Regional Banks in Japan 2008 We, the 64 regional banks in Japan, have for a long time enjoyed the patronage of the people of our regions as banks that move in step with the community. Hokkaido The Hokkaido Bank The regional banks as financial institutions that have the trust of their customers, will continue to contribute to the activation of regional societies through meeting various financial needs in the regions, by enhancing financial functions such as relationship- based banking. Aomori The Aomori Bank THE MICHINOKU BANK Akita Iwate THE AKITA BANK The Bank of Iwate The Hokuto Bank THE TOHOKU BANK Yamagata THE SHONAI BANK The Yamagata Bank Miyagi The 77 Bank Niigata The Daishi Bank Fukushima The Hokuetsu Bank The Toho Bank Ishikawa Toyama The Hokkoku Bank The Hokuriku Bank THE TOYAMA BANK Tochigi Gunma The Ashikaga Bank Tottori Fukui Nagano The Gunma Bank Ibaraki The Hachijuni Bank The Joyo Bank Shimane THE TOTTORI BANK The Fukui Bank Gifu The San-in Godo Bank Kyoto Saitama The Kanto Tsukuba Bank The Ogaki Kyoritsu Bank The Musashino Bank Hyogo The Bank of Kyoto The Juroku Bank Okayama The Tajima Bank Tokyo Shiga Hiroshima The Chugoku Bank The Tokyo Tomin Bank Fukuoka Yamaguchi The Hiroshima Bank Osaka THE SHIGA BANK Chiba THE BANK OF FUKUOKA The Yamaguchi Bank The Kinki Osaka Bank Aichi The Chikuho Bank The Senshu Bank The Chiba Bank THE NISHI-NIPPON CITY BANK Kagawa The Bank of Ikeda The Chiba Kogyo Bank Saga Ehime The Hyakujushi Bank Mie THE BANK OF SAGA Oita The Iyo Bank The Mie Bank Tokushima Nara THE OITA BANK The Hyakugo Bank Kanagawa Nagasaki The Awa Bank The Nanto Bank Kochi Wakayama The Bank of Yokohama The Eighteenth Bank Kumamoto The Kiyo Bank The Shikoku Bank Yamanashi THE SHINWA BANK The Higo Bank The Yamanashi Chuo Bank Shizuoka Miyazaki THE SHIZUOKA BANK The Miyazaki Bank Kagoshima Suruga Bank THE SHIMIZU BANK THE KAGOSHIMA BANK （March 31,2008） The number of regional banks 64 The number of branches 7,456 (including overseas branches) The number of ATMs 35,669 The number of directors Okinawa and employees 127,587 Bank of The Ryukyus The Bank of Okinawa RegionalRegional BanksBanks inin JapanJapan ■ Japan’s Financial System There are three types of financial institutions in Japan: the central bank (Bank of Japan), private financial institutions, and public financial institutions. Private financial institutions can be divided into two main types, namely, institutions that accept deposits and others. In addition, institutions that accept deposits can be further broken down into banks, cooperative financial institutions, and the federations of cooperative financial institutions. Regional banks are banks licensed under the Banking Law, as are city banks and member banks of the Second Association of Regional Banks (most of which were mutual banks and have been registered as banks since 1989), and play a main role as commercial banks in Japan. Whereas city banks offer banking services to relatively many large corporate customers, regional banks (and member banks of the Second Association of Regional banks) focus their business mainly on retail banking. (See diagram: Breakdown of Financial Institutions in Japan) ■ Current Situation and Characteristics of Regional Banks Current Situation of Regional Banks As of March 31, 2008, there are 64 regional banks. Headquarters for regional banks are located in major and mid-size cities throughout the country, around which they have built major business bases. The majority of their loan customers, more than 80 percent, are local small and medium-sized companies and consumers. As for deposits, individual deposits account for approximately 70 percent of all the deposits. Characteristics of Regional Banks □ Main Financial Institution in Their Regions Regional banks have branch networks around their headquarters, and they function as the main financial service providers in the regions. Not only accepting deposits and financing, but also they are providing payment services to their customers through nationwide networks for ATMs and fund transfer. In addition, to meet the customers diversifying financial needs, they are offering securities services _ such as retail sales of government bonds and mutual funds _ and international services. They have also started to provide some insurance products and financial instruments intermediary services in line with recent progress of deregulation conducted by Japanese government. □ Regional Involvement Regional banks are making every effort to keep credit opportunities available constantly in the regions, and they are involved in numerous local community projects including sending their staffs, as well as joining volunteer activities to contribute to the regional society. These behaviors are based on their management principles “Growing in step with the regional communities” . In addition, they are contributing to financial stabilization of local public institutions, which include prefectural and municipal governments, by handling fiscal cash management as their designated financial institutions or through providing loans. □ Sound Management As regional banks’ business bases are in the specific regions, their keys for success are to win reliance from their customers in the regions. So they have given high priority for sound management for a long time. Recently, they have been trying to make their risk management techniques more highly sophisticated. They have been trying to use alternative channel such as Internet and to update IT infrastructure from the viewpoint of increasing efficiency of the operations. 2 Breakdown of Financial Institutions in Japan CENTRAL BANK Bank of Japan City banks Regional banks Member banks of the Second Association of Regional Banks BANKS (Tier II regional banks) Trust banks Foreign banks in Japan Japan Post (Japan Post Bank) Other banks INSTITUTIONS Shinkin banks Credit cooperatives THAT ACCEPT COOPERATIVE Labour banks DEPOSITS FINANCIAL Agricultural cooperatives INSTITUTIONS Fishery cooperatives Shinkin Central Bank (the central financial institution for the Shinkin banks) The Shinkumi Federation Bank (the national federation of credit cooperatives) The Rokinren Bank (the national federation of Labour banks) FEDERATIONS OF The Norinchukin Bank (the central bank for the Japanese agricultural, COOPERATIVE forestry, and fishery cooperatives) PRIVATE FINANCIAL Credit federations of agricultural cooperatives INSTITUTIONS Credit federations of fishery cooperatives FINANCIAL The Shoko Chukin Bank INSTITUTIONS (the central cooperative bank for commerce and industry) Securities companies Securities finance companies SECURITIES Investment trust management companies RELATED Investment advisory companies COMPANIES OTHER Life insurance companies Nonlife insurance companies INSURANCE PRIVATE Japan Post (Japan Post Insurance) Various mutual aid systems FINANCIAL Consumer credit companies INSTITUTIONS Business loan companies OTHERS Leasing companies Mortgage securities companies Money market dealers Development Bank of Japan Japan Bank for International Cooperation PUBLIC National Life Finance Corporation Japan Finance Corporation for Small and Medium Enterprise FINANCIAL Agriculture, Forestry and Fisheries Finance Corporation Japan Housing Finance Agency INSTITUTIONS Japan Finance Corporation for Municipal Enterprises The Okinawa Development Finance Corporation Other government affiliated financial bodies (June 30, 2008) 3 Current Status of the Regional Banks Shares of Deposits and Loans of Private Financial Institutions (March 31, 2008) Deposits Loans & di scounts Financial institutions Financial institutions for agriculture, for agriculture, Others forestry and fishery 7.1％ Others forestry and fishery 10.6％ 8.3％ Regional 6.3％ Regional banks banks 23.1％ 26.6％ Shinkin banks 11.4％ ＄8,735 billion Domestically licensed banks ＄5,609 billion Shinkin banks 13.1％ excluding regional banks, C5,486 billion city banks and C3,523 billion Domestically licensed banks tier II regional banks 7.7％ excluding regional banks, city banks and City banks City banks tier II regional banks 7.0％ 31.4％ Tier II regional banks 7.7％ 33.2％ Tier II regional banks 6.5％ Source : Bank of Japan Notes : (1)The figures above exclude those of Japan Post Bank (it is bellow the same) (2)Deposits include CDs, bank debentures and installment savings. (3)￥99.37=US$1, the middle rate between offers and bids surveyed from interbank market participants etc as of 5:00 p.m. at the date by Tokyo inter-bank market participants (it is bellow the same) (4)￥158.21= C1, the bid rate reported by the FRB of New York as of noon at the date (New York time), arbitraged on the Tokyo inter-bank market central rate (it is bellow the same) Proportions of Deposits and Loans by Area (March 31, 2008) Deposits Loans & discounts Regional Areas Urban areas Regional Areas Urban areas Regional Regional banks 67.1 32.9 banks 55.5 44.5 Domestically Domestically licensed banks licensed banks excluding 14.3 85.7 excluding 13.8 86.2 regional banks regional banks 0 20 40 60 80 100（％） 0 20 40 60 80 100（％） Sources : Regional Banks Association of Japan, Bank of Japan Note : Urban areas comprise Saitama, Chiba, Tokyo, Kanagawa, Aichi, Kyoto, Osaka, Hyogo and Fukuoka Prefectures. Regional areas comprise the remaining 38 prefectures. Proportions of Deposits by Sector Proportions of Loans by Sector (March 31, 2008) (March 31, 2008) Financial institutions' deposits 1.3 Large enterprises Public deposits 3.8 Others 1.3 Medium-sized enterprises 3.7 Local governments 7.7 Corporations Regional Individuals 72.5