applicable under the Notification of the Consolidated Capital Adequacy
Notes: (1) The Kinki Osaka Bank, Ltd. plans to adopt the F-IRB approach for the calculation of the amount of credit risk assets from the end of March 2010. (Stepwise
application of the internal ratings approach)
Notes: (2) Under the Standardized Approach, the amount equivalent to operational risk is calculated based on “gross profit” for the previous three years. This “gross
profit” is defined under the Notification on Capital Adequacy and differs from “gross operating profit” that appears on Resona Group’s financial statements.
Capital Management System
Resona’s Capital Management System
Resona Holdings and all Group banks believes that, to
maintain sound and stable business operations, securing
sufficient capital appropriate to risk exposure 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 specific 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 preparing plans for capital adequacy and risk
limits, monitoring compliance with these plans, analyzing
and assessing 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.
[ Capital Management System ]
Capital Management
Board of Directors
Capital adequacy ratio management
(Regulatory capital)
Executive Committee
Comprehensive risk management
(Economic capital)
Finance and Accounting Division
ALM Committee
Risk Management Division
Capital management
(1) Preparation of plans
Risk limits plans
Discussion/reporting
(2) Process management
Monitoring
Discussion/reporting
Actual capital adequacy ratio
(3) Results management
Discussion/reporting
Confirmation of actual risk limits
(4) Adequacy evaluation
Stress tests
Assessment of Capital Adequacy
Discussion/reporting
> Assessment using a matrix of actual capital adequacy ratios and actual risk volume
> Assessment using stress tests on both actual capital adequacy ratios and actual risk volume
Stress tests
Reviewing the original plans and process
management
Reviewing the original plans and process
management
Monitoring
(5) Review of the results
In the event capital is not adequate: Review risk limits, consider and implement remedial action,
including asset controls, raising additional capital, etc.
Discussion/reporting
Methods for Assessment of Capital Adequacy
Resona Holdings and Resona Group banks assess the
“level of capital adequacy” from the 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 stress tests to
measure the impact of various scenarios, and, by taking
account of the principal risks that are not included in the
Basel II capital adequacy calculations (such as credit concentration risk, interest rate risk in the banking account,
and other risks), we make comprehensive assessments of
capital adequacy.
During the fiscal year ended March 31, 2008, Resona
Holdings and Resona Group banks maintained sufficient
capital to maintain the sound and stable operation of their
business activities.