The Toho Bank, Ltd.

Risk that cyberattacks cause large-scale damage such as business disruption, information leakage, and unauthorized money transfers, leading to loss of credibility and business opportunities. Selected as a top risk, the Bank is working to reduce this risk through the establishment of a CSIRT, technical countermeasures, and regular incident response drills.

Risk that large-scale damage from a system failure results in the payment of compensation costs and reputational damage. Selected as a top risk, the Bank is promoting early identification of latent risks through enhanced monitoring of system risk, and strengthening its response capabilities in the event of a failure through BCP drills.

Risk that a global economic downturn or slowdown in the Japanese economy worsens corporate performance, resulting in sluggish loan demand, reduced earnings for the Bank, and increased credit costs. Selected as a top risk, the Bank is strengthening its response capabilities under stress through stress testing and the formulation of action plans assuming credit contraction and global stagflation scenarios.

Risk that the shrinking population in Fukushima Prefecture, the Bank's primary market, reduces the scale of the economy and weakens the Bank's earning power. In addition, difficulty in securing human resources may adversely affect business operations and financial results. The Bank addresses this through comprehensive human resources consulting, support for sustainable regional growth via financial intermediation functions, and strengthening new graduate and career recruitment.

Risk that conflicts or terrorist attacks cause surging energy prices, supply chain disruptions, and import bans on Japanese products, leading to economic stagnation and deteriorating corporate performance. Selected as a top risk, the Bank is strengthening its response capabilities under stress through stress testing and the formulation of specific action plans assuming the occurrence of global stagflation.

Both physical risk (damage to head office and branches from typhoons and other natural disasters, and increased costs) and transition risk (deteriorating corporate performance and increased credit costs due to industrial structural change accompanying the shift to a decarbonized society) exist. Selected as a top risk, the Bank is addressing this through the promotion of sustainable finance, setting a carbon neutrality target for FY2040 (ending March 2041), and installing branches designed to ZEB standards.

At the Bank, which operates mainly in Fukushima Prefecture, deterioration in the domestic economic environment could adversely affect the business conditions of borrowers, leading to downward migration in obligor classifications, declines in collateral value, and increased credit costs. Risk exposure is calculated using VaR at a 99.9% confidence interval, and is managed to remain within the scope of capital through the capital allocation system.

Risk that valuation gains/losses on held securities deteriorate and impairment occurs due to rising interest rates, sluggish stock prices, or exchange rate fluctuations. Risk exposure is quantitatively assessed using VaR (99.9% confidence interval), and risk management is practiced in an integrated manner with management strategy through the capital allocation system.

Risk that if the capital adequacy ratio falls below required levels due to declines in the value of the securities portfolio, increased credit costs from a rise in non-performing loans, or changes to the standards or calculation methods for the capital adequacy ratio, the Bank could receive an order from the Commissioner of the Financial Services Agency, including a full or partial suspension of business. Risk exposure is managed under the capital allocation system to remain within the scope of capital.

Risk that inadequate measures against money laundering, etc., result in sanctions from regulatory authorities, leading to loss of credibility and a business suspension order. Recognized as a key risk, the Bank is addressing this through strengthened institutional frameworks.