UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of June 2024

Commission File No. 000-54189

 

 

MITSUBISHI UFJ FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

 

 

7-1, Marunouchi 2-chome, Chiyoda-ku

Tokyo 100-8330, Japan

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or

will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  X  Form 40-F     

 

 

 

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM F-3 (NO. 333-273681) OF MITSUBISHI UFJ FINANCIAL GROUP, INC. AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 25, 2024

 

English Translation of Excerpts from Securities Report Filed in Japan

This document is an English translation of selected information included in the Securities Report for the fiscal year ended March 31, 2024 filed by Mitsubishi UFJ Financial Group, Inc. (“MUFG” or “we”) with the Kanto Local Financial Bureau, the Ministry of Finance of Japan, on June 25, 2024 (the “Securities Report”). An English translation of certain information included in the Securities Report was previously submitted in a report on Form 6-K dated May 15, 2024. Accordingly, this document should be read together with the previously submitted report.

The Securities Report has been prepared and filed in Japan in accordance with applicable Japanese disclosure requirements as well as generally accepted accounting principles in Japan (“J-GAAP”). There are significant differences between J-GAAP and generally accepted accounting principles in the United States. In addition, the Securities Report is being filed in the context of other prior disclosures filed by MUFG in Japan and discusses selected recent developments taking into account those prior disclosures. Accordingly, you may need to review the following disclosure, together with other prior disclosures, to obtain all of the information that is important to you. For a more complete discussion of the background to information provided below, please see our annual report on Form 20-F for the fiscal year ended March 31, 2023 and other reports filed with or submitted to the U.S. Securities and Exchange Commission by MUFG.

The following disclosure contains forward-looking statements, which, unless specifically stated otherwise, reflect our understanding as of the date of filing of the Securities Report. Actual results may significantly differ from those expressed or implied by such forward-looking statements. In addition, although the Risk Committee identified the top risks below, there may be other material risks that emerge as we operate our businesses.

Risks Relating to Our Business

We determine the significance of various risk scenarios based on their assessed impact and probability and identify potential risk events that are deemed to require close monitoring and attention for the next one-year period as top risks. The main top risks identified by our Risk Committee in March 2024 are as follows. By identifying these top risks, we seek to implement necessary risk management measures designed to minimize such risks to the extent possible and manage them in such a manner that they can be agilely dealt with in the event that they materialize. In addition, through management’s participation in discussions on such top risks, we strive to take effective measures based on a shared assessment of risks.

Main Top Risks

 

Risk events		Risk scenarios
Decline in capital sufficiency / Increase in risk assets		•  Our capital management may be adversely affected by an increase in unrealized losses on debt securities due to a rise in interest rates globally.
Foreign currency liquidity risk		•  Deterioration in market conditions may result in a depletion of foreign currency funding liquidity and an increase in our foreign currency funding costs.
Increase in credit costs		•  Sudden deterioration in global economic activities may result in an increase in our credit costs. •  Deterioration in the credit quality of particular industries or counterparties, to which we have relatively larger exposures, may result in an increase in our credit costs.
IT risk		•  Cyber-attacks may result in customer information leakage, suspension of our services, and reputational damage. •  System problems may result in our payment of financial compensation and damage to our reputation.
Risks relating to climate changes		•  If our efforts to address climate change-related risks or to make appropriate disclosure are deemed insufficient, our corporate value may be impaired. •  Our credit portfolio may be adversely affected by the negative impact of climate change on our borrowers and transaction counterparties.

 

*	These risk events are among the risk events that were reported to MUFG’s Board of Directors following the Risk Committee’s discussion in March 2024. These risk events include risk events of general applicability.

 

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Based on our analysis of the top risks described above, we have described below major matters relating to risks to our business and other risks that we believe may have a material impact on an investor’s investment decision. In addition, to proactively disclose information to investors, we have described matters that do not necessarily correspond to such risk factors, but that we believe are material to investors in making an investment decision. We will, with the understanding that these risks may occur, endeavor to avoid the occurrence of such risks and to address such risks if they occur.

This section contains forward-looking statements, which, unless specifically stated otherwise, reflect our understanding as of the date of filing of this Securities Report.

Risks Related to Our Business Environment

 

1.	Risks relating to deterioration in economic conditions in Japan and globally

Economic conditions in Japan and around the world may deteriorate due to various factors such as changes in the monetary and fiscal policies in major jurisdictions and the fiscal condition of major countries, rapid and significant fluctuations in foreign exchange rates, global inflation, and real estate market trends, and concerns and developments affecting financial institutions. Uncertainty over the Japanese and global economies still remain because of such other factors as concerns over political developments in the United States, concerns over the U.S.-China conflict, geopolitical instabilities and conflicts, interruptions in international supply chains and trade, and political turmoil in various regions around the world.

Worsening economic conditions in Japan and around the world may result in, among other things, impairment or valuation losses on securities and other assets that we hold due to declines in the market value of such assets, an increase in our non-performing loans and credit costs due to deterioration in borrowers’ business performance, a decrease in our profits due to deterioration in the creditworthiness of counterparties in market transactions, a reduction in foreign currency funding liquidity, an increase in our foreign currency funding costs, and an increase in the level of risk in, and the balance of, the risk assets that we hold. Our profitability may be adversely affected by various other factors, including a decline in our net interest income caused by such factors as an increase in our funding costs due to a rise in interest rates globally resulting from changes in the monetary policies of central banks in various jurisdictions. In addition, an economic downturn may result in a decline in new investments and business transactions by customers due to stagnation in economic activity, weak consumer spending, diminished investor appetite for making investments in uncertain financial markets, and a decrease in our assets under custody or management.

In the event of a financial market turmoil or depression resulting from significant volatility in bond and stock markets or foreign currency exchange rates, or a global financial crisis, the market value of financial instruments that we hold may significantly decline, properly quoted market prices of such instruments may become unavailable for valuation purposes, or financial markets may become dysfunctional. As a result, we may incur impairment or valuation losses on financial instruments in our portfolio.

Any of the foregoing factors may materially and adversely affect our business, operating results and financial condition.

 

2.	Risks relating to external circumstances or events (such as conflicts, terrorist attacks and natural disasters)

As a major financial institution incorporated in Japan and operating in major international financial markets, our business operations, ATMs and other information technology systems, personnel, and facilities and other physical assets are subject to the risks of earthquakes, typhoons, floods and other natural disasters, terrorism, geopolitical conflicts and ensuing economic sanctions, political and social conflicts, health pandemics or epidemics, and other disruptions caused by external events, which are beyond our control. Such external events may result in loss of facility, personnel and other resources, suspension or delay in all or part of our operations, inability to implement business strategic measures or respond to changes in the market or regulatory environment as planned, and other disruptions to our operations. We may also be required to incur significant costs and expenses, including those incurred for preventive or remedial measures, to deal with the consequences of such external events. In addition, such external events may negatively impact the economic conditions in the markets we or our customers operate. As a result, our business, operating results and financial condition may be materially and adversely affected.

As with other Japanese companies, we are exposed to heightened risks of large-scale natural disasters, particularly earthquakes. In particular, a large-scale earthquake occurring in the Tokyo metropolitan area and other areas where we have our important business functions may have a material adverse effect on our business, operating results and financial condition.

 

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Our risk management policies and procedures may be insufficient to address the consequences of these external events, resulting in our inability to continue to operate a part or the whole of our business, although we work to strengthen our operational resilience (the ability of a bank to deliver critical operations through disruption such as a conflict, terrorism (including cyber terrorism), or natural disaster) by establishing a business continuity framework based on the regulations of each relevant jurisdiction and testing through training and other measures.

Our redundancy and backup measures may not be sufficient to avoid a material disruption in our operations, and our contingency and business continuity plans may not address all eventualities that may occur in the event of a material disruption caused by a large-scale natural disaster.

 

3.	Risks relating to Sustainability

Amid recently widening recognition of environmental and social issues and growing awareness of efforts towards the realization of a sustainable environment and society, we are cognizant of rising societal expectations placed upon us. We have in place the “MUFG Environmental Policy” and the “MUFG Human Rights Policy” and, based on the “MUFG Environmental and Social Policy Framework”, implement policies applicable to certain specific industry sectors with raised concerns over their environmental or social impacts in the corporate lending and debt and equity securities underwriting businesses of our three major subsidiaries, MUFG Bank, Ltd., Mitsubishi UFJ Trust and Banking Corporation and Mitsubishi UFJ Securities Holdings Co., Ltd., and conduct a due diligence process designed to identify and assess the environmental and social risks and impacts of the business operations to be financed by the subsidiaries. Regarding climate change, we support the recommendations of the Climate-related Financial Disclosure Task Force, or TCFD, and continue to make an effort to improve our understanding and evaluation of the relevant risks, enhance our related disclosures, and strengthen our governance in accordance with such recommendations and applicable regulatory requirements. We also seek to provide assistance with responses to climate change and measures to transition to a decarbonized society as well as efforts towards the realization of a sustainable environment and society.

However, if our measures or disclosures described above prove or are deemed inappropriate, if such measures do not proceed as planned, if we fail or are deemed to have failed to effectively respond to expansion of regulatory requirements or diversification of policies, or if, as a result of any of the foregoing, we are considered to be failing to fulfill our responsibility to society, then our corporate value may be impaired and our business, financial condition and results of operations may be adversely affected. Climate change, in particular, entails transition risks arising from, among other things, changes in regulations, technologies and market preferences toward a less carbon-dependent society and physical risks associated with, among other things, direct damage to assets and disruptions in supply chains caused by changes in the climate. These climate change-related risks may directly affect our operations and may also have other indirect effects on us, including their impact on the business and financial performance of our borrowers adversely affecting our loan portfolio management. These direct and indirect effects may have a significant negative impact on our results of operations and financial condition.

Risks Related to Our Strategies and Our Major Investees

 

4.	Risks relating to competitive pressures and failure to achieve business plans or operating targets

Competition in the financial services industry may further intensify due to the increase in the number of non-financial institutions entering the financial services industry with alternative services such as electronic settlement services as a result of development of new technologies as well as significant changes in regulatory barriers.

We have been implementing various business strategies on a global basis designed to strengthen our competitive position and profitability. However, competition may further increase as other global financial institutions enhance their competitive strength through mergers, acquisitions, strategic alliances, and profit improvement and other measures.

Under such circumstances, our business, financial condition and results of operations may be adversely affected if our strategies fail to produce the results we expect or if we are required to delay or otherwise change our strategies. Our competitiveness may decline because of various factors, including where:

 

•

the volume of loans made to borrowers cannot be maintained or does not increase as anticipated;

 

•

our income from interest spreads on loans does not improve as anticipated;

 

•

our fee income does not increase as much or quickly as planned;

 

•

our strategy to build a business infrastructure for new services and products through digital transformation, use of new technologies or otherwise does not proceed as planned;

 

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•

our strategy to improve financial and operational efficiency does not proceed as planned;

 

•

clients and business opportunities are lost, or costs and expenses significantly exceed our expectations, as a result of the ongoing or planned strategies to streamline our business portfolio, to integrate our systems, or to improve financial and operational efficiency not being achieved as expected;

 

•

we are unable to hire or retain necessary human resources;

 

•

our foreign currency funding becomes limited or unavailable;

 

•

we are restricted in agility or flexibility in investing in non-financial institutions under applicable laws and regulations in and outside of Japan; and

 

•

rapid and significant deposit outflows caused by deteriorated customer confidence in our financial health or market confidence in the financial industry result in a lack of liquidity.

 

5.	Risks accompanying the global expansion of our operations and the range of products and services

As we expand our business operations and operate our business as a global financial institution, we may become exposed to new and increasingly complex risks associated therewith. We may not be able to establish appropriate internal controls or risk management systems or to hire or retain necessary human resources to effectively deal with compliance, regulatory and other risks entailing the expanded scope of our operations, products and services in all cases and, as a consequence, our financial condition and results of operations may be adversely affected.

As a strategic measure implemented in an effort to become the world’s most trusted financial group, we acquire businesses, make investments and enter into capital alliances globally. We may continue to pursue opportunities to acquire businesses, make investments and enter into capital alliances. Our major overseas subsidiaries include Krungsri, an indirect subsidiary in Thailand, and Bank Danamon, an indirect subsidiary in Indonesia. Our acquisition, investments and capital alliances may not proceed as planned or may be changed or dissolved, we may not achieve the synergies or other results that we expected, or we may incur impairment or valuation losses on securities acquired or intangible assets, including goodwill, recorded in connection with such business acquisitions, investments or business alliances, because of, among other things, political and social instability, stagnation of the economy, fluctuations of the financial market, inability to obtain regulatory approvals, changes in the laws, regulations or accounting standards, changes in the strategies or financial condition of our acquirees, investees or alliance partners that are inconsistent with our interests, and unanticipated changes in the local market, industry or business environment affecting our acquirees, investees or alliance partners. These and other similar circumstances may adversely affect our business strategies, financial condition and results of operations. In addition, we may be unable to achieve the benefits expected from our efforts to expand business operations if our expansion strategy does not proceed as planned.

 

6.	Risks relating to our strategic alliance with Morgan Stanley

We hold shares of common stock (representing 22.4% of the voting rights immediately following the conversion of convertible preferred stock in June 2011 and 23.2% as of March 31, 2024) in Morgan Stanley and continue to hold certain non-convertible (non-voting) preferred stock previously issued to us by Morgan Stanley. We have entered into a strategic alliance with Morgan Stanley to, among other things, jointly manage securities business joint ventures in Japan and to cooperate with each other in the corporate finance business in the United States.

We intend to further strengthen the alliance. However, if the social, economic, market or financial environment changes, or if our collaboration of personnel, products and services or the formation and implementation of the joint ventures’ management, controls or business strategies are not realized as planned, we may not be able to achieve the synergy and other results that we expected from the strategic alliance.

If our strategic alliance with Morgan Stanley is terminated, it may adversely affect our business strategies, financial condition and results of operations. In addition, we are a non-controlling shareholder, and we cannot control Morgan Stanley’s business, nor can we make decisions for Morgan Stanley. If Morgan Stanley makes independent decisions that are not consistent with our interests, we may not be able to achieve the goals expected from our strategic alliance with Morgan Stanley. In addition, because of our large investment in Morgan Stanley, if Morgan Stanley’s financial condition or results of operations deteriorate, we may incur substantial losses on our investment.

 

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We hold 23.2% of the voting rights in Morgan Stanley as of March 31, 2024 and appoint two representatives to Morgan Stanley’s board of directors. Accordingly, Morgan Stanley is our affiliated company accounted for under the equity method. As a result, Morgan Stanley’s results of operations or changes in our ownership interest in Morgan Stanley will have an impact on our results of operations as the amount of Morgan Stanley’s income or loss in proportion to our shareholding ratio is recognized as income or loss from investments in affiliates in our statements of income, and changes in our ownership interest in Morgan Stanley resulting from changes in our shareholder ratio in Morgan Stanley caused by increases or decreases in Morgan Stanley’s outstanding shares will be recognized as gains or losses in our statements of income.

