Mitsubishi UFJ Financial Group, Inc.

Changes in monetary and fiscal policy in major countries, geopolitical risk, global inflation/stagflation and other factors may result in valuation losses on securities held, increases in non-performing loans and credit-related expenses, and deterioration in foreign currency liquidity. In the event of turmoil or stagnation in financial markets, declines in the value of financial products held and difficulty in obtaining appropriate price references may also be envisaged. Although the Group conducts market risk management, the calculated risk amount does not always accurately reflect the actual risk.

Due to regulatory tightening such as the finalization of Basel III (applied from the end of March 2024), additional capital requirements for G-SIBs, and TLAC regulations (raising the required level of the external TLAC ratio from April 2024), if the capital adequacy ratio or leverage ratio falls below the required level, the Group may be subject to orders from the Financial Services Agency restricting the amount of outflows to outside parties or suspending business operations. As a trial calculation of additional collateral requirements in the event of a downgrade, it is estimated that approximately ¥23.8 billion in additional collateral would be required for a one-notch downgrade, and approximately ¥149.4 billion for a two-notch downgrade. Factors cited as having an adverse impact on the capital adequacy ratio include declines in the value of the securities portfolio, foreign exchange fluctuations, and reductions in deferred tax assets.

Deterioration of the domestic and overseas economy, fluctuations in resource prices, declines in real estate prices, rising interest rates and other factors may increase credit-related expenses and non-performing loans. As of the end of March 2026, the allowance for credit losses on the consolidated balance sheet amounted to ¥1,229,900 million, and the proportion of credit extended to the real estate and financial industries is relatively high, making the Group susceptible to the impact of deteriorating performance in these industries. Although the Group works to reduce credit risk through collateral, guarantees, credit derivatives and other means, the possibility that actual loan losses will exceed the allowance for credit losses cannot be ruled out.

Increasingly sophisticated cyberattacks, unauthorized access, computer virus infections, and new threats exploiting AI and quantum technologies may result in information leaks, business suspension, and liability for damages. As the importance of systems increases amid the promotion of digital strategy and the expansion of remote work, risks related to vulnerabilities in the software supply chain and changes to third-party systems are also increasing. Regulatory authorities are also raising the required level of cybersecurity risk management frameworks, and if the Group's response is deemed insufficient, it may become subject to administrative action.

Insufficient compliance with laws and regulations concerning money laundering, economic sanctions, and bribery/corruption prevention may result in fines, business suspension orders, revocation of licenses, and other dispositions. In June 2024, MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and other entities received a business improvement order due to inappropriate sharing of customer information in bank-securities collaborative business, and the response to this remains ongoing. In addition, in December 2024 the Group received a request for a report regarding an incident in which a former bank employee stole customer assets from safe deposit boxes, and the Group continues to thoroughly implement measures to prevent recurrence.

There are transition risks associated with policy changes, technological innovation, and shifts in market preferences accompanying the transition to a decarbonized society, as well as physical risks such as direct damage to assets and supply chain disruptions caused by climate change. If initiatives and disclosures are deemed insufficient or inappropriate, this could lead to impairment of corporate value, and adverse effects on the management and operation of the credit portfolio through impacts on business counterparties are also envisaged. Although the Group is advancing responses such as formulating the MUFG Environmental Policy and Human Rights Policy and applying the MUFG Environmental and Social Policy Framework, it is difficult to predict the timing and impact of regulatory changes.

The Company holds 23.9% of the voting rights of Morgan Stanley (as of the end of March 2026) and accounts for it as an equity-method affiliate, and therefore trends in Morgan Stanley's business performance and changes in the equity ratio have a direct impact on the Group's business performance. As the Company is not the controlling shareholder of Morgan Stanley, Morgan Stanley may independently make decisions that do not align with the Group's interests, and if expected synergies are not achieved or if the strategic alliance is dissolved, adverse effects on business strategy and financial condition may occur. As the Company has made a large-scale investment, it may also incur substantial investment losses in the event of a deterioration in Morgan Stanley's financial condition.

The Group is actively pursuing acquisitions, capital investments, and capital alliances in the United States, Europe, and the Asia-Pacific region, but expected synergies may not be achieved due to instability in political and social conditions, disapproval by regulatory authorities, or changes in the strategy or financial condition of counterparties. There is also a risk that the value of intangible fixed assets such as goodwill arising from acquisitions and capital investments could become impaired, which may adversely affect financial condition and operating results. Existing major overseas subsidiaries include Bank of Ayudhya Public Company Limited and PT Bank Danamon Indonesia Tbk, which are exposed to risks specific to their respective regions.

As reliance on third parties increases against the backdrop of rapid digitalization, cyberattacks against outsourcing partners, information leaks, legal violations, and system failures may disrupt the Group's business operations. There is also a risk that service interruptions or delays caused by system failures or natural disasters at third parties could affect the Group's business continuity. Although the Group conducts risk assessment and monitoring based on the MUFG Third-Party Risk Management Policy and other regulations, it cannot guarantee that all such events can be prevented.

The Group is promoting the development, provision, and use of AI with the aim of improving operational efficiency, enhancing services, and sophisticating risk management, but there is a possibility of inaccurate or inappropriate outputs, unintended judgments or processing, and information leaks or rights infringements arising from training data or input information. There is also a risk that concentrated dependence on specific external vendors, cloud platforms, or models could make it difficult to operate business and systems in the event of an external incident. If the Group's response to the development and changes in AI-related laws and regulations, which differ by country and region, is insufficient, existing operational risk could be amplified, adversely affecting business and financial condition.