As filed with the Securities and Exchange Commission on July 10, 2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
‘ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2019
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
OR
‘ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number 000-54189
KABUSHIKI KAISHA MITSUBISHI UFJ FINANCIAL GROUP
(Exact name of Registrant as specified in its charter)
MITSUBISHI UFJ FINANCIAL GROUP, INC.
(Translation of Registrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
7-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100-8330
Japan
(Address of principal executive offices)
Masahisa Takahashi, +81-3-3240-8111, +81-3-3240-7073, same address as above
(Name, Telephone, Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
symbol(s) Name of each exchange on which registered
Common stock, without par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
American depositary shares, each of which represents one share of common stock . . . . . . . . . . . . . . . .
MUFG
New York Stock Exchange(1)
New York Stock Exchange
(1) The listing of the registrant’s common stock on the New York Stock Exchange is for technical purposes only and without trading privileges.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of March 31, 2019,13,667,770,520 shares of common stock (including 745,921,774 shares of common stock held by the registrant and its consolidated
subsidiaries as treasury stock)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes È No ‘
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Yes ‘ No È
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes È No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Accelerated filer ‘
Non-accelerated filer ‘
Emerging growth company ‘
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to
use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the
Exchange Act. ‘
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
È
International Financial Reporting Standards as issued
by the International Accounting Standards Board ‘
Other ‘
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ‘ Item 18 ‘
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ‘ No È
TABLE OF CONTENTS
Page
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements
4
Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
4
Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
4
Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
28
Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
72
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4A.
73
Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.
139
Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
163
Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
165
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
166
The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
167
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 10.
175
Quantitative and Qualitative Disclosures about Credit, Market and Other Risk . . . . . . . . . . . . .
Item 11.
204
Description of Securities Other than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
206
Item 13.
Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
206
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds . . . . . . . . . . . . .
206
Item 15.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209
Item 16A. Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209
Item 16B. Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209
Item 16C. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
210
Item 16D. Exemptions from the Listing Standards for Audit Committees . . . . . . . . . . . . . . . . . . . . . . . . . .
210
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers . . . . . . . . . . . . . . . . . . .
211
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16F. Change in Registrant’s Certifying Accountant
211
Item 16G. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
213
Item 16H. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
214
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 17.
214
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 18.
Item 19.
214
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Statistical Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
F-1
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For purposes of this Annual Report, we have presented our consolidated financial statements in accordance
with accounting principles generally accepted in the United States, or U.S. GAAP, except for risk-adjusted
capital ratios, capital components, risk-weighted assets, business segment financial information and some other
specifically identified information. Unless otherwise stated or the context otherwise requires, all amounts in our
financial statements are expressed in Japanese yen.
In this Annual Report, unless otherwise indicated or the context otherwise requires, all figures are rounded
to the figures shown except for the capital ratios, capital components, risk-weighted assets, leverage ratios and
liquidity coverage ratios of MUFG and its domestic subsidiaries, which are rounded down and truncated to the
figures shown. In some cases, figures presented in tables are adjusted to match the sum of the figures with the
total amount, and such figures are also referred to in the related text.
When we refer in this Annual Report to “MUFG,” “we,” “us,” “our” and the “Group,” we generally mean
Mitsubishi UFJ Financial Group, Inc. and its consolidated subsidiaries, but from time to time as the context
requires, we mean Mitsubishi UFJ Financial Group, Inc. as an individual legal entity. In addition, our
“commercial banking subsidiaries” refers to MUFG Bank, Ltd. (formerly, The Bank of Tokyo-Mitsubishi UFJ,
Ltd.), or “BK,” and, as the context requires, its consolidated subsidiaries engaged in the commercial banking
business. Our “trust banking subsidiaries” refers to Mitsubishi UFJ Trust and Banking Corporation, or “TB,” and,
as the context requires, its consolidated subsidiaries engaged in the trust banking business. Our “banking
subsidiaries” refers to MUFG Bank and Mitsubishi UFJ Trust and Banking and, as the context requires, their
respective consolidated subsidiaries engaged in the banking business. Our “securities subsidiaries” refers to
Mitsubishi UFJ Securities Holdings Co., Ltd., or “SCHD,” and as the context requires, its consolidated
subsidiaries engaged in the securities business.
1
References to “MUAH” and “BK(US)” are to MUFG Americas Holdings Corporation and MUFG Union
Bank, N.A., as single entities, respectively, as well as to MUFG Americas Holdings and MUFG Union Bank and
their respective consolidated subsidiaries, as the context requires.
References to “Krungsri” are to Bank of Ayudhya Public Company Limited, as a single entity, as well as to
Bank of Ayudhya Public Company Limited and its respective consolidated subsidiaries, as the context requires.
References to “Bank Danamon” are to PT Bank Danamon Indonesia, Tbk., as a single entity, as well as to PT
Bank Danamon Indonesia, Tbk. and its respective consolidated subsidiaries, as the context requires.
References to the “FSA” are to the Financial Services Agency, an agency of the Cabinet Office of Japan.
References in this Annual Report to “yen” or “¥” are to Japanese yen, references to “U.S. dollars,”
“U.S. dollar,” “dollars,” “U.S.$” or “$” are to United States dollars, references to “euro” or “€” are to the
currency of the member states of the European Monetary Union, references to “THB” are to Thai baht, references
to “AU$” are to Australian dollars, references to “HK$” are to Hong Kong dollars, and references to “IDR” are
to Indonesian Rupiah.
Our fiscal year ends on March 31 of each year. References to years not specified as being fiscal years are to
calendar years.