Risks Related to Our Ability to Meet Regulatory Capital Requirements

 

7.	Risks relating to regulatory capital ratio and other related requirements

 

(1)	Capital ratio and other regulatory ratio requirements and factors that can adversely affect our ratios

We and our subsidiary banks are subject to capital adequacy ratio and leverage ratio requirements adopted in Japan in accordance with Basel III. Final Basel III reforms became applicable to us on March 31, 2024, as announced by the FSA in its public notice relating to partial amendments to the capital ratio requirements, dated April 28, 2022. The applicable minimum leverage ratio requirement was raised on April 1, 2024, as announced by the FSA on November 11, 2022, while the temporary measure previously in place to exclude the amount of deposits with the Bank of Japan from the total exposure amount has been maintained. The Financial Stability Board has identified us as one of the global systemically important banks, or G-SIBs, which are subject to a leverage ratio buffer from the end of March 2023.

If our or our subsidiary banks’ capital ratios or leverage ratios fall below the required levels, including various capital buffers, the FSA may require us to take a variety of corrective actions, including abstention from making capital distributions and suspension of our business operations.

In addition, some of our bank subsidiaries are subject to the local capital adequacy ratio and other regulatory ratio requirements of various foreign countries, including the United States, and if their ratios fall below the required levels, the local regulators may require them to take a variety of corrective actions.

Factors that will affect our and our bank subsidiaries’ capital ratios or leverage ratios include:

 

•

fluctuations in our or our banking subsidiaries’ portfolios due to deterioration in the creditworthiness of borrowers and the issuers of equity and debt securities,

 

•

difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to raise capital under terms and conditions similar to prior financings or issuances,

 

•

declines in the value of our or our banking subsidiaries’ securities portfolios,

 

•

adverse changes in foreign currency exchange rates,

 

•

adverse revisions to the capital ratio and other regulatory ratio requirements,

 

•

reductions in the value of our or our banking subsidiaries’ deferred tax assets, and

 

•

other adverse developments.

 

(2)	Regulations applicable to G-SIBs

The G-SIBs, including us, are subject to a capital surcharge. As such, we may be required to meet stricter capital ratio requirements.

 

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(3)	Total loss absorbing capacity in resolution

The Financial Stability Board issued “Principles on Loss-absorbing and Recapitalisation Capacity of G-SIBs in Resolution” in November 2015 and “Guiding Principles on the Internal Total Loss-Absorbing Capacity of G-SIBs (‘Internal TLAC’)” in July 2017. These principles are designed to ensure that if a G-SIB fails, it has sufficient total loss-absorbing capacity, or TLAC, available in resolution. Based on these principles, in Japan, G-SIBs, including us, are required to maintain certain minimum levels of capital and liabilities that are deemed to have loss-absorbing and recapitalization capacity, or External TLAC, and allocate a certain minimum level of External TLAC to any material subsidiary within their respective groups of companies, or Internal TLAC, starting in the fiscal year ended March 31, 2019. The applicable minimum requirements were raised in the fiscal year ended March 31, 2022, and the applicable minimum required external TLAC ratio on a total exposure basis was further raised on April 1, 2024. Within the MUFG Group, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. are designated as our material subsidiaries. We may become subject to various regulatory actions, including restrictions on capital distributions, if we are unable to maintain our External TLAC ratios or the amount of Internal TLAC allocated to any of our material subsidiaries in Japan above the minimum levels required by the standards imposed by the FSA. Our External TLAC ratios and the amount of our Internal TLAC are affected by various factors described in (1) and (2) pertaining to the capital adequacy ratio and other related regulations. Although we plan to issue TLAC-qualified debt in an effort to meet the minimum required levels of External TLAC ratios and Internal TLAC amounts, we may fail to do so if we are unable to issue or refinance TLAC-qualified debt as planned.

 

8.	Risks relating to foreign exchange rate

We operate our business globally and we hold assets and liabilities denominated in foreign currencies. The Japanese yen translation amounts of our assets and liabilities denominated in foreign currencies will fluctuate due to fluctuations in the foreign currency exchange rates. To the extent that our foreign currency-denominated assets and liabilities are not matched in the same currency or appropriately hedged, fluctuations in foreign currency exchange rates against the Japanese yen may adversely affect our capital ratios, financial condition, and results of operations.

Credit Risk (Risk of Loss Resulting from Deterioration in Financial Condition of Borrowers or Transaction Counterparties)

 

9.	Risks relating to our lending business

The lending business is one of our primary businesses. To the extent that our measures designed to mitigate credit risk, including collateral, guarantees and credit derivatives, are insufficient, our credit costs may significantly increase if borrowers fail to meet their interest payment or principal repayment obligations as expected or if we fail to effectively and adequately anticipate and deal with deterioration in the credit quality of our borrowers. Any such failure may adversely affect our financial condition and results of operations and may also result in a decrease in our capital ratios. Our credit costs and problem loans may increase in the future due to deterioration in economic conditions in Japan and other parts of the world, including emerging countries, fluctuations in oil and other commodity prices, declines in real estate and stock prices, depreciation of currencies of emerging markets, rises in interest rates, or financial difficulties of our borrowers due to such factors as intensifying competition within their respective industries.

 

(1)	Status of our allowance for credit losses

Our allowance for credit losses is recorded based on assumptions and estimates of the condition of borrowers, the value of collateral and the economy as a whole. If general economic conditions or the financial performance of specific borrowers deteriorates, if the value or liquidity of collateral declines, or if our actual loan losses exceed our allowance for credit losses, we may also incur additional credit losses. In addition, the regulatory standards or guidance on establishing allowances may also change, causing us to change some of the evaluations used in determining the allowances. As a result, we may need to provide for additional allowance for credit losses. As of March 31, 2024, the balance of our allowance for credit losses was ¥1,535.2 billion.

 

(2)	Concentration of loan and other credit exposures to particular industries and counterparties

When we make loans and other extensions of credit, we seek to diversify our portfolio to avoid any concentration of exposure to a particular industry or counterparty. However, our credit exposures to the real estate industry are relatively high in comparison to other industries, and we are consequently susceptible to adverse changes particularly in that industry. While we continue to monitor and respond to changes in circumstances and other developments relating to particular industries and individual counterparties as well as each relevant country and region, including emerging countries, the quality of our credit portfolio may deteriorate to an extent greater than expected due to changes in economic conditions in Japan and other countries and regions, including the impact of climate change and geopolitical developments, and fluctuations in real estate prices, oil and other commodity prices, and foreign currency exchange rates.

 

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(3)	Our response to borrowers

Even in the event that a borrower defaults, based on the efficiency and effectiveness of collecting on loans and other factors, we may not exercise all of our legal rights as a creditor against the borrower.

In addition, if we determine that it is reasonable, we may forgive debt or provide additional loans or equity capital to support borrowers. If such support is provided, our outstanding loans may increase significantly, our credit costs may increase, and the value of the additional equity purchased may decline.

 

10.	Transactions with other financial institutions

Declining asset quality and other financial problems may exist at some domestic and foreign financial institutions, including banks, non-bank lending and credit institutions, securities companies and insurance companies, and these problems may worsen or these problems may arise again as new issues. Such problems recently manifested in a series of high-profile failures of financial institutions in the United States and Europe. If financial difficulties of financial institutions continue, worsen or arise, they may not only lead to liquidity and insolvency problems for such financial institutions but also result in systemic problems adversely affecting the financial market and the wider economy, and may adversely affect us for the following reasons:

 

•

we have credit extended to some financial institutions;

 

•

we are shareholders of some financial institutions;

 

•

financial institutions that face problems may terminate or reduce financial support to borrowers and, as a result, these borrowers may become distressed or our problem loans to these borrowers may increase;

 

•

we may be requested to participate in providing support to distressed financial institutions;

 

•

if the government elects to provide regulatory, tax, funding or other benefits to financial institutions that the government controls to strengthen their capital, increase their profitability or for other purposes, they may adversely affect our competitiveness against them;

 

•

our deposit insurance premiums may rise if deposit insurance funds prove to be inadequate;

 

•

bankruptcies or government control of financial institutions may generally undermine the confidence of depositors and investors in, or adversely affect the overall environment for, financial institutions; and

 

•

negative media coverage of the financial industry or system, regardless of its accuracy and applicability to us, may harm our reputation and market confidence.

Risk Related to Our Strategic Equity Portfolio (Risk of Loss Resulting from a Decline in the Value of Equity Securities We Hold)

 

11.	Risks relating to our equity portfolio

We hold large amounts of marketable equity securities, including those held for strategic investment purposes. As of March 31, 2024, the market value of such securities was approximately ¥5.0 trillion, and the book value of such securities was approximately ¥1.4 trillion. In view of mitigating the risk of equity price volatility, our basic policy is to reduce the amount of equity securities held for strategic investment purposes. We examine the objective and economic rationale for strategically held equity securities, and if we determine that it no longer makes reasonable sense to continue to hold them, we will seek to dispose of such equity securities. For our strategic equity portfolio, we endeavor to manage the risk of stock price fluctuations by hedging a portion of the portfolio using total return swaps and other hedging instruments.

However, if stock prices decline, we may incur significant impairment losses or valuation losses on our equity investment portfolio. In addition, since unrealized gains and losses on equity securities are reflected in the calculation of regulatory capital amounts, a decline in stock prices may result in a decrease in our capital ratios and other regulatory ratios. As a result, our financial condition and results of operations may be adversely affected.

 

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Market Risk (Risk of Loss Resulting from Fluctuations in Interest Rates, Prices of Securities and Foreign Currency Exchange Rates)

 

12.	Risks relating to our financial markets operations

We undertake extensive financial market operations involving a variety of financial instruments, including derivatives, and hold large volumes of such financial instruments. For example, if market interest rates decline due to such factors as changes in the monetary policies of central banks in various jurisdictions, the yield on the Japanese government bonds and foreign government bonds that we hold may also decline. Furthermore, if short-term interest rates rise to a larger extent than long-term interest rates, or if long-term interest rates decline to a larger extent than short-term interest rates, our net interest income may be adversely affected. If interest rates in and outside of Japan rise, we may incur significant losses on sales of, and valuation losses on, our bond portfolio, and our debt financing costs may also increase significantly. In addition, an appreciation of the Japanese yen will cause the value of our foreign currency-denominated investments recorded in our financial statements to decline and may cause us to recognize losses on sales or valuation losses. Furthermore, if stock prices decline, and the value of marketable equity securities and trading account equity securities that we hold also declines, we may incur significant losses on sales of, and valuation losses on, our marketable equity securities and trading account equity securities portfolios. Although we seek to manage market risk, which is the risk of incurring losses due to various market changes including interest rates, foreign currency exchange rates and stock prices, market risk exposure amounts that we calculate cannot accurately reflect the actual risk that we face in all cases, and we may realize actual losses that are greater than our estimated market risk exposure.

Funding Liquidity Risk (Risk of Loss Due to Inability to Raise Funds or Need to Raise Funds at Unexpectedly High Interest Rates)

 

13.	Risks associated with a downgrade of our credit ratings and other external factors

Deterioration in market illiquidity or other external circumstances or an actual or perceived decline in our creditworthiness could negatively affect our ability to access and maintain liquidity. Our liquidity may be impaired by factors such as an inability to raise funding in financial markets, an increase in our funding costs, unexpected increases in cash or collateral requirements, an inability to sell assets or enter into or settle other transactions as planned or needed, and an inability to attract or retain deposits. These situations may arise due to circumstances which we may be unable to control but which have occurred in the past, including market or economic disruptions, financial system instability, and a downgrade in our credit ratings, or circumstances specific to us, including an actual or perceived decline in our creditworthiness. Insufficient liquidity may have a material adverse impact on our business, operating results and financial condition.

Assuming all of the relevant credit rating agencies downgraded the credit ratings of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings as of March 31, 2024 by one-notch on the same date, we estimate that MUFG and its three main subsidiaries would have been required to provide approximately ¥47.2 billion of additional collateral postings under their derivative contracts. Assuming a two-notch downgrade by all of the same credit rating agencies occurring on the same date, we estimate that the additional collateral postings for the same MUFG group companies under their derivative contracts would have been approximately ¥97.4 billion.

Operational Risk (Risk of Loss Resulting from Inappropriate Management of Operations or External Factors)

 

14.	Risks of being deemed to have engaged in inappropriate or illegal practices or other conduct and, as a result, becoming subject to regulatory actions

We conduct our business subject to laws, regulations, rules, policies and voluntary codes of practice in Japan and other markets where we operate. We are subject to various regulatory inquiries or investigations from time to time in connection with various aspects of our business and operations. Our compliance risk management systems and programs, which are continually enhanced, may not be fully effective in preventing all violations of laws, regulations and rules.

If we are deemed not compliant with applicable laws, regulations or rules, including those relating to money laundering, economic sanctions, bribery, corruption, financial crimes, or other inappropriate or illegal transactions, if our conduct is deemed to constitute unfair or inappropriate business practices, or if we are deemed to have failed to meet market or industry rules or standards, customer protection requirements, or corporate behavior expectations, we may become subject to penalties, fines, public reprimands, reputational damage, issuance of business improvement, suspension or other administrative orders, or withdrawal of authorization to operate. These consequences may result in loss of customer or market confidence in us or otherwise may adversely affect our financial condition and results of operations. Our ability to obtain regulatory approvals for future strategic initiatives may also be adversely affected.

 

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We have received requests and subpoenas for information from government agencies in some jurisdictions in connection with their investigations into past submissions made by panel members, including us, to the bodies that set various interbank benchmark rates as well as investigations into foreign exchange related practices of global financial institutions. Some of the investigations into foreign exchange related practices resulted in our payment of monetary penalties to the relevant government agencies. We are cooperating with those investigations and have been conducting an internal investigation. In connection with these matters, we and other financial institutions are involved as defendants in a number of civil lawsuits.

These developments or other similar events, including potential additional regulatory actions against us, agreements to make significant additional settlement payments, may result in significant adverse financial and other consequences to us.

Additionally, on June 14, 2024, the Securities and Exchange Surveillance Commission of Japan (“SESC”) issued and announced a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency (“FSA”) take administrative action against our subsidiaries MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities and our securities affiliate. The recommendation was based on the SESC’s findings of, among other things, inappropriate sharing of customer information as well as improper solicitation of business in contravention of the prohibition on engagement by Registered Financial Institutions in securities-related business activities. The SESC’s findings concerned, among other things, the business collaboration among the bank and securities companies and the management of non-public corporate information by the bank and securities companies.

In response to the SESC’s recommendation, on June 24, 2024, the FSA issued business improvement orders to MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and our securities affiliate under Articles 51-2 and 51 of the Financial Instruments and Exchange Act of Japan. Additionally, the FSA has required MUFG and MUFG Bank to submit reports under Articles 52-31 and 24 of the Banking Act of Japan.

 

15.	Risks relating to loss or leakage of confidential information

We are required to appropriately handle customer information or personal information in accordance with laws and regulations in Japan and other parts of the world. We possess a large amount of customer information and personal information, and we are working to improve our information management system by preparing information management policies and procedures concerning the storage and handling of information and implementing information system enhancements. However, due to improper management, unauthorized access from external sources such as cyber-attacks, or computer virus infection, we may not be able to completely prevent the loss or leakage of customer information and personal information. In such event, we may be subject to penalties, administrative sanctions and other direct losses such as compensation paid to customers. In addition, loss of customer and market confidence may adversely affect our business, financial condition and results of operations. We may also incur additional costs to deal with the consequences of these events.

