The Chiba Bank, Ltd.

The risk that a complete system outage, mass mishandling of data, or a system failure affecting a large number of customers could render the Bank unable to provide services to customers, leading to loss of trust and deterioration in business performance. While failures limited to specific customers can occur with relatively high frequency, large-scale failures such as complete outages are assessed as low frequency. The Bank addresses this through dual redundancy of core systems, strengthened measures to prevent intrusion by malicious programs, and the development of contingency plans.

The risk that deterioration in economic conditions, regional economic stagnation, disasters such as earthquakes or typhoons, or declines in land prices and real estate liquidity could worsen the financial condition of borrowers, leading to an increase in non-performing loan write-offs and provisions. Losses could also expand if collateral real estate cannot be liquidated at the expected value. As countermeasures, the Bank applies rigorous screening standards, provides management improvement support, quantitatively manages credit concentration risk using VaR and other methods, and sets credit exposure limits.

The risk that declines in stock prices, yen appreciation, rising interest rates, or other factors could cause impairment or valuation losses on held securities, adversely affecting the Bank's financial position and results of operations. The Bank ensures soundness by setting limits based on VaR (Value at Risk, the estimated maximum loss amount) for each product category such as securities investments and deposits/loans, and appropriately managing the amount of market risk.

The risk that market disruption or deterioration in the Bank's financial condition could make it impossible to secure necessary funds, or force the Bank to raise funds at significantly higher interest rates. Deterioration of the funding environment and decline in the Bank's creditworthiness are assumed as the primary risk events. The Bank addresses this by holding liquid assets sufficient to cover fund outflows during stress events such as financial crises, setting limits on market-based fund procurement, and controlling mismatches between fund-raising and fund deployment.

The risk that information leaks, misconduct incidents, or litigation/ADR could result in administrative sanctions or damage claims from stakeholders, adversely affecting business operations and performance. In June 2023, a business improvement order was issued to the Bank and Chibagin Securities in connection with the solicitation and sale of structured bonds (the items in the improvement plan have since been completed). The Bank thoroughly maintains a stance of placing compliance at the foundation of all operations through the development of information management regulations and the implementation of education and training.

The risk that a shrinking regional economy centered on Chiba Prefecture, the Bank's principal market, could reduce demand for existing services and lower earning power. This is driven by the structural decline in population and the regional economy. The Bank addresses this by strengthening support for regional revitalization, improving services and reducing costs through alliances, expanding new businesses, and enhancing the customer experience across both physical and digital channels.

The risk that business operations that betray customer expectations or damage trust could lead to customer attrition, adversely affecting business operations and performance. In light of the background to the business improvement order issued in connection with the sale of structured bonds, thoroughly implementing fiduciary duty has been recognized as an important issue. The Bank promotes the entrenchment of awareness through ongoing training and in-workplace study sessions, and pursues early improvement through enhanced collection and analysis of complaints and regional feedback.

The risk that business operations could be suspended due to large-scale natural disasters such as earthquakes or typhoons. Chiba Prefecture has regional characteristics that make it susceptible to typhoon damage, making the development of business continuity systems an important issue. The Bank strengthens its business continuity framework through the implementation of business continuity drills, expansion and review of disaster prevention equipment, installation of private power generation facilities, and deployment of mobile branch vehicles.

If financial functions are misused for the purpose of money laundering, terrorist financing, proliferation financing, or other violations of economic sanctions, this could result in administrative sanctions by domestic and overseas authorities or termination of correspondent banking agreements, potentially causing extremely serious adverse effects on business operations and performance. The Bank addresses this through risk-based customer management, utilization of IT systems to detect fraudulent transactions, and employee education and training.

The risk that delays in providing next-generation financial services or a shortage of digital talent could lead to loss of market share due to entry by companies from other industries, impede the realization of digital strategy, and reduce the ability to respond to customer needs. The likelihood of these risks materializing is assessed as low. The Bank addresses this by expanding app- and corporate-portal-related services, promoting digital marketing, and developing human resources equipped to handle digitalization.