Suruga Bank Ltd.

A large portion of personal loans consists of investment real estate loans for rental purposes, and there is a risk that deterioration in the real estate market or declining occupancy rates due to aging properties could reduce borrowers' rental income, leading to an increase in credit-related expenses and non-performing loan balances. In addition, if errors occur in checking for forgery or falsification of loan screening documents, similar losses could arise due to misjudgment of borrowers' repayment capacity or the valuation of collateral assets. The Company manages this risk through loan portfolio analysis and the establishment of a loan screening system.

Many of the Company's loans are secured by real estate, and there is a risk that a decline in real estate prices or reduced liquidity could impair the value of collateral assets. If self-assessment standards or write-off/provisioning standards are changed due to a significant deterioration in economic conditions, credit-related expenses may increase due to additional provisions for allowance for doubtful accounts. The Company calculates the allowance for doubtful accounts based on its self-assessment rules and write-off/provisioning rules, and conducts appropriate management through various credit risk analyses.

If inadequate compliance results in large-scale damage claims lawsuits or class action suits related to past or future business activities, depending on the outcome, this could have a material adverse effect on business operations and financial results and condition. If the risk management and internal audit systems do not function properly, there is also a risk of overlooking warning signs of risk or misjudging their assessment. The Company is working to build a robust corporate governance system and instill compliance awareness among its employees.

There exist both funding liquidity risk, in which necessary funds cannot be secured due to deterioration in market conditions, and market liquidity risk, in which trading of financial instruments becomes difficult due to market turmoil. If funding conditions become tight, the Company may be forced to raise funds at interest rates significantly higher than usual. The Company recognizes these risks as important risks and strives for appropriate liquidity management.

There is a risk that a downturn in the stock market could increase valuation losses and losses related to held equities, and a risk that fluctuations in market interest rates could increase valuation losses and losses related to held bonds. Changes in the interest rate environment may also affect pension obligations and unrecognized obligations. These risks depend on the external environment and directly affect the Company's business performance and financial condition.

There is a possibility that capital may be impaired due to deteriorating business performance or changes in capital adequacy ratio regulations, and the Company is required to maintain consolidated and non-consolidated capital adequacy ratios above the minimum required level under domestic standards. In addition, if deferred tax assets are written down or impairment of fixed assets occurs due to deteriorating business performance, this could also affect business performance and financial condition. The Company must comply with regulations based on "Financial Services Agency Notification No. 19 of 2006."

If a disaster, equipment failure, or program defect causes a computer system outage or malfunction, or if a cyberattack results in destruction or leakage of information, this could affect business performance through the suspension of settlement functions and service operations, as well as loss of social trust. Leakage, falsification, or unauthorized use of customer information or management information poses a similar risk. The Company strives to reduce this risk through the establishment of an information management system and management of outsourcing partners.

Under the Medium-Term Management Plan (FY2026 (ending March 2026)–FY2028) announced in April 2026, there is a possibility that strategies and measures may not be executed, or even if executed, may not achieve the initially expected results. In addition to the possibility that numerical targets may not be achieved due to the materialization of various risks or changes in the economic environment, there is also a risk that expected results may not be realized due to intensifying competition with peers and companies from other industries. The Company recognizes these as important risks and is working to steadily implement its management plan.

If wind and flood damage occurs due to climate change or abnormal weather, or if a major earthquake occurs centered on Shizuoka Prefecture and Kanagawa Prefecture, which are the Company's main business bases, this could affect business performance not only through damage to the Company Group itself but also through an increase in credit risk resulting from the deteriorating business performance of business partners. As a regional concentration risk, the fact that the Company's main business bases are concentrated in specific regions is a factor that amplifies this impact. The Company strives to avoid the materialization of this risk and to respond appropriately should it occur.

If compliance with laws and regulations related to the prevention of money laundering and terrorist financing is insufficient, there is a risk of receiving administrative dispositions such as fines or business improvement orders. This could lead to a loss of social trust and have a material impact on business operations and performance. The Company positions AML/CFT measures as an important management issue and continues efforts to strengthen its management system.