 

16.	Risks relating to cyber-attacks

Our information, communications and transaction management systems (including our own proprietary systems as well as those third-party systems which are provided for our use or to which our systems are connected) constitute a core infrastructure for our accounting and other business operations and are of critical importance particularly in the current business environment with increasing dependence on remote or online networks and our strategy to promote digitization. We are working to prevent system failures through appropriate design and testing and other means and to establish security-conscious systems. However, we may not be able to completely prevent system failures, cyber-attacks, unauthorized access, computer virus infection, human errors, equipment malfunctions, defects in services provided by third parties such as communications service providers, and failure to appropriately deal with technological advances and new systems and tools. In addition, we may be unable to enhance our financial transaction management systems as required for all of our business operations or under increasingly stricter regulations applicable to financial institutions. Furthermore, our system development or improvement projects, many of which are critical to our ability to operate in accordance with market and regulatory standards, may not be completed as planned due to the complexity and other difficulty relating to such projects. Moreover, our cybersecurity risk management framework and practices may be found inadequate, particularly in light of expanding regulatory requirements and growing market expectations, including those relating to incident reporting and risks associated with our use of third-party services and systems. Such inability, failure and inadequacy may lead to errors and delays in transactions, information leakage and other adverse consequences, and, if serious, could lead to the suspension of our business operations and financial losses such as those incurred in connection with compensation for damages caused by such suspension, diminish confidence in us, harm our reputation, subject us to administrative sanctions, or result in our incurring additional costs to deal with the consequences of these events.

 

–9–

17.	Risks relating to transactions with counterparties in countries designated as state sponsors of terrorism

We engage in limited business activities with entities in or affiliated with Iran and other countries designated by the U.S. Department of State as “state sponsors of terrorism.” In addition, our banking subsidiary has a representative office in Iran.

U.S. law generally prohibits or limits U.S. persons from doing business with state sponsors of terrorism. In addition, we are aware of initiatives by U.S. governmental entities and U.S. institutional investors, such as pension funds, to prohibit or restrict transactions with or investments in entities doing business with Iran and other countries identified as state sponsors of terrorism. It is possible that such initiatives may result in our being unable to gain or retain business with U.S. governmental entities, U.S. institutional investors, such as pension funds, and entities subject to such prohibition or restrictions as customers or as investors in our shares. In addition, depending on socio-political developments, our reputation may suffer because of our associations with these countries. The above circumstances may adversely affect our financial condition, results of operations and the price of our shares.

The U.S. Government sanctions against Iran apply to prohibit, among other things, U.S. persons from conducting transactions relating to Iran, subject to limited exceptions. In addition, in May 2018, the United States withdrew from participation in the Joint Comprehensive Plan of Action. Under subsequently issued executive orders, the United States may impose secondary sanctions against non-U.S. persons who engage in or facilitate a broad range of transactions and activities involving Iran. We will continue to monitor and implement measures to address this heightened risk of U.S. measures, including any possible secondary sanctions.

Companies registered with the U.S. Securities and Exchange Commission (including non-U.S. companies) are subject to the disclosure requirement relating to certain Iran-related transactions. Moreover, certain Japanese sanctions measures are in effect, including freezing the assets of persons involved in Iran’s sensitive nuclear activities and development of nuclear weapon delivery systems. We continue to work to improve our policies and procedures to comply with such regulatory requirements. There remains a risk of potential regulatory action against us, however, if regulators perceive our policies and procedures not to be in compliance with applicable regulations. For more information on relevant regulatory actions, please refer to “14. Risks of being deemed to have engaged in inappropriate or illegal practices or other conduct and, as a result, becoming subject to regulatory actions.”

 

18.	Risks relating to regulatory changes

As a global financial services provider, our business is subject to ongoing changes in laws, regulations, rules, policies, accounting standards or methods, voluntary codes of practice and interpretations in Japan and other markets where we operate. Major global financial institutions currently face an increasingly stricter set of laws, regulations and standards as a result of emerging or new technologies, political and geopolitical developments, environmental, social and governance concerns, efforts to combat increasingly sophisticated criminal activity, and other concerns enveloping the global financial sector. There is also growing political pressure to demand even greater internal compliance and risk management systems following several high-profile scandals and risk management failures in the financial industry and the resulting failures of financial institutions. The laws, regulations and standards that apply to us are often complex and, in many cases, we must make interpretive decisions regarding the application of such laws, regulations and standards to our business activities. Future developments or changes in laws, regulations, rules, policies, accounting standards or methods, voluntary codes of practice, interpretations and their effects are expected to require greater capital, human and technological resources as well as significant management attention, and may require us to modify our business strategies and plans. We may be unable to enhance our compliance management programs and systems, which, in some cases, are supported by third-party service providers, as required or planned. Our failure or inability to comply fully with applicable laws and regulations may lead to penalties, fines, public reprimands, damage to reputation, issuance of business improvement and other administrative orders, enforced suspension of operations, our inability to obtain regulatory approvals for future strategic initiatives or, in extreme cases, withdrawal of authorization to operate, adversely affecting our business and results of operations.

 

19.	Risks relating to our consumer lending business

We have subsidiaries and affiliates in the consumer finance industry as well as loans outstanding to consumer finance companies. Changes in the business or regulatory environment for consumer finance companies may adversely affect our results of operations. The results of a series of court cases, including the stricter interpretation of the requirements for deemed payments, or “minashi bensai,” have made a borrower’s claim for reimbursement of previously collected interest payments in excess of the limits stipulated by the Interest Rate Restriction Law easier, and, as a result, there have been a significant number of such claims. In addition to the refund of overpaid interest by our subsidiaries and affiliates engaged in the consumer finance business, we may incur additional credit costs due to deterioration in the financial performance of consumer finance companies to which we extend credit. Moreover, any adverse changes in judicial decisions or regulatory requirements may result in our incurring additional costs and expenses.

 

–10–

20.	Risks relating to our reputation

We are one of the leading financial institutions in Japan and one of the handful G-SIBs in the world, and we aim to be the world’s most trusted financial group. Our ability to conduct business is indispensably dependent on the trust and confidence of our customers as well as local and international communities. Our reputation is critical in maintaining our relationships with customers, investors, regulators and the general public. Our reputation may be damaged by their negative perceptions of us and our operations in light of their concerns relating to human rights, the environment, public health and safety, or other corporate social responsibilities, or by our transactions if they are deemed repugnant to the intent and policy underlying applicable laws and regulations such as anti-money laundering, economic sanctions and competition laws as well as the prohibition on dealing with anti-social forces. Failure to prevent or properly address these issues may result in impairment of our corporate brand, loss of our existing or prospective customers or investors, or increased public or regulatory scrutiny, and may adversely affect our business, financial condition and results of operations.

 

–11–

Additional Japanese GAAP Financial Information for the Fiscal Year Ended March 31, 2024

 

1.	Significant Accounting Policies Applied to the Consolidated Financial Statements

 

I.

Scope of consolidation

 

(1)

Number of consolidated subsidiaries: 253

Principal companies:

MUFG Bank, Ltd.

Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Securities Holdings Co., Ltd.

Mitsubishi UFJ NICOS Co., Ltd.

ACOM CO., LTD.

 

(a)

Changes in the scope of consolidation in the fiscal year ended March 31, 2024

Albacore Capital Limited and twenty six other companies were newly included in the scope of consolidation due to acquisition of shares or other reasons.

Otemachi Guarantee Co., Ltd. and nineteen other companies were excluded from the scope of consolidation due to dissolution through a merger or other reasons.

 

(2)

Non-consolidated subsidiaries: None

 

(3)

Entities not regarded as subsidiaries even though Mitsubishi UFJ Financial Group, Inc. (“MUFG”) owns the majority of voting rights in its own account:

Hygeia Co., Ltd.

HISHOH Biopharma Co., Ltd.

 

(a)

Reasons for excluding from the scope of consolidation

These entities were not treated as subsidiaries because they were established as property management agents for land trust projects without any intent to control, or MUFG’s consolidated venture capital subsidiaries owned the majority of voting rights primarily to benefit from the appreciation of their investments resulting from growth or restructuring of the investees’ businesses without any intent to control.

 

II.

Application of the equity method

 

(1)

Number of non-consolidated subsidiaries accounted for under the equity method: None

 

(2)

Number of equity method affiliates: 51

Principal companies:

Mitsubishi HC Capital Inc.

Morgan Stanley

 

(a)

Changes in the scope of application of the equity method in the fiscal year ended March 31, 2024

WealthNavi Inc. and six other companies were newly included in the scope of application of the equity method due to acquisition of shares or other reasons. .

Kanmu, Inc. and one other company were excluded from the scope of application of the equity method due to the transfer to the scope of consolidation or other reason

 

–12–

(3)

Number of non-consolidated subsidiaries not accounted for under the equity method: None

 

(4)

Number of affiliates not accounted for under the equity method: None

 

(5)

Entities not regarded as affiliates in which MUFG owns 20% to 50% of their voting rights in its own account:

Kamui Pharma Co., Ltd.

Alchemedicine, Inc.

DT Axis, Inc.

FELIQS CORPORATION

 

(a)

Reasons for excluding from the scope of affiliates

These entities were not regarded as affiliates because MUFG’s consolidated venture capital subsidiaries owned 20% to 50% of voting rights primarily to benefit from the appreciation of their investments resulting from growth or restructuring of the investees’ businesses without any intent to control.

 

III.

The balance sheet dates of the consolidated subsidiaries

 

(1)

The balance sheet dates of the consolidated subsidiaries were as follows:

 

(2)

A subsidiary whose balance sheet date is the end of October was consolidated based on its preliminary financial statements as of the end of January.

The remaining subsidiaries were consolidated based on their financial statements as of their respective balance sheet dates.

Adjustments were made to the consolidated financial statements to reflect any significant transactions within the consolidated group that occurred between the balance sheet dates of the relevant subsidiaries and the consolidated balance sheet date.

 

–13–

IV.

Accounting policies

 

(1)

Trading assets and Trading liabilities; Trading income and expenses

Transactions involving short-term fluctuations or arbitrage opportunities in interest rates, currency exchange rates, market prices of financial instruments or other market indices (“trading purposes”) are presented in “Trading assets” and “Trading liabilities” on the consolidated balance sheet on a trade-date basis, and gains and losses from trading transactions (interest and dividends, gains or losses on sales and gains or losses on valuation) are presented in “Trading income” and “Trading expenses” on the consolidated statement of income.

Trading assets and trading liabilities are stated at fair value as of the consolidated balance sheet date.

With respect to derivative transactions for trading purposes, specific market risk and counterparty credit risk exposures are measured in groups of trading assets and trading liabilities, and fair value is determined for each such group of trading assets and trading liabilities on a net basis.

 

(2)

Securities

 

(a)

Debt securities being held to maturity are stated at amortized cost (using the straight-line method) computed using the moving-average method. Available-for-sale securities are stated at their quoted market prices (cost of securities sold is calculated primarily using the moving-average method), and equity securities with no quoted market price available are stated at acquisition cost computed using the moving-average method.

Net unrealized gains (losses) on available-for-sale securities are included directly in net assets, net of applicable income taxes, except in the case of application of the fair value hedge accounting method, in which the change in the fair value recognized is recorded in current earnings.

 

(b)

Securities included in trust assets in money held in trust are accounted for on the same basis as noted above in Notes (1) and (2)(a).

Net unrealized gains (losses) on securities in money held in trust which are not held for trading purposes or held to maturity are included directly in net assets, net of applicable income taxes.

 

(3)

Derivatives

Derivative transactions (excluding those for trading purposes) are stated at fair value as of the consolidated balance sheet date.

With respect to derivative transactions for trading purposes, specific market risk and counterparty credit risk exposures are measured in groups of trading assets and trading liabilities, and fair value is determined for each such group of trading assets and trading liabilities on a net basis.

 

(4)

Depreciation and amortization of fixed assets

 

(a)

Tangible fixed assets (except for lease assets)

Depreciation of tangible fixed assets of MUFG and its domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries is computed primarily using the declining-balance method. The useful lives are primarily estimated as follows:

Buildings: 15 to 50 years

Equipment: 2 to 20 years

Depreciation of tangible fixed assets of other consolidated subsidiaries is computed primarily using the straight-line method based on their estimated useful lives and other factors.

 

(b)

Intangible fixed assets (except for lease assets)

Amortization of intangible fixed assets is computed using the straight-line method.

Development costs for internally used software are amortized using the straight-line method over the estimated useful lives of primarily 3 to 10 years.

 

–14–

(c)

Lease assets

Depreciation or amortization of lease assets in “Tangible fixed assets” or “Intangible fixed assets” under finance leases other than those that are deemed to transfer the ownership of leased property to the lessees is computed using the straight-line method over the lease periods with zero residual value unless residual value is guaranteed by the corresponding lease contracts, in which case the residual value equals the guaranteed amount.

 

(5)

Deferred assets

Bond issuance costs and stock issuance costs are expensed as incurred.

 

(6)

Allowance for credit losses

Principal domestic consolidated subsidiaries determine the amount of allowance for credit losses in accordance with the internal standards for self-assessment of asset quality and the internal standards for write-offs and provisions.

For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings or whose notes have been dishonored and suspended from processing through clearing houses (“bankrupt borrowers”) or borrowers that are not legally or formally bankrupt but are regarded as substantially in similar condition (“virtually bankrupt borrowers”), allowances are provided based on the amount of claims, after the write-offs as stated below, net of expected amounts to be collected through the disposal of collateral and the execution of guarantees.

For claims on borrowers that are not yet legally or formally bankrupt but deemed to have a high possibility of becoming bankrupt (“likely to become bankrupt borrowers”), where the amounts of principal repayments and interest payments cannot be reasonably estimated from the borrowers’ cash flows, allowances are provided based on an overall solvency assessment of the claims, net of expected amounts to be collected through the disposal of collateral and the execution of guarantees.

For claims on likely to become bankrupt borrowers and claims on borrowers requiring close monitoring, where the amounts of principal repayments and interest payments can be reasonably estimated from the borrowers’ cash flows, allowances are provided in an amount equal to the difference between the book value of the claims and the relevant cash flows discounted by the initial contractual interest rates.

For other claims, allowances are provided based mainly on expected losses for the immediately following one-year period or the average remaining term to maturity of loans. Expected losses are calculated by applying a loss rate, which is obtained based on the average rate of historical credit loss experience or historical default probability experience over a certain period, which is derived from actual credit losses or actual defaults over a one-year period or over a period equal to the average remaining term to maturity of loans, with necessary adjustments for future loss projections and other factors.

For claims originated in certain foreign countries, additional allowances are provided based on an assessment of political and economic conditions of these countries.

All claims are assessed by the relevant branches and the credit supervision departments in accordance with the internal standards for self-assessment of asset quality. The credit review department, which is independent from those operating sections, subsequently audits these assessments.

For claims on bankrupt borrowers and virtually bankrupt borrowers, the amount of claims exceeding the estimated value of collateral and guarantees, which is deemed uncollectible, is written off. The total amount of write-offs was ¥217,701 million (¥216,625 million as of March 31, 2023).

Consolidated subsidiaries not adopting the procedures stated above provide for allowances based on their historical credit loss experience or other factors for collectively assessed claims and based on individual assessments of the possibility of collection for specific deteriorated claims.

 

–15–

(Additional information)

(Allowance for credit losses of certain overseas subsidiaries which apply Generally Accepted Accounting Principles in the United States (“U.S. GAAP”))

Certain overseas subsidiaries which apply U.S. GAAP have adopted U.S. Accounting Standards Codification (“ASC”) Topic 326, “Financial Instruments—Credit losses,” provide for allowance for credit losses by estimating credit losses currently expected for the remaining term of the relevant contract. Expected credit losses are calculated collectively for each portfolio of loans with similar risk characteristics based on the loss rates derived from past credit loss experience or bankruptcy experience through the application of a model that incorporates future forecast information, such as macroeconomic variables, into the probability of bankruptcy, etc. In addition, adjustments are made in the calculation of allowance for credit losses for qualitative factors relating to current conditions and future forecasts which may not be sufficiently captured in such model but should be appropriately taken into account. Future uncertainties due to the impact of the prolonged COVID-19 pandemic and the Russia-Ukraine situation are factored into estimates for the credit loss provisioning through such adjustments based on macroeconomic variables and/or qualitative factors.

With respect to loan assets with deteriorated credit risk that are deemed not to entail risks in common with other loan assets, allowance for credit losses is recognized individually for each loan asset based on risks that are particular to the asset. This credit loss provisioning is done through certain methodologies, including calculating the difference between the carrying amount of the loan asset and the amount of estimated cash flows from the loan asset discounted by the effective interest rate as well as using the fair value of the collateral for the loan asset.

 

(7)

Reserve for bonuses

Reserve for bonuses, which is provided for future bonus payments to employees, is recorded in the amount deemed to have accrued based on the estimated amount of bonuses as of the consolidated balance sheet date.

 

(8)

Reserve for bonuses to directors

Reserve for bonuses to directors, which is provided for future bonus payments to directors, is recorded in the amount deemed to have accrued based on the estimated amount of bonuses as of the consolidated balance sheet date.

 

–16–

(9)

Reserve for stocks payment

Reserve for stocks payment, which is provided for future payments of compensation under the stock compensation plan for directors and officers of MUFG and certain domestic consolidated subsidiaries, is recorded in the amount deemed to have accrued based on the estimated amount of compensation as of the consolidated balance sheet date.

 

(10)

Reserve for retirement benefits to directors

Reserve for retirement benefits to directors, which is provided for future payments of retirement benefits to directors of consolidated subsidiaries, is recorded in the amount deemed to have accrued based on the estimated amount of benefits as of the consolidated balance sheet date.

 

(11)

Reserve for loyalty award credits

Reserve for loyalty award credits, which is provided for the future redemption of points awarded to customers of certain consolidated subsidiaries, is calculated by estimating the amount that will be redeemed in the future based on the monetary amount converted from the awarded but unused points, and is recorded in the appropriate amount as a reserve.

 

(12)

Reserve for contingent losses

Reserve for contingent losses, which is provided for possible losses from contingent events related to off-balance sheet transactions and various litigation and regulatory matters, is calculated by estimating the impact of such contingent events. This reserve also includes future claims for repayment of excess interest payments on consumer loans that are estimated based on the past repayments, the pending claims and other factors.

 

(13)

Reserves under special laws

Reserves under special laws represent the reserves for contingent liabilities from derivative financial instruments transactions executed for clients, which are recorded in accordance with Article 46-5-1 of the Financial Instruments and Exchange Law and Article 175 of the Cabinet Office Ordinance on Financial Instruments Business.

 

(14)

Retirement benefits

In calculating the amount of benefit obligation, the portion of projected benefit obligation attributed to the fiscal year ended March 31, 2023 is determined using the benefit formula basis.

Prior service cost is amortized using the straight-line method over a fixed period, primarily over 10 years, within the employees’ average remaining service period.

Net actuarial gains (losses) are amortized using the straight-line method over a fixed period, primarily over 10 years, within the employees’ average remaining service period, primarily beginning in the subsequent fiscal year after such gains (losses) are recognized.

For certain overseas branches of domestic consolidated subsidiaries and certain consolidated subsidiaries, net defined benefit liability and retirement benefit expenses are calculated using the simplified method.

 

–17–

(15)

Revenue Recognition

 

(a)

Revenue recognition

Revenues arising from contracts with customers are recognized in the consolidated statements of income based on the status of fulfillment of the performance obligations identified in each contract, depending on the actual nature of the transactions under the contract.

 

(b)

Revenue Recognition for Principal Categories of Transactions

Revenue arising from contracts with customers is recognized using a method that is designed to closely reflect economic reality, with the timing of fulfillment of performance obligations, which is an important factor in determining the timing of revenue recognition, assessed as described below.

In most cases, the consideration for transactions is settled in cash at the time of the transaction. In other cases, receivables recognized in connection with transactions are generally collected within one year.

Of the fees and commissions, those on remittances and transfers consist mainly of remittance and transfer fees and are recognized as revenue at the time of settlement.

Of the fees and commissions, those on deposits consist mainly of ATM usage fees and periodic account management service fees. ATM usage fees are recognized as revenue at the time of execution of transactions, and periodic account management service fees are recorded as revenue over the service period.

Of the fees and commissions, those on loans consist mainly of the consideration for administration and management services during the tenors of syndicated loans and the consideration for financial advice to clients, and are recorded as revenue over the service period.

Of the fees and commissions, those on trust-related services consist mainly of the consideration for shareholder registry administration services for issuers of stocks, real estate brokerage and appraisal services, and succession services including preparation, maintenance and execution of wills and inheritance management. These fees and commissions are recognized as revenue at the time when the services are provided.

Of the fees and commissions, those on securities-related services consist mainly of fees related to sales and transfers of securities including investment trust, underwriting, brokerage and advisory services, fees related to securitization, and agent fees related to calculation and payment of dividends. Fees on securities-related services are recorded as revenue over the relevant service period. Fees arising from securities-related services that are consumed by a client at a point in time (e.g., sales and transfers of securities executed under the direction of clients, underwriting or securitization of bonds and equity securities which is completed on the date of the transaction, provision of advice to clients, and calculation and payment to investors of dividends) are recognized as revenue at such point in time. Fees arising from securities-related services that are used by a client at equal intervals over the service period (e.g., retainer fees for M&A advisory services) are recognized as revenue over such service period. Fees to be paid when a particular performance target is achieved (e.g., success fees for M&A advisory services) are recognized as revenue at the time when such performance target is achieved.

Of the fees and commissions, those on credit card business consist mainly of credit card merchant fees and royalty fees from franchised merchants. Merchant fees are recorded as revenue at the time when the credit sale data is received, and royalty fees from franchised merchants are recorded as revenue over the service period.

Of the fees and commissions, those on administration and management services for investment funds and investment advisory services arise mainly from asset management and investment advisory services and consist of asset management fees, success fees and investment advisory fees related to investment trusts. Asset management fees and investment advisory fees are recognized as revenue in the amount MUFG is entitled to charge based on the balance of assets under management as MUFG’s performance obligations are satisfied over the service period. Performance-based success fees are recognized as revenue at the time when performance targets are met and it is deemed highly likely that there will be no material reversal of the recognized revenue.

Trust fees consist mainly of fees on administration and management of trust assets and are recognized as revenue in the amount MUFG is entitled to charge based generally on the balance of assets under management for each trust or the performance of each trust account for an accounting period as MUFG’s performance obligations are satisfied over the service period.

 

–18–

(16)

Translation of assets and liabilities denominated in foreign currencies

Assets and liabilities denominated in foreign currencies or booked at overseas branches of domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries are translated into yen primarily at exchange rates prevailing at the consolidated balance sheet date, except for investments in non-consolidated affiliates which are translated into yen at exchange rates prevailing at the acquisition dates.

Assets and liabilities denominated in foreign currencies of other consolidated subsidiaries are translated into yen at exchange rates prevailing at the respective balance sheet date.

 

(17)

Leasing transactions

(As lessees)

Domestic consolidated subsidiaries’ finance leases other than those that are deemed to transfer the ownership of leased property to the lessees are accounted for in a similar way to purchases, and depreciation of lease assets is computed using the straight-line method over the lease term with zero residual value unless residual value is guaranteed by the corresponding lease contracts, in which case the residual value equals the guaranteed amount.

(As lessors)

Finance leases other than those that are deemed to transfer the ownership of leased property to the lessees are accounted for in a similar way to sales and income and expenses related to such leases are recognized by allocating interest equivalents to applicable fiscal periods instead of recording sales as “Other ordinary income.

 

(18)

Hedge accounting

 

(a)

Hedge accounting for interest rate risks

Domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries have adopted the deferred hedge accounting method for hedging transactions to hedge interest rate risks arising from financial assets and liabilities, except for certain transactions qualifying for special hedge accounting treatment of interest rate swaps. Portfolio hedging or individual hedging, as described in the Japanese Institute of Certified Public Accountants (“JICPA”) Industry Committee Practical Guidelines No. 24, “Treatment of Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (March 17, 2022), and JICPA Accounting Committee Report No. 14, “Practical Guidelines for Accounting for Financial Instruments” (January 31, 2000), is primarily applied to determine hedged items.

With respect to hedging transactions to offset fluctuations in the fair value of fixed rate deposits, loans and other instruments, hedging instruments (e.g., interest rate swaps) are designated to hedged items individually or collectively by their maturities in accordance with JICPA Industry Committee Practical Guidelines No. 24. With respect to hedging transactions to offset fluctuations in the fair value of fixed rate bonds classified as available-for-sale securities, hedging instruments (e.g., interest rate swaps) are designated to hedged items collectively by the type of bond. Since material terms related to hedged items and hedging instruments are substantially identical, and such hedging transactions are deemed highly effective, the assessment of effectiveness is based on the similarity of the terms.

With respect to hedging transactions to fix the cash flows of forecasted transactions related to floating rate deposits, loans and other instruments as well as forecasted transactions related to short-term fixed rate deposits, loans and other instruments, hedging instruments (e.g., interest rate swaps) are designated to hedged items collectively by interest rate indices and tenors in accordance with JICPA Industry Committee Practical Guidelines No. 24. Since material terms related to hedged items and hedging instruments are substantially identical, and such hedging transactions are deemed highly effective, the assessment of effectiveness is based on the similarity of the terms. The effectiveness of hedging transactions is also assessed by the correlation between factors that cause fluctuations in interest rates of hedged items and those of hedging instruments.

 

–19–

(b)

Hedge accounting for foreign currency risks

Domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries have adopted the deferred hedge accounting method for hedging foreign currency risks arising from financial assets and liabilities denominated in foreign currencies, except for certain transactions qualifying for the allocation method applicable to forward exchange contracts and other contracts. Portfolio hedging is applied to determine hedged items as described in JICPA Industry Committee Practical Guidelines No. 25 “Treatment of Accounting and Auditing concerning Accounting for Foreign Currency Transactions in the Banking Industry” (October 8, 2020). Hedging instruments (e.g., currency swaps and forward exchange contracts) are designated to hedged items collectively by currencies.

Portfolio hedging or individual hedging is applied to hedge foreign currency risks arising from equity investments in foreign subsidiaries and foreign affiliates and from available-for-sale securities (other than bonds) denominated in foreign currencies as well as from future equity investments in foreign subsidiaries. Monetary claims and liabilities denominated in the same foreign currencies or forward exchange contracts are used as hedging instruments. As for the hedge accounting method applied to equity investments in foreign subsidiaries and foreign affiliates, foreign currency translation differences arising from hedging instruments are recorded as foreign currency translation adjustments. The fair value hedge accounting method is applied to available-for-sale securities (other than bonds) denominated in foreign currencies, and the deferred hedge accounting method is applied to future equity investments in foreign subsidiaries.

 

(c)

Hedge accounting for stock price fluctuation risks

Individual hedging is applied to hedge market fluctuation risks arising from strategic equity securities held by domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries. Instruments such as total return swaps are used as hedging instruments. The effectiveness of hedging transactions is assessed by the correlation between changes in the fair value of hedged items and changes in the fair value of hedging instruments. The fair value hedge accounting method is applied.

 

(d)

Transactions among consolidated subsidiaries

Derivative transactions including interest rate swaps and currency swaps which are designated as hedging instruments among consolidated subsidiaries or between trading accounts and other accounts (or among internal sections) are not eliminated from the consolidated statements of income or valuation difference, but are recognized as related gains or losses or deferred under hedge accounting because these derivative transactions meet non-arbitrariness and certain other criteria under JICPA Industry Committee Practical Guidelines No. 24 and No. 25 and are regarded as equivalent to external third-party cover transactions.

 

(19)

Amortization of goodwill

Goodwill was primarily amortized using the straight-line method over 10 to 20 years beginning in the period of the acquisition. Other goodwill with insignificant balance was amortized as incurred.

 

(20)

Cash and cash equivalents in the consolidated statements of cash flows

Cash and cash equivalents in the consolidated statements of cash flows are defined as “Cash and due from banks” on the consolidated balance sheet.

 

(21)

Consumption taxes

National and local consumption taxes are primarily excluded from transaction amounts of MUFG and its domestic consolidated subsidiaries. Non-deductible portions of consumption taxes on the purchases of tangible fixed assets are expensed when incurred.

 

(22)

Adoption of the Group Tax Sharing System

MUFG and some of its domestic consolidated subsidiaries have adopted the group tax sharing system.

 

–20–

(23)

Accounting of bills discounted and rediscounted

Bills discounted and rediscounted are accounted for as financial trading in accordance with JICPA Industry Committee Practical Guidelines No. 24

 

(24)

Accounting standard for foreign subsidiaries

If the financial statements of foreign subsidiaries are prepared in accordance with the International Financial Reporting Standards (“IFRS”) or the Generally Accepted Accounting Principles in the United States (“U.S. GAAP”), such financial statements are used in the consolidated accounting process.

If the financial statements of foreign subsidiaries are prepared in accordance with generally accepted accounting principles in each domicile country and not in accordance with IFRS or U.S. GAAP, the financial statements of foreign subsidiaries are mainly rearranged in accordance with U.S. GAAP.

Adjustments are also made when necessary in the consolidated accounting process.

 

–21–

Significant Accounting Estimates

 

I.

Allowance for credit losses

 

(1)

Amount recorded in the consolidated financial statements for the current fiscal year

MUFG has banking subsidiaries including MUFG Bank, Ltd. (“the Bank”), and they are engaged in lending services as one of our core businesses. To absorb probable losses resulting from decreases in or elimination of the value of assets such as loan receivables due to deterioration in the financial condition of parties to which loans and other forms of credit have been extended (the risk of incurring such losses being referred to as “credit risk” within the MUFG Group), an allowance for credit losses is recorded according to the calculation process prescribed in our internal policies. The amount of allowance for credit losses recorded in the consolidated balance sheet as of the end of the current fiscal year is 1,535,253 million yen (1,245,727 million yen as of March 31, 2023).

The allowance for credit losses is determined in accordance with predetermined internal policies and approved by the Credit Committee under the Executive Committee. In addition, independent credit audit departments audit the evaluation results as described in “(6) Allowance for credit losses” under “IV. Accounting policies” under “1. Significant Accounting Policies Applied to the Consolidated Financial Statements.”

There is uncertainty in the estimates and significant assumptions used in calculating the allowance for credit losses. In particular, future developments concerning the Russia-Ukraine situation, which are expected to impact our borrowers’ operating environment and the economic environment, remain subject to significant uncertainty. Accordingly, we make certain assumptions, including that the current Russia-Ukraine situation continues for the foreseeable future. The recorded allowance represents our best estimate made in a manner designed to ensure objectivity and rationality.

 

(2)

Other information which is relevant to an understanding by readers of the consolidated financial statements with regard to the accounting estimates

(Allowance for credit losses of principal domestic consolidated banking subsidiaries)

 

(a)

Method of calculation of the amount recorded in the consolidated financial statements for the current fiscal year

The process of calculating the allowance for credit losses for the Bank and its domestic consolidated subsidiaries, our principal domestic consolidated banking subsidiaries, involves various estimates such as determination of borrower credit ratings which are based on evaluation and classification of borrowers’ debt-service capacity, assessment of the value of collateral provided by borrowers, estimation of future cash flows when applying the cash flow estimation method, and adjustments for future loss projections and other factors to the loss rates calculated based on historical credit loss experience. For details of the allowance calculation method, refer to “(6) Allowance for credit losses” under “IV. Accounting policies” under “1. Significant Accounting Policies Applied to the Consolidated Financial Statements.” The amount of allowance for credit losses and the loan balance of the Bank, our principal domestic consolidated banking subsidiary, recorded in the Bank’s balance sheet as of the end of the current fiscal year, are 841,518 million yen and 103,444,984 million yen, respectively (641,107 million yen and 97,127,749 million yen, respectively as of March 31, 2023).

 

(b)

Significant assumptions used in calculating the amounts presented in the consolidated financial statements for the current fiscal year

In order to make appropriate borrower classification determinations, our principal domestic consolidated banking subsidiaries use a credit rating system that is consistent with the borrower classification as a uniform standard for evaluating credit risk. As a general rule, internal credit ratings are assigned to all customers to which we extend credit and their transactions. Among our internal credit ratings, the borrower ratings for non-financial business corporations and certain other borrowers are assigned based on our evaluation of their debt-service capacity over the next 3 to 5 years on a 15-rating scale. Our principal domestic consolidated banking subsidiaries assign internal credit ratings to borrowers based on qualitative factors such as the current and expected future business environment of the industry to which borrowers belong as well as their management and funding risks in addition to quantitative financial evaluations through an analysis of their financial results. In this regard, our internal credit ratings may be highly dependent on estimation of borrowers’ future performance and business sustainability in case they experience poor business performance or financial difficulties. Estimates relating to these borrowers’ future performance and business sustainability are affected by changes in their external and internal business environment, including changes in economic condition, inflation and monetary policy in each country as well as geopolitical situation, and are accordingly subject to a high degree of uncertainty.

 

–22–

The Bank, our principal domestic consolidated banking subsidiary, applies the cash flow estimation method when providing for allowance for credit losses for loans to substantially bankrupt borrowers and borrowers requiring special attention and caution in cases where it is possible to reasonably estimate the cash flows related to the collection of loan principal and receipt of interest payments.

The estimation of such future cash flows is based on a borrower-specific assessment regarding the collectability of loans, including past collection experience, evaluation of the borrower’s restructuring plans, the financial condition and operating results of the borrower, and the economic environment of the industry to which the borrower belongs. In this regard, the estimation of future cash flows may be highly dependent on estimation of borrowers’ future performance and business sustainability. Estimates are subject to a high degree of uncertainly especially when made in connection with assessments regarding the collectability of loans to substantially bankrupt borrowers with respect to which objective information is not readily available.

In addition, the Bank determines loss rates primarily by calculating a rate of loss based on a historical average of the credit loss rate or a historical average of the default probability derived from actual credit loss experience or actual bankruptcy experience and making necessary adjustments based on future projections and other factors. The Bank makes such adjustments based on future projections and other factors to the loss rate calculated based on historical loss experience, when and to the extent such adjustments are deemed appropriate by, for example, considering any additional expected loss amount not reflected in such loss rate calculated based on historical loss experience, especially in light of the Russia-Ukraine situation. The amount of impact of these adjustments as of the end of the current fiscal year is 42,492 million yen (69,569 million yen as of March 31, 2023).

Since these adjustments based on future loss projections and other factors to loss rates calculated based on historical loss experience, which are made to reflect the credit risk for loans and other assets held as of the end of the fiscal year, are based on estimation relating to the Russia-Ukraine situation with respect to which objective information is not readily available, such estimates are subject to a high degree of uncertainty.

Given that actual loss information after the spread of COVID-19 has been accumulated and the impact of COVID-19 is reflected in the loss rates calculated based on historical loss experience, during the current fiscal year, no adjustment is made based on future projections that take into account the rate of increase in the credit loss rate or the default probability in recent period.

 

(c)

Effect on the consolidated financial statements for the following fiscal year

The internal credit ratings and the estimates of future cash flows when applying the cash flow estimation method are reviewed at least once a year. Estimates relating to borrowers’ future performance, business sustainability and the collectability of loans, which we consider to be significant assumptions, may be reviewed in light of changes in borrowers’ creditworthiness due to changes in their financial condition and in the relevant industry environment. As a result, the allowance for credit losses may significantly increase or decrease in the following fiscal year if the overall credit risk is deemed to have increased or decreased.

Adjustments based on future loss projections and other factors to loss rates calculated based on historical loss experience, which we consider to be significant assumptions, are based on estimation relating to the Russia-Ukraine situation with respect to which objective information is not readily available. These assumptions change to reflect developments in the Russia-Ukraine situation, and changes in the assumptions may result in a significant increase or decrease in the allowance for credit losses in the following fiscal year.

(Allowance for credit losses of certain overseas subsidiaries which apply U.S. GAAP)

 

(a)

Method of calculation of the amount recorded in the consolidated financial statements for the current fiscal year

Certain overseas subsidiaries which apply U.S. GAAP have adopted ASC Topic 326, “Measurement of Credit Losses on Financial Instruments,” and provide for allowance for credit losses by estimating credit losses currently expected over the remaining contractual term of the financial assets. For details of the allowance provision method, refer to Additional Information in “(6) Allowance for credit losses” under “IV. Accounting policies” under “1. Significant Accounting Policies Applied to the Consolidated Financial Statements.” The amount of allowance for credit losses and the loan balance recorded in the consolidated balance sheet as of the end of the current fiscal year with respect to our principal overseas subsidiaries that apply U.S. GAAP are 529,711 million yen and 7,752,929 million yen, respectively (455,625 million yen and 6,773,525 million yen, respectively as of March 31, 2023).

 

–23–

(b)

Significant assumptions used in calculating the amounts presented in the consolidated financial statements for the current fiscal year

Expected credit losses of our principal overseas subsidiaries that apply U.S. GAAP are calculated for each portfolio of loans with similar risk characteristics using a quantitative model that reflects economic forecast scenarios based on macroeconomic variables. Macroeconomic variables include the unemployment rate, GDP and other inputs, which correlate with historical credit losses. The subsidiaries use multiple economic forecast scenarios in light of the uncertainty in such scenarios and consider such scenarios by applying certain weightings. Various factors, such as the latest economic environment and the views of internal and external economists, are taken into account in the determination of the macroeconomic variables reflected in such economic forecast scenarios and the weightings applied to each economic forecast scenario. In this regard, the estimates made in determining such macroeconomic variables reflected in multiple economic forecast scenarios and the weightings applied to each economic forecast scenario are subject to a high degree of uncertainty due to the significant variability and uncertainty in the future economic environment arising mainly from changes in economic condition, inflation and monetary policy in each country as well as geopolitical situation.

The calculated amount of expected credit losses is adjusted for qualitative factors to compensate for expected credit losses that are not reflected in a quantitative model. The subsidiaries forecast the impact of inflation and temporary relief measure on the expected credit losses determined using quantitative models and reflect adjustments based on such qualitative factors. These qualitative adjustments are estimates with respect to which objective information is not readily available and are similarly subject to a high degree of uncertainty.

 

(c)

Effect on the consolidated financial statements for the following fiscal year

The determination of macroeconomic variables to be reflected in multiple economic forecast scenarios and the weighting to be assigned to each such scenario, as well as the application of adjustments based on qualitative factors, are based on estimates relating to the economic environment and other factors with respect to which objective information is not readily available. Relevant assumptions may change to reflect developments in the economic environment and other factors and, as a result, the amount of allowance for credit losses.

 

II.

Valuation of goodwill recorded in connection with acquisitions and investments

 

(1)

Amount recorded in the consolidated financial statements for the current fiscal year

As part of its strategic measures designed to become the world’s most trusted financial group, the MUFG Group enters into acquisitions, equity investments and capital alliances on a global basis. Any goodwill arising from these business combination transactions is recorded in the consolidated balance sheet.

Such acquisitions, equity investments and capital alliances may result in the MUFG Group’s inability to achieve the synergies and other benefits anticipated by the MUFG Group due to unexpected changes in the industry to which the acquiree, investee or alliance partner belongs and other factors or in an impairment of such goodwill, adversely affecting the MUFG Group’s business strategy, financial position and operating results.

The amount of goodwill recorded on the consolidated balance sheet as of the end of the current fiscal year is 405,629 million yen (252,009 million yen as of March 31, 2023), of which 183,063 million yen (180,273 million yen as of March 31, 2023) was recorded in connection with the acquisition of First Sentier Investors (“FSI”).

The recorded balance of goodwill is subject to identification of an indication of impairment (an event indicating the possibility of impairment of a group of assets including goodwill) and recognition and measurement of impairment loss in accordance with the Accounting Standards for Impairment of Fixed Assets (Business Accounting Council, August 9, 2002) and other standards and with predetermined internal policies. In addition, such identification of indications of impairment and recognition and measurement of impairment loss are tested for appropriateness in accordance with predetermined internal policies and other regulations. The estimates and significant assumptions made in identifying indications of impairment of the goodwill recorded in connection with the acquisition of FSI, which accounts for a substantial portion of the balance of goodwill held by the MUFG Group, are subject to uncertainty. The recorded goodwill represents our best estimate made in a manner designed to ensure objectivity and rationality.

 

(2)

Other information which is relevant to an understanding by readers of the consolidated financial statements with regard to the accounting estimates

 

(a)

Method of calculation of the amount recorded in the consolidated financial statements for the current fiscal year

Identification of indications of impairment of goodwill and recognition and measurement of impairment loss are performed on the basis of a larger unit consisting of the group of assets relating to the business to which the goodwill is allocated and such goodwill.

 

–24–

The MUFG Group determines whether any indication of impairment exists based on the characteristics of an asset group in accordance with certain established criteria.

The goodwill recorded in connection with the acquisition of FSI, which accounts for a substantial portion of the balance of goodwill held by the MUFG Group, is reported in the amount based on the determination as to the existence of an indication of impairment and valuation performed on FSI as a single asset group.

To identify an indication of impairment, we determine based on certain established criteria whether FSI’s future profits for a certain period projected by considering FSI’s latest business plan have declined to a level where the investment may not be recoverable due to such decline in the profitability. In addition, to determine whether any indication of impairment exists, we analyze whether FSI has reported net operating losses after amortization of goodwill for two consecutive reporting periods and whether there are factors that cause the recoverability of the investment in FSI to significantly diminish, including deterioration in the stock indices in the stock market, a decline in the balance of FSI’s assets in custody, and the attrition rate of key fund managers.

For the current fiscal year, we identified no event indicating impairment and determined that no indication of impairment existed.

With respect to goodwill with an identified indication of impairment, impairment loss is not recognized if the carrying amount, before impairment loss, of the group of assets relating to the business to which the goodwill is allocated plus the carrying amount of the goodwill is smaller than the total amount of undiscounted future cash flows derived from the larger unit including the goodwill (hereinafter referred to as “undiscounted future cash flows”). If the aggregate carrying amount exceeds the amount of undiscounted future cash flows, the difference is recognized as impairment loss to the extent that it does not exceed the balance of the goodwill.

 

(b)

Significant assumptions used in calculating the amounts presented in the consolidated financial statements for the current fiscal year

Identification of indications of impairment and estimation of undiscounted future cash flows necessarily involve judgment and often incorporate significant estimates and assumptions.

Forecasts relating to projected profits used to identify an indication of impairment of the goodwill recorded in connection with the acquisition of FSI, which accounts for a substantial portion of the balance of goodwill held by the MUFG Group, are based on significant estimates, and such estimates are based on assumptions. The primary assumptions include the growth rate of the business based on current and past facts and operating results, and the growth rate of the market and the overall economy in the future.

 

(c)

Effect on the consolidated financial statements for the following fiscal year

The MUFG Group believe that the primary assumptions used to identify indications of goodwill impairment as of the end of the current fiscal year are reasonable. However, changes in the primary assumptions used in the identification of indications of impairment due to unforeseeable future changes in assumptions relating to the business may have a material impact on recognition of any impairment loss and measurement of the amount of impairment loss for the following fiscal year.

 

III.

Fair value of derivative transactions

 

(1)

Amount recorded in the consolidated financial statements for the current fiscal year

The MUFG Group engages in a large number of various derivative transactions in connection with the business of providing foreign exchange, financing and securities services to customers as well as market transactions and liquidity and funding management operations. For details of the fair value of derivative transactions grouped by transaction type, refer to “II. Matters concerning fair value of financial instruments and breakdown by input level” under “8. Financial Instruments.”

The fair value of derivative transactions is calculated in accordance with the policies and procedures for the calculation of fair value and the procedures for the use of fair value valuation models set forth in predetermined internal policies. The estimates and significant assumptions made in calculating the fair value of derivative transactions are subject to uncertainty. The recorded fair value represents our best estimate made in a manner designed to ensure objectivity and rationality and subject to internal controls. For details of the processes for calculating the fair value of derivative transactions, refer to “(Note 1) Description of the valuation techniques and inputs used to determine fair value” to “II. Matters concerning fair value of financial instruments and breakdown by input level” under “8. Financial Instruments.”

 

–25–

(2)

Other information which is relevant to an understanding by readers of the consolidated financial statements with regard to the accounting estimates

 

(a)

Method of calculation of the amount recorded in the consolidated financial statements for the current fiscal year

The fair value of exchange-traded derivative transactions is based on the price posted by exchanges. The fair value of over-the-counter derivative transactions is based on the discounted present value or amount calculated under the option-price calculation model. The valuation models are tested from a market consistency perspective. However, the estimates and assumptions used in such models necessarily involve judgment and are subject to complexity and uncertainty. For details of the calculation method, refer to “(Note 1) Description of the valuation techniques and inputs used to determine fair value” to “II. Matters concerning fair value of financial instruments and breakdown by input level” under “8. Financial Instruments.”

 

(b)

Significant assumptions used in calculating the amounts presented in the consolidated financial statements for the current fiscal year

Inputs used in valuation models include inputs that can be observed directly or indirectly in the market such as foreign currency exchange rates, yield curves, volatility, credit curves and stock prices, as well as inputs that cannot be observed in the market such as correlation coefficients and other significant estimates. The MUFG Group classifies the fair value of financial instruments into three levels depending on the observability and significance of the input used in the fair value calculation. In particular, the estimates and assumptions made in the valuation of derivative transactions classified into level 3, where inputs that cannot be observed in the market are used as a material basis for the calculated fair value, are subject to significant complexity and uncertainty. For details of such inputs, refer to “(1) Quantitative information on significant unobservable inputs” under “(Note 2) Quantitative information about financial assets and liabilities measured and presented on the consolidated balance sheet at fair value and classified in Level 3” to “II. Matters concerning fair value of financial instruments and breakdown by input level” under “8. Financial Instruments.”

 

(c)

Effect on the consolidated financial statements for the following fiscal year

The MUFG Group have determined that the fair value of derivatives transactions is reasonable after conducting testing. However, the significant assumptions used to calculate the fair value are subject to uncertainty. In particular, the estimates and assumptions made in the valuation of the fair value of derivative transactions classified into Level 3 are subject to significant complexity and uncertainty. The fair value of derivative transactions held by the MUFG Group may fluctuate as a result of changes in inputs used for valuation due to changes in the market environment and other factors. For details of the sensitivity of the fair value to changes in inputs, refer to “(4) Description of the sensitivity of the fair value to changes in significant unobservable inputs” under “(Note 2) Quantitative information about financial assets and liabilities measured and presented on the consolidated balance sheet at fair value and classified in Level 3” to “II. Matters concerning fair value of financial instruments and breakdown by input level” under “8. Financial Instruments.”

 

–26–

New Accounting Pronouncements

(Accounting Standard Board of Japan (“ASBJ”) Statement No. 27, “Accounting Standard for Current Income Taxes” (ASBJ, October 28, 2022), ASBJ Statement No. 25, “Accounting Standard for Presentation of Comprehensive Income” (ASBJ, October 28, 2022), and ASBJ Guidance No. 28, “Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ, October 28, 2022))

(1)

Summary

The new accounting standards and guidance provide for the accounting classification of income taxes on other comprehensive income and for the treatment of the tax effects of sales of shares of subsidiaries when the group corporate taxation system is applied.

(2)

Planned adoption date

The MUFG Group plans to adopt the accounting standards and guidance as of the beginning of the fiscal year starting on April 1, 2024.

(3)

Estimated impact

The MUFG Group is currently evaluating the impact of adopting the accounting standards and guidance on its consolidated financial statements and related disclosures.

Changes in Presentation of Financial Information

(Note to the Consolidated Statement of Income)

“Refund of income taxes”, which was previously presented separately from “Income taxes” on a disaggregated basis for the fiscal year ended March 31, 2023, is included in “Income taxes” on a net basis from the fiscal year ended March 31,2024 due to the decreased significance in the recorded amount. In order to reflect this change in presentation, the consolidated financial statements for the fiscal year ended March 31, 2023 have been reclassified.

As a result, “Income taxes” of ¥493,256 million and “Refund of income taxes” of ¥(56,288) million previously presented in the consolidated statement of income for the fiscal year ended March 31, 2023 have been aggregated on a net basis and reclassified into “Income taxes” of ¥436,968 million.

Additional Information

(Provisional closing of accounts of a significant equity-method affiliate)

Morgan Stanley, a significant equity-method affiliate of MUFG, closes its financial accounts based on a fiscal year-end of December 31 and, previously, the equity method of accounting was applied to Morgan Stanley’s consolidated financial statements as of the end of Morgan Stanley’s fiscal year. However, from the perspective of providing financial information in a more timely manner, MUFG has decided to make modifications so that, effective from the fiscal year ended March 31, 2024, the equity method of accounting is to applied to Morgan Stanley based on a provisional closing of accounts implemented as of March 31, which is the end of MUFG’s fiscal year.

Accordingly, for the fiscal year ended March 31, 2024, the equity method of accounting has been applied to Morgan Stanley’s consolidated financial statements for the fifteen-month period from January 1, 2023 to March 31, 2024 based on a provisional closing of accounts, and the impact of implementation of such provisional closing of accounts has been reflected in MUFG’s consolidated financial statements from the beginning of the fiscal year ended March 31, 2024.

For the period from January 1, 2023 to March 31, 2023, equity in earnings of the equity method investees related to Morgan Stanley is 106,161 million yen, losses on change in equity related to Morgan Stanley is 22,058 million yen, and share of other comprehensive income of associates accounted for using equity method related to Morgan Stanley included in other comprehensive income is 406,491 million yen.

(Provisional closing of accounts of a significant subsidiary planned for the fiscal year ending March 31, 2025)

Bank of Ayudhya Public Company Limited (“Krungsri”), a significant subsidiary of MUFG, closes its financial accounts based on a fiscal year-end of December 31, and is consolidated based on its consolidated financial statements as of the December 31 fiscal year-end.

However, from the perspective of providing financial information in a more timely manner, MUFG has decided to consolidate Krungsri based on a provisional closing of accounts of Krungsri to be implemented as of March 31, which is MUFG’s fiscal year-end, effective from the beginning of the fiscal year ending March 31, 2025.

Accordingly, for the fiscal year ending March 31, 2025, Krungsri’s financial results for the 15-month period from January 1, 2024 to March 31, 2025 are expected to be reflected in MUFG’s consolidated financial statements.

 

–27–

2.	Consolidated Balance Sheets

 

I.

Equity securities and other capital investments in affiliates

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Equity securities in affiliates		¥	3,757,973			¥	4,374,498
Other capital investments in affiliates			43,571				55,966

The amount of investments in jointly controlled companies included in the amounts in the above table was as follows:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Investments in jointly controlled companies		¥	5,956			¥	6,900

 

II.

Securities loaned under unsecured and secured securities lending transactions included in “Securities” and “Monetary claims bought”.

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Securities loaned under unsecured and secured securities lending transactions		¥	87,730			¥	74,772

Securities borrowed under securities borrowing transactions and securities purchased under resale agreements where the borrowers or purchasers have the right to dispose of the securities through sale or re-pledging without any restrictions

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Securities re-pledged		¥	16,534,808			¥	17,194,551
Securities re-loaned			2,597,315				3,772,967
Securities held without disposition			6,465,540				9,966,683

Bank acceptance bills discounted, commercial bills discounted and foreign currency bills bought discounted with the right to dispose of the bills discounted through sale or re-pledging without any restrictions

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Bills discounted (face value)		¥	1,114,509			¥	1,506,038

Foreign currency bills bought which were re-discounted upon transfer

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Foreign currency bills re-discounted (face value)		¥	8,289			¥	5,086

 

–28–

III.

Loans to be disclosed under the Banking Act and the Financial Reconstruction Act (the “FRA”) were as follows. Disclosed loans include corporate bonds included in Securities (to the extent that such bonds were issued through private placements as stipulated in Article 2-3 of the Financial Instruments and Exchange Act and that the principal of and interest on such bonds are partly or fully guaranteed by MUFG), Loans and bills discounted, Foreign exchanges, accrued interest and suspense payments included in Other assets, and Customers’ liabilities for acceptances and guarantees, each as included in the consolidated balance sheets, and securities loaned (to the extent borrowers have the right to sell or pledge such securities) as included in the notes to the consolidated balance sheets.

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Bankrupt or De facto Bankrupt		¥	198,312			¥	239,004
Doubtful		¥	746,207			¥	1,134,503
Special Attention		¥	618,892			¥	634,023
Accruing loans contractually past due 3 months or more		¥	23,679			¥	26,869
Restructured loans		¥	595,212			¥	607,154
Subtotal		¥	1,563,411			¥	2,007,531
Normal		¥	121,766,210			¥	130,602,373
Total		¥	123,329,622			¥	132,609,905

Bankrupt or De facto Bankrupt represents loans to borrowers that are bankrupt or in substantially similar condition due to reasons including a petition being filed to commence bankruptcy, reorganization or rehabilitation proceedings.

Doubtful represents loans to borrowers that are not yet in a state of bankruptcy but that are in deteriorated financial condition, with deteriorated operating results, and with a high likelihood of loan principal and interest not being collected or received in accordance with contractual terms, other than loans included in the Bankrupt or De facto Bankrupt category.

Accruing loans contractually past due 3 months or more represent loans with respect to which principal repayments or interest payments have been past due for 3 months or more, other than loans included in the Bankrupt or De facto Bankrupt category or the Doubtful category.

Restructured loans represent loans that have been modified with concessionary terms, including interest rate reductions, deferral of interest payments, deferral of principal repayments, waivers of loan claims and other renegotiated terms, that are favorable to borrowers, for the purpose of assisting such borrowers in improving their financial condition, other than loans included in the Bankrupt or De facto Bankrupt category, the Doubtful category or the Accruing loans contractually past due 3 months or more category.

Normal represents loans with no particular issues identified in terms of the financial condition and results of operations of borrowers and thus not included in the Bankrupt or De facto Bankrupt category, the Doubtful category, the Accruing loans contractually past due 3 months or more category or the Restructured loan category.

The amounts provided in the table above represent gross amounts before deduction of allowance for credit losses.

 

–29–

IV.

Assets pledged as collateral

Assets pledged as collateral and their relevant liabilities as of March 31, 2023 and 2024 were as follows:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Assets pledged as collateral:
Cash and due from banks		¥	5,020			¥	4,292
Trading assets			303,918				500,000
Securities			9,959,654				9,023,306
Loans and bills discounted			11,806,356				13,424,905
Other assets			191				601
Tangible fixed assets			4,635				92
Total		¥	22,079,777			¥	22,953,199
Relevant liabilities to above assets:
Deposits		¥	13,900			¥	13,900
Borrowed money			21,962,993				22,800,405
Bonds payable			24,574				21,787
Other liabilities			4,618				672

In addition to the above, the following assets were pledged as collateral for cash settlements and other transactions or asdeposits for margin accounts for futures and other transactions:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Cash and due from banks		¥	33,382			¥	—
Monetary claims bought			33,093				46,930
Trading assets			1,668,783				1,871,424
Securities			16,367,312				17,481,814
Loans and bills discounted			1,904,568				2,498,238

Furthermore, the following assets were sold under repurchase agreements or loaned under securities lending transactions with cash collateral as of March 31, 2023 and 2024:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Monetary claims bought		¥	—			¥	54,582
Trading assets			1,750,274				2,770,003
Securities			23,442,434				16,920,718
Total		¥	25,192,709			¥	19,745,303
Relevant liabilities to above assets:
Payables under repurchase agreements		¥	25,934,089			¥	18,920,170
Payables under securities lending transactions			565,888				349,665

 

–30–

In addition, the following assets were pledged under general collateral repurchase agreements using the subsequent collateral allocation method as of March 31, 2023 and 2024:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Trading assets		¥	1,131,433			¥	916,424
Securities			1,668,012				1,100,570
Total		¥	2,799,446			¥	2,016,994

 

V.

Non-recourse debt of consolidated special purpose companies was as follows.

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Non-recourse debt
Borrowed money		¥	2,100			¥	2,100
Bonds payable			9,074				—
Relevant assets to above non-recourse debt:
Cash and due from banks		¥	1,072			¥	—
Securities			8,958				—
Loans and bills discounted			20,000				20,000
Other assets			191				—
Tangible fixed assets			4,635				—

The above table includes certain assets reported in the immediately preceding Item IV.

 

VI.

Overdraft facilities and commitment lines of credit are binding contracts under which MUFG’s consolidated subsidiaries have obligations to disburse funds up to predetermined limits upon the borrower’s request as long as there have been no breach of contracts. The total amount of the unused portion of these facilities as of March 31, 2023 and March 31, 2024 was as follows:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Unused overdraft facilities and commitment lines of credit		¥	96,203,085			¥	102,894,396

The total amount of the unused portion does not necessarily represent actual future cash requirements because many of these contracts are expected to expire without being drawn upon. In addition, most of these contracts include clauses that allow MUFG’s consolidated subsidiaries to decline a borrower’s request for disbursement or decrease contracted limits for cause, such as changes in financial market condition or deterioration in a borrower’s creditworthiness. MUFG’s consolidated subsidiaries may request a borrower to pledge real property and/or securities as collateral upon signing of a contract and will perform periodic monitoring on a borrower’s business condition in accordance with internal procedures, which may lead to renegotiation of the terms and conditions of the contracts and/or initiation of a request for additional collateral and/or guarantees.

 

VII.

The amount of assets that belonged to the declaration of trust for which domestic trust banking subsidiaries were the settlor and the trustee was as follows:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Loans and bills discounted		¥	259,749			¥	—

 

–31–

VIII.

In accordance with the “Law concerning Revaluation of Land” (the “Land Revaluation Law”) (No. 34, March 31, 1998), land used for business operations of domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries has been revalued as of the dates indicated below. The total excess from revaluation, net of income taxes corresponding to the excess that were recognized as “Deferred tax liabilities for land revaluation,” is stated as “Land revaluation excess” in net assets. Land revaluation excess includes MUFG’s share of affiliated companies’ Land revaluation excess.

Dates of revaluation:

Domestic consolidated banking subsidiaries: March 31, 1998.

Domestic consolidated trust banking subsidiaries: March 31, 1998, December 31, 2001 and March 31, 2002.

The method of revaluation as set forth in Article 3, Paragraph 3 of the Land Revaluation Law:

Fair values are determined based on (1) “published land price under the Land Price Publication Law” stipulated in Article 2-1 of the “Enforcement Ordinance of the Law concerning Revaluation of Land” ( “Ordinance” ) (No. 119, March 31, 1998), (2) “standard land price determined on measurement spots under the Enforcement Ordinance of the National Land Planning Law” stipulated in Article 2-2 of the Ordinance, (3) “land price determined by the method established and published by the Director General of the National Tax Agency in order to calculate land value that is used for determining taxable amounts subject to landholding tax articulated in Article 16 of the Landholding Tax Law” stipulated in Article 2-4 of the Ordinance with price adjustments for shape and time and (4) appraisal by certified real estate appraisers stipulated in Article 2-5 of the Ordinance with price adjustments for time.

In addition, some of MUFG’s affiliates that were accounted for under the equity method conducted a revaluation for land used for business operations on March 31, 2002.

 

IX.

Accumulated depreciation on tangible fixed assets

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Accumulated depreciation on tangible fixed assets		¥	1,082,897			¥	1,123,454

 

X.

Deferred gains on tangible fixed assets deducted for tax purposes

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Deferred gains on tangible fixed assets		¥	67,377			¥	62,278
Deferred gains on tangible fixed assets for the fiscal year		¥	–			¥	–

 

XI.

Subordinated borrowings with special contractual provisions which rank below other debts with regard to the fulfillment of obligations included in “Borrowed money”

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Subordinated borrowings		¥	260,500			¥	315,500

 

XII.

Subordinated bonds included in “Bonds payable”

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Subordinated bonds		¥	3,637,670			¥	4,494,288

 

XIII.

The principal amount of money trusts entrusted to domestic trust banking subsidiaries for which repayment of the principal to the customers was guaranteed

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Principal-guaranteed money trusts		¥	6,408,838			¥	3,292,449

 

–32–

XIV.

Guarantee obligations for private placement bonds (provided in accordance with the Article 2-3 of the Financial Instruments and Exchange Law) among the bonds and other securities included in “Securities”

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Guarantee obligations for private placement bonds		¥	313,903			¥	334,872

 

XV.

Contingent liabilities

(Litigation)

In the ordinary course of business, MUFG is subject to various litigation and regulatory matters. In accordance with applicable accounting guidance, MUFG establishes a Reserve for Contingent Losses arising from litigation and regulatory matters when they are determined to be probable in their occurrences and the probable loss amount can be reasonably estimated. Based upon current knowledge and consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters, where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material adverse effect on MUFG’s financial position, results of operations or cash flows.

Management also believes the amount of loss that is reasonably possible, but not probable, from various litigation and regulatory matters is not material to MUFG’s financial position, results of operations or cash flows.

 

–33–

3.	Consolidated Statements of Income

 

I.

“Other ordinary income” for the periods indicated included the following:

 

		(in millions of yen)
		For the fiscal year ended March 31,
		2023				2024
Equity in earnings of the equity method investees		¥	425,829			¥	531,803
Gains on sales of equity securities			332,747				452,125

 

II.

“General and administrative expenses” for the periods indicated included the following:

 

		(in millions of yen)
		For the fiscal year ended March 31,
		2023				2024
Personnel expenses		¥	1,362,991			¥	1,374,870
Depreciation and amortization			314,708				340,137

 

III.

“Other ordinary expenses” for the periods indicated included the following:

 

		(in millions of yen)
		For the fiscal year ended March 31,
		2023				2024
Write-offs of loans		¥	547,783			¥	193,119

 

IV.

“Gains on sales of shares of subsidiaries” for the fiscal year ended March 31, 2023 included ¥699,509 million of gains on sales of shares of subsidiaries resulting from the sale of the shares in MUFG Union Bank, N.A. (hereinafter referred to as “MUB”).

 

V.

“Losses on pension buyout” for the fiscal year ended March 31, 2023 included ¥78,111 million of loss on a pension buyout transaction to transfer portions of the defined benefit pension plans of the Bank’s overseas branches.

 

VI.

(Additional Information)

In connection with the sale of the shares in MUB, MUFG Americas Holdings Corporation recognized an aggregate of ¥952,590 million of losses for the twelve months ended December 31, 2022, primarily in accordance with ASC Topic 326, “Financial Instruments—Credit losses,” and ASC Topic 310, “Receivables.” The aggregate losses reflected ¥555,421 million of valuation losses related to securities held for sale recorded as Other operating expenses and ¥400,511 million of valuation losses related to loans held for sale recorded as Other ordinary expenses.

 

–34–

4.	Comprehensive Income

The components of other comprehensive income for the years ended March 31, 2023 and 2024 were as follows:

 

		(in millions of yen)
		2023				2024
Unrealized gains (losses) on available-for-sale securities:
Gains (losses) arising during the year		¥	(1,027,640	)		¥	976,986
Reclassification adjustments to profits (losses)			87,494				98,111
Amount before income tax effect			(940,145	)			1,075,097
Income tax effect			263,262				(368,999	)
Total			(676,883	)			706,097
Deferred gains (losses) on derivatives under hedge accounting:
Gains (losses) arising during the year			(516,317	)			(638,853	)
Reclassification adjustments to profits (losses)			59,537				212,224
Adjustments to acquisition costs of assets			—				(1,197	)
Amount before income tax effect			(456,780	)			(427,825	)
Income tax effect			140,910				130,663
Total			(315,870	)			(297,162	)
Foreign currency translation adjustments:
Gains (losses) arising during the year			701,419				586,974
Reclassification adjustments to profits (losses)			—				188
Amount before income tax effect			701,419				587,162
Income tax effect			8				443
Total			701,427				587,606
Defined retirement benefit plans:
Gains (losses) arising during the year			(129,196	)			574,046
Reclassification adjustments to profits (losses)			47,962				(40,277	)
Amount before income tax effect			(81,234	)			533,769
Income tax effect			26,443				(164,000	)
Total			(54,790	)			369,769
Share of other comprehensive income in affiliates accounted for using the equity method:
Gains (losses) arising during the year			311,154				403,653
Reclassification adjustments to profits (losses)			(6,553	)			(25,207	)
Total			304,600				378,446
Total other comprehensive income		¥	(41,515	)		¥	1,744,757

 

–35–

5.	Consolidated Statements of Changes in Net Assets

For the fiscal year ended March 31, 2023

 

I.

Information on the class and number of issued shares and treasury stock

 

		(Thousand shares)
		Number of shares as of April 01, 2022				Number of shares increased				Number of shares decreased				Number of shares as of March 31, 2023				Note
Issued shares:
Common stock			13,281,995				—				594,284				12,687,710				(Note 1)
Total			13,281,995				—				594,284				12,687,710
Treasury stock:
Common stock			667,296				594,307				597,538				664,065				(Note 2) (Note 3)
Total			667,296				594,307				597,538				664,065

 

(Note 1)		The decrease in the number of shares of common stock by 594,284 thousand shares was due to the cancellation of shares.
(Note 2)		The increase in the number of shares of common stock held in treasury by 594,307 thousand shares was due to the acquisitions of shares pursuant to provisions of the Articles of Incorporation and the repurchases of shares in response to requests made by shareholders holding shares constituting less than one whole unit. The decrease in the number of shares of common stock held in treasury by 597,538 thousand shares was due to the cancellation of shares, the sale of shares for a performance-based director and officer stock compensation plan using a Board Incentive Plan trust (“BIP trust”), the sales of shares in response to requests made by shareholders holding shares constituting less than one whole unit, the sales of shares by equity method affiliates and a decrease in the number of shares held by equity method affiliates.
(Note 3)		The number of shares of common stock as of April 01, 2022 and March 31, 2023 includes 31,660 thousand shares and 28,407 thousand shares held by the BIP trust, respectively. For the fiscal year ended March 31, 2023, the number of shares held by the BIP trust decreased by 3,252 thousand shares.

 

II.

Information on share subscription rights

 

None.

 

III.

Information on Cash Dividends

 

(1)

Cash dividends paid in the fiscal year ended March 31, 2023

 

(Note)		The total dividend amount as resolved by the Annual General Meeting of Shareholders on June 29, 2022 includes ¥459 million of dividends on the treasury shares held by the BIP trust, and the total dividend amount as resolved by the Meeting of the Board of Directors on November 14, 2022 includes ¥459 million of dividends on the treasury shares held by the BIP trust.

 

(2)

Dividends the record date for which fell within the fiscal year and the effective date of which was after the fiscal year ended March 31, 2023

 

(Note)		The total dividend amount includes ¥454 million of dividends on the treasury shares held by the BIP trust.

 

–36–

IV.

“Change from transaction under common control involving overseas subsidiary” includes the change in capital surplus resulting from the transfer of the GCIB business of MUB to the Bank.

For the fiscal year ended March 31, 2024

 

I.

Information on the class and number of issued shares and treasury stock

 

 

(Note 1)		The decrease in the number of shares of common stock by 350,000 thousand shares was due to the cancellation of shares.
(Note 2)		The increase in the number of shares of common stock held in treasury by 300,677 thousand shares was due to the acquisitions of shares pursuant to provisions of the Articles of Incorporation, the repurchases of shares in response to requests made by shareholders holding shares constituting less than one whole unit and increase in the number of shares held by equity method affiliates. The decrease in the number of shares of common stock held in treasury by 353,220 thousand shares was due to the cancellation of shares, the sale of shares for the BIP trust, the sales of shares in response to requests made by shareholders holding shares constituting less than one whole unit and a decrease in the number of shares held by equity method affiliates.
(Note 3)		The number of shares of common stock held in treasury as of April 01, 2023 and March 31, 2024 includes 28,407 thousand shares and 25,769 thousand shares held by the BIP trust, respectively. For the fiscal year ended March 31, 2024, the number of shares held by the BIP trust decreased by 2,638 thousand shares.

 

II.

Information on share subscription rights

 

 

III.

Information on Cash Dividends

 

(1)

Cash dividends paid in the fiscal year ended March 31, 2024

 

 

(Note)		The total dividend amount as resolved by the Annual General Meeting of Shareholders on June 29, 2023 includes ¥454 million of dividends on the treasury shares held by the BIP trust, and the total dividend amount as resolved by the Meeting of the Board of Directors on November 14, 2023 includes ¥529 million of dividends on the treasury shares held by the BIP trust.

 

–37–

(2)

Dividends the record date for which fell within the fiscal year and the effective date of which was after the fiscal year ended March 31, 2024

The following matters relating to dividends are submitted to shareholder vote at the Annual General Meeting of Shareholders scheduled to be held on June 27, 2024

 

 

(Note)		The total dividend amount includes ¥528 million of dividends on the treasury shares held by the BIP trust.

 

–38–

6.	Consolidated Statements of Cash Flows

 

I.

“Cash and cash equivalents” compared to items presented on the consolidated balance sheet

The amount of “Cash and cash equivalents” is equal to the amount of “Cash and due from banks” on the consolidated balance sheet.

 

II.

Major components of assets and liabilities of subsidiaries newly consolidated through share acquisitions

For the fiscal year ended March 31, 2024

Components of the assets and liabilities of each of HC Consumer Finance Philippines, Inc. (“HC Philippines”) and PT Home Credit Indonesia (“HC Indonesia”) at the time of consolidation as a result of acquisition of its shares and a reconciliation between the acquisition cost and the net payment for the acquisition are as follows:

HC Philippines

 

		(in millions of yen)
Assets		¥	137,576
Liabilities			(96,151	)
Foreign currency translation adjustments			220
Goodwill			28,195
Acquisition cost			69,841
Cash and cash equivalents of HC Philippines			(5,736	)
Payments for acquisition of subsidiaries’ equity affecting the scope of consolidation		¥	64,104

HC Indonesia

 

		(in millions of yen)
Assets		¥	44,177
Liabilities			(30,493	)
Foreign currency translation adjustments			93
Goodwill			18,034
Acquisition cost			31,811
Cash and cash equivalents of HC Indonesia			(2,894	)
Payments for acquisition of subsidiaries’ equity affecting the scope of consolidation		¥	28,917

Components of the assets and liabilities of AlbaCore Capital Limited (“AlbaCore”) at the time of consolidation as a result of acquisition of its shares and a reconciliation between the acquisition cost and the net payment for the acquisition are as follows:

 

		(in millions of yen)
Assets		¥	33,583
Liabilities			(12,187	)
Goodwill			63,063
Non-controlling interests			(17,214	)
Acquisition cost			67,244
Acquisition cost payable			(18,660	)
Cash and cash equivalents of AlbaCore			(6,448	)
Payments for acquisition of subsidiaries’ equity affecting the scope of consolidation		¥	42,135

 

–39–

III.

Major components of assets and liabilities of subsidiary deconsolidated as a result of sale of shares

For the fiscal year ended March 31, 2023

Components of the assets and liabilities of MUB, which was deconsolidates as a result of the sale of its shares to U.S. Bancorp,at the time of the sale are as follows:

 

		(in millions of yen)
Assets		¥	13,639,869
Liabilities			(12,981,874	)
Gains on sales of shares of subsidiaries			699,509
Consideration received for sale of shares			1,357,504
Accounts receivable			(432,381	)
Securities			(276,119	)
Cash and cash equivalents of MUB			(2,433,758	)
Payments for sales of shares of subsidiaries resulting in change in scope of consolidation		¥	(1,784,755	)

 

–40–

7.

Leases

Operating leases

 

(1)

Lessee

Future lease payments, including interest expenses, under non-cancelable operating leases as of March 31, 2023 and 2024 were as follows:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Due within one year		¥	40,128			¥	39,805
Due after one year			102,509				104,382
Total		¥	142,637			¥	144,187

 

(Note)		The above table does not include lease payments that are booked as “Right-of-use asset” at overseas subsidiaries.

 

(2)

Lessor

Future lease receivables, including interest receivables, under non-cancelable operating leases as of March 31, 2023 and 2024 were as follows:

 

		(in millions of yen)
		March 31, 2023				March 31, 2024
Due within one year		¥	7,232			¥	11,254
Due after one year			66,627				70,405
Total		¥	73,860			¥	81,660

 

–41–

8.	Financial Instruments

 

I.	Disclosure on financial instruments

 

(1)

Policy for financial instruments

MUFG provides comprehensive financial services such as deposit-taking and lending services, securities investment and other securities services and foreign exchange services.

In order to prevent these businesses from being negatively affected by fluctuations in interest and foreign exchange rates and other market conditions, MUFG conducts asset and liability management (“ALM”) by adjusting market exposure and the balance between short-term and long-term assets and liabilities. To do so, among other things, MUFG raises capital from the market and hedges risks through derivative transactions.

 

(2)

Nature and extent of risks arising from financial instruments

MUFG holds various types of financial instruments such as loans, securities, and derivatives and is thus exposed to credit and market risks.

Credit risk is the risk of loss on receivables such as loans due to nonperformance of contractual obligations caused by factors such as deterioration in the financial condition of a borrower.

Market risk mainly arises from changes in domestic and overseas interest rates, foreign exchange rates, and fluctuations in market prices of stocks and bonds. For example, an increase in domestic and overseas interest rates would reduce the value of MUFG’s bond portfolio consisting of government and other bonds, and a rise in yen would reduce the value of foreign-currency-denominated securities and other assets when converted into yen. MUFG also invests in marketable equity securities, and a fall in the market price would decrease the fair value of these securities. As part of MUFG’s trading and ALM activities, MUFG holds derivative products such as interest rate swaps. A significant change in foreign exchange or interest rates may cause a significant fluctuation in the fair value of these derivative products. In conducting derivative transactions for purposes of hedging risks, MUFG hedges against interest rate risks associated with instruments including fixed rate deposits, loans and bonds, floating rate deposits and loans, and forecasted transactions involving fixed rate deposits and loans through designated hedging methods including interest rate swaps. MUFG hedges against exchange rate fluctuation risks associated with instruments such as foreign currency denominated monetary claims and liabilities through designated hedging methods including currency swap transactions and forward exchange contracts. In lieu of effectiveness determination, MUFG designs hedging activities so that the material terms of the designated hedging instruments are almost identical to those of the hedged items. In limited circumstances, the effectiveness of hedging activities is assessed by verification of the correlation between factors that cause fluctuations in interest rates.

 

(3)

Risk management relating to financial instruments

 

(A)

Credit risk management

MUFG regularly monitors and assesses the credit portfolios of MUFG’s group companies and uses credit rating and asset evaluation and assessment systems to ensure timely and proper evaluation of credit risk.

Within the basic framework of MUFG’s credit risk control system based on MUFG’s credit risk control rules, each group company has established a consolidated and global credit risk control system while MUFG monitors group-wide credit risk. MUFG provides training and advice when necessary in addition to monitoring credit risk management conducted by MUFG’s group companies.

In screening individual transactions and managing credit risk, each major group company has in place a check-and-balance system in which the credit administration section and the business promotion section are kept separate.

MUFG holds regular management committee meetings to ensure full reporting and discussion on important credit risk management and administration matters.

In addition to providing check-and-balance between different functions and conducting management level deliberations, the audit department also undertakes to validate credit operations to ensure appropriate credit administration.

 

–42–

(B)

Market risk management

 

(a)

Risk management system

MUFG has adopted an integrated system to manage market risks associated with market activities for trading purposes (trading activities) and non-trading market activities (banking activities). MUFG monitors group-wide market risk while each of the major group companies has established a market risk management system on a consolidated and global basis.

At each of the major group companies, checks and balances are maintained through a system in which the back office (operating and administrative section) and the middle office (risk control section) operate independently from the front office (market department). As part of risk control by management,the Executive Committee or another appropriate body establishes the framework for the market risk management system and defines responsibilities relating to market operations. MUFG allocates economic capital corresponding to the levels of market risk within the scope of MUFG’s capital base, and establishes quantitative limits on market risk based on the allocated economic capital as well as limits on losses to contain MUFG’s exposure to risks and losses within a certain range.

 

(b)

Market risk management

The status of the group-wide exposure to market risk and compliance with quantitative limits on market risk and losses at each major group company is reported daily to the Chief Risk Officer of MUFG, while the status of each major group company’s exposure to market risk and compliance with quantitative limits on market risk and losses is reported daily to the group company’s risk management officer. MUFG and each major group company conduct comprehensive analyses on risk profiles, including stress testing, and the results are regularly reported to their respective ALM Committees and Corporate Risk Management Committees.

MUFG’s major group companies manage risks by hedging against interest rate and exchange rate fluctuation risks associated with marketable assets and liabilities with various hedging transactions using marketable securities and derivatives as appropriate. With respect to trading account transactions and their administration, MUFG documents the processes and periodically verifies through internal audits that the valuation methods and management of such transactions are appropriate.

 

(c)

Market risk measurement model

Since the daily variation in market risk is significantly greater than that in other types of risks, MUFG measures and manages market risk primarily using Value at Risk (“VaR”), Value.

Market risk for both trading and banking activities (excluding strategic equity securities) is measured using a market risk measurement model. The principal method used for the model is the historical simulation method (Trading activities: holding period — 1 business day; confidence interval — 95%; and observation period — 250 business days) (Banking activities: holding period — 10 business days; confidence interval — 99%; and observation period — 701 business days).

* The historical simulation method calculates VaR amounts by estimating the profit and loss on the current portfolio by applying actual fluctuations in market rates and prices that occurred over a fixed period in the past. The noted features of the historical simulation method include the ability to directly reflect the characteristics of the market fluctuations. However, VaR may not be able to ascertain risks when market volatility reaches abnormal levels because they measure market risks with a fixed event probability calculated statistically based on past market changes.

 

–43–

(d)

Quantitative information in respect of market risk

 

(i)

Amount of market risk associated with trading activities

The amount of consolidated market risk associated with trading activities across the Group was ¥2.8 billion and ¥1.7 billion as of March 31, 2023 and 2024, respectively.

 

(ii)

Amount of market risk associated with banking activities

The amount of consolidated market risk associated with banking activities (excluding strategic equity securities) across the Group was ¥974.0 billion and ¥558.4 billion as of March 31, 2023 and 2024, respectively. As appropriate identification of interest rate risk is vital to banking activities (excluding strategic equity securities), the risk is managed based on the following assumptions for appropriate measurement of core deposits and prepayments on loans and deposits.

For a certain portion of the deposits without contractual maturities (so-called core deposits), interest rate risk is recognized by allocating maturities of various terms (no longer than 10 years) according to the features of deposits, taking into account the results of a statistical analysis using data on changes in the balance by product, expected deposit interest rates and other business judgments. The amount of core deposits and the method of allocating maturities are reviewed on a regular basis. Meanwhile, deposits and loans with contractual maturities involve risks associated with premature repayment or cancellation. These risks are reflected in interest rate risks by estimating the ratio of cancellations through a statistical analysis based on factors including interest rate fluctuations and actual repayments and cancellations.

 

(iii)

Risk of strategic equity portfolio

With respect to the strategic equity securities (publicly traded) held by MUFG as of March 31, 2023 and 2024, MUFG estimates that the total market value of such securities would fluctuate by ¥2.2 billion and ¥1.9 billion per one-point change in TOPIX.

 

(e)

Limitations of the market risk measurement model and related measures

 

VaR,which is measured using a market risk measurement model,is calculated using the historical simulation method which estimates the loss on the current portfolio by applying actual fluctuations in market rates and prices over a fixed period in the past. Actual losses may exceed VaR in the event, for example, that the market fluctuates to a degree not accounted for in the observation period, or that the correlations among various risk factors, including interest rates and foreign currency exchange rates, deviate from those in the past period.

 

As a means to measure potential losses that the current market risk measurement model is not designed to capture, MUFG measures potential losses by applying various scenarios, including those which take into account estimates regarding future market volatility (stress testing) in order to better identify risks.

 

MUFG also utilizes back-testing to verify the effectiveness of its market risk measurement model in order to better ensure sufficient accuracy of the model.

 

–44–

(C)

Management of liquidity risk associated with funding activities

MUFG’s major group companies strive to secure appropriate liquidity in both yen and foreign currencies by managing the sources of funding and liquidity gap, liquidity-supplying products such as commitment lines, as well as buffer assets that help maintain liquidity level.

Specifically, the Board of Directors, etc. provide the framework for liquidity risk management, operate businesses at various stages according to the urgency of funding needs and manage liquidity risk at each such stage. The department responsible for risk management is designed to perform checking functions independent of other departments. The department reports to the ALM Committee, the Risk Management Committee and other appropriate bodies on the results of the performance of its responsibilities such as evaluation of funding urgency and monitoring of compliance with quantitative limits. The department responsible for funding management performs funding and management activities, and regularly reports the current funding status and forecast as well as the current liquidity risk status to the department responsible for risk management and other appropriate bodies such as the ALM Committee.

 

(4)

Supplementary explanation of the fair value of financial instruments

Since certain assumptions are applied in measuring the fair value of financial instruments, such fair value may vary if different assumptions are used.

 

II.

Matters concerning fair value of financial instruments and breakdown by input level

The amounts on the consolidated balance sheet, the fair value of financial instruments, the difference between them as well as a breakdown of financial instruments by input level are as follows.

The following tables do not include investment trusts which are accounted for in accordance with Paragraphs 24-3 and 24-9 of ASBJ Implementation Guidance No. 31, “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ, June 17, 2021) (“Implementation Guidance on Fair Value Measurement”), stocks with no market price, etc. and investments in partnerships and others which are accounted for in accordance with Paragraph 24-16 of the Implementation Guidance on Fair Value Measurement. (See Note (*2) to each of the tables in (1), (Note 3) and (Note 4) below.)

The fair values of financial instruments are classified into the following three levels depending on the observability and significance of the input used in the fair value calculation.

Level 1: Fair value determined based on (unadjusted) quoted prices in active markets for identical assets or liabilities

Level 2: Fair value determined based on directly or indirectly observable inputs other than the Level 1 inputs

Level 3: Fair value determined based on significant unobservable inputs

Where multiple inputs are used with a significant impact on the fair value calculation, the fair value of a financial instrument is classified based on the lowest of the priority levels to which any of those inputs belongs.

 

–45–

(1)

Financial assets and liabilities at fair value on the consolidated balance sheets

As of March 31, 2023

 

		(in millions of yen)
Category		Amount on consolidated balance sheet
		Level1				Level2				Level3				Total
Monetary claims bought (*1)			—				792,625				591,530				1,384,156
Trading assets			3,665,466				5,339,485				112,109				9,117,060
Money held in trust (Trading purpose / Other)			—				1,196,190				8,272				1,204,462
Securities (Available-for-sale securities)			41,033,674				21,355,832				400,105				62,789,613
Domestic equity securities			4,246,104				23,429				2,389				4,271,923
Government bonds			23,292,055				226,776				—				23,518,832
Municipal bonds			—				2,759,940				—				2,759,940
Short-term corporate bonds			—				—				—				—
Corporate bonds			—				3,473,132				—				3,473,132
Foreign equity securities			364,746				4,484				39,147				408,377
Foreign bonds			13,021,062				8,686,933				2,165				21,710,161
Investment trusts (*2)			105,025				6,094,265				2,189				6,201,481
Other securities			4,679				86,870				354,213				445,764
Total assets			44,699,141				28,684,133				1,112,017				74,495,292
Trading liabilities			5,246,139				102,380				—				5,348,520
Borrowed money (FVO) (*3)			—				181,414				—				181,414
Bonds payable (FVO) (*3)			—				195,802				102,130				297,933
Total liabilities			5,246,139				479,596				102,130				5,827,867
Derivatives (*4) (*5) (*6)			(34,824	)			(1,052,077	)			316,707				(770,193	)
Interest rate-related derivatives			4,362				(1,164,150	)			198,796				(960,990	)
Currency-related derivatives			2,229				91,679				12,696				106,605
Equity-related derivatives			(40,343	)			(10,682	)			21,110				(29,914	)
Bond-related derivatives			(1,073	)			30,192				82,566				111,685
Commodity-related derivatives			—				—				90				90
Credit-related derivatives			—				883				1,082				1,965
Other derivatives			—				—				364				364

 

(*1)

Monetary claims bought consists of securitized products, etc. of ¥1,384,156 million accounted for in the same manner as available-for-sale securities.

(*2)

The amount of investment trusts which are accounted for in accordance with Paragraph 24-3 and 24-9 of the Implementation Guidance on Fair Value Measurement is not included in the table above. The amount of such investment trusts on the consolidated balance sheet is ¥563,208 million of financial assets.

(*3)

Some overseas subsidiaries apply the fair value option.

(*4)

Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets or liabilities arising from derivative transactions are presented on a net basis, and net liabilities in the aggregate are presented in minus.

(*5)

Derivative transactions to which hedge accounting is applied are reported on the consolidated balance sheet at ¥(570,813) million.

(*6)

Transactions to which hedge accounting is applied include interest rate swap transactions designated as hedging instruments for the purpose of fixing cash flows from hedged loans and other assets. Deferred hedge accounting is applied to these transactions. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, March 17, 2022) applies are accounted for under the standard.

 

–46–

As of March 31, 2024

 

		(in millions of yen)
Category		Amount on consolidated balance sheet
		Level1				Level2				Level3				Total
Monetary claims bought (*1)			—				643,385				1,248,256				1,891,641
Trading assets			5,123,276				5,193,024				74,665				10,390,967
Money held in trust (Trading purpose / Other)			—				1,182,414				5,864				1,188,278
Securities (Available-for-sale securities)			38,777,821				19,187,848				603,542				58,569,211
Domestic equity securities			5,074,443				24,554				2,694				5,101,691
Government bonds			21,336,858				28,382				—				21,365,241
Municipal bonds			—				1,045,990				—				1,045,990
Short-term corporate bonds			—				—				—				—
Corporate bonds			—				2,663,412				—				2,663,412
Foreign equity securities			628,522				44,455				36,587				709,565
Foreign bonds			11,412,226				9,575,971				2,285				20,990,483
Investment trusts (*2)			321,189				5,743,840				2,218				6,067,249
Other securities			4,580				61,239				559,756				625,577
Total assets			43,901,097				26,206,672				1,932,328				72,040,098
Trading liabilities			5,650,311				183,539				—				5,833,851
Borrowed money (FVO) (*3)			—				126,251				—				126,251
Bonds payable (FVO) (*3)			—				93,700				26,411				120,111
Other liabilities			—				—				17,413				17,413
Total liabilities			5,650,311				403,491				43,824				6,097,627
Derivatives (*4) (*5) (*6)			(14,670	)			(836,182	)			138,640				(712,212	)
Interest rate-related derivatives			(6,713	)			(881,512	)			39,723				(848,502	)
Currency-related derivatives			9,518				33,389				10,274				53,183
Equity-related derivatives			(17,465	)			(28,978	)			11,688				(34,756	)
Bond-related derivatives			(9	)			43,350				77,444				120,785
Commodity-related derivatives			—				—				(45	)			(45	)
Credit-related derivatives			—				(2,437	)			(351	)			(2,789	)
Other derivatives			—				4				(92	)			(88	)

 

(*1)

Monetary claims bought consists of securitized products, etc. of ¥1,891,641 million accounted for in the same manner as available-for-sale securities.

(*2)

The amount of investment trusts which are accounted for in accordance with Paragraphs 24-3 and 24-9 of the Implementation Guidance on Fair Value Measurement is not included in the table above. The amount of such investment trusts on the consolidated balance sheet is ¥817,460 million of financial assets.

(*3)

Some overseas subsidiaries apply the fair value option.

(*4)

Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets or liabilities arising from derivative transactions are presented on a net basis, and net liabilities in the aggregate are presented in minus.

(*5)

Derivative transactions to which hedge accounting is applied are reported on the consolidated balance sheet at ¥(1,310,705) million.

(*6)

Transactions to which hedge accounting is applied include interest rate swap transactions designated as hedging instruments for the purpose of fixing cash flows from hedged loans and other assets. Deferred hedge accounting is applied to these transactions. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, March 17, 2022) applies are accounted for under the standard.

 

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(2)

Financial assets and liabilities which are not stated at fair value on the consolidated balance sheet

Cash and due from banks, Call loans and bills bought, Receivables under resale agreements, Receivables under securities borrowing transactions, Foreign exchanges (assets and liabilities), Call money and bills sold, Payables under repurchase agreements, Payables under securities lending transactions, Commercial papers, Due to trust accounts and Other liabilities are not included in the following tables since they are predominantly short-term (within one year), and their fair values approximate their carrying amounts.

As of March 31, 2023

 

		(in millions of yen)
Category		Fair value																Amount on consolidated balance sheet				Difference
		Level 1				Level 2				Level 3				Total
Monetary claims bought (*1)			—				—				5,889,213				5,889,213				5,941,029				(51,815	)
Money held in trust (other / held to maturity)			—				80,433				—				80,433				82,557				(2,123	)
Securities (held to maturity)			13,526,750				5,354,471				—				18,881,222				18,965,357				(84,135	)
Government bonds			13,526,750				—				—				13,526,750				13,513,972				12,778
Municipal bonds			—				1,139,490				—				1,139,490				1,144,825				(5,334	)
Short-term corporate bonds			—				—				—				—				—				—
Corporate bonds			—				393,783				—				393,783				393,214				568
Foreign bonds			—				3,821,197				—				3,821,197				3,913,345				(92,148	)
Other securities			—				—				—				—				—				—
Loans and bills discounted (*2) (*3)			—				225,701				108,219,822				108,445,523				108,162,952				282,570
Total assets			13,526,750				5,660,606				114,109,035				133,296,393				133,151,897				144,495
Deposits			—				213,744,141				—				213,744,141				213,609,501				134,639
Negotiable certificates of deposit			—				13,667,733				—				13,667,733				13,632,559				35,173
Borrowed money			—				24,579,207				—				24,579,207				24,674,925				(95,717	)
Bonds payable (*3)			—				14,879,435				—				14,879,435				15,410,786				(531,351	)
Total liabilities			—				266,870,518				—				266,870,518				267,327,774				(457,255	)

 

(*1)

Monetary claims bought includes securitized products, etc. of ¥2,554,723 million accounted for in the same manner as securities held to maturity.

(*2)

General and specific allowances for credit losses of ¥983,319 million corresponding to loans are deducted. However, with respect to items other than loans, the amount stated on the consolidated balance sheet is shown since the amount of allowance for credit losses corresponding to these items is insignificant.

(*3)

With respect to interest rate swaps to which special hedge accounting treatment is applied to offset fluctuations in the market value of the hedged items and forward exchange contracts, etc. to which the allocation method is applied, the fair value of such interest rate swaps and such currency swaps is included in the fair value of the hedged items. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, March 17, 2022) applies are accounted for under the standard.

 

–48–