We usually hold the annual ordinary general meeting of shareholders of Mitsubishi UFJ Financial Group,
Inc. in June of each year in Tokyo.
2
Forward-Looking Statements
We may from time to time make written or oral forward-looking statements. Written forward-looking
statements may appear in documents filed with, or submitted to, the U.S. Securities and Exchange Commission,
or SEC, including this Annual Report, and other reports to shareholders and other communications.
The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking
information to encourage companies to provide prospective information about themselves. We rely on this safe
harbor in making these forward-looking statements.
Forward-looking statements appear in a number of places in this Annual Report and include statements
regarding our current intent, business plan, targets, belief or expectations or the current belief or current
expectations of our management with respect to our results of operations and financial condition, including,
among other matters, our problem loans and loan losses. In many, but not all cases, we use words such as
“anticipate,” “aim,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probability,” “risk,” “will,” “may” and
similar expressions, as they relate to us or our management, to identify forward-looking statements. These
statements reflect our current views with respect to future events and are subject to risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions
prove incorrect, actual results may vary materially from those which are aimed, anticipated, believed, estimated,
expected, intended or planned, or otherwise stated.
Our forward-looking statements are not guarantees of future performance and involve risks and
uncertainties. Actual results may differ from those in the forward-looking statements as a result of various
factors. We identify in this Annual Report in “Item 3.D. Key Information—Risk Factors,” “Item 4.B. Information
on the Company—Business Overview,” “Item 5. Operating and Financial Review and Prospects” and elsewhere,
some, but not necessarily all, of the important factors that could cause these differences.
We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements,
whether as a result of new information, future events or otherwise unless required by law.
3
PART I
Item 1.
Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
A. Selected Financial Data
The selected statement of income data and selected balance sheet data set forth below has been derived from
our audited consolidated financial statements.
Except for risk-adjusted capital ratios, which are calculated in accordance with Japanese banking regulations
based on information derived from our consolidated financial statements prepared in accordance with accounting
principles generally accepted in Japan, or Japanese GAAP, the selected financial data set forth below are derived
from our consolidated financial statements prepared in accordance with U.S. GAAP.
You should read the selected financial data set forth below in conjunction with “Item 5. Operating and
Financial Review and Prospects,” “Selected Statistical Data” and our consolidated financial statements and other
financial data included elsewhere in this Annual Report. These data are qualified in their entirety by reference to
all of that information.
4
Fiscal years ended March 31,
2015
2016
2017
2018
2019
(in millions, except per share data and number of shares)
Statement of income data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2,894,645
663,184
¥
3,005,738
744,364
¥
2,990,767
769,639
¥
3,259,016
1,028,755
¥
3,813,379
1,517,981
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . .
2,231,461
86,998
2,261,374
231,862
2,221,128
253,688
2,230,261
(240,847)
2,295,398
34,330
Net interest income after provision for (reversal of)
credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income before attribution of noncontrolling
2,144,463
2,845,078
2,726,885
2,262,656
666,020
2,029,512
2,407,690
3,274,532
1,162,670
369,432
1,967,440
1,196,706
2,891,603
272,543
94,453
2,471,108
1,935,091
2,744,380
1,661,819
407,823
2,261,068
1,595,244
2,985,470
870,842
133,237
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,596,636
793,238
178,090
1,253,996
737,605
Net income (loss) attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,509
(9,094)
(24,590)
25,836
18,960
Net income attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
1,531,127
Earnings applicable to common shareholders of
Mitsubishi UFJ Financial Group . . . . . . . . . . . . . .
¥
1,522,157
¥
¥
802,332
802,332
¥
¥
202,680
¥
1,228,160
202,680
¥
1,228,160
¥
¥
718,645
718,645
Amounts per share:
Basic earnings per common share—Earnings
applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share—Earnings
applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . .
Number of shares used to calculate basic earnings
¥
107.81
¥
57.78
¥
14.93
¥
92.40
¥
55.03
107.50
57.51
14.68
92.10
54.74
per common share (in thousands)
. . . . . . . . . . . . .
14,118,469
13,885,842
13,574,314
13,291,842
13,058,698
Number of shares used to calculate diluted earnings
per common share (in thousands)(1) . . . . . . . . . . . .
Cash dividends per share paid during the fiscal year:
—Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Preferred stock (Class 5)(2) . . . . . . . . . . . . . . . . . . .
—Preferred stock (Class 11)(3) . . . . . . . . . . . . . . . . . .
14,137,645
13,903,316
13,584,885
13,293,492
13,059,182
¥
$
¥
$
¥
$
¥
$
18.00
0.16
57.50
0.57
2.65
0.03
¥
$
18.00
0.15
—
—
—
—
¥
$
18.00
0.17
—
—
—
—
As of March 31,
¥
$
18.00
0.16
—
—
—
—
21.00
0.19
—
—
—
—
2015
2016
2017
2018
2019
Balance sheet data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for credit losses . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥280,875,706
117,209,723
265,594,365
171,991,267
18,782,257
15,281,341
2,090,270
¥292,557,355
121,679,828
277,709,088
181,438,087
20,524,615
14,848,267
2,090,270
(in millions)
¥297,185,019
117,032,784
282,420,311
190,401,623
26,131,527
14,764,708
2,090,270
¥300,570,312
116,271,771
284,924,497
195,674,593
27,069,556
15,645,815
2,090,270
¥305,228,899
116,225,757
289,244,151
199,280,789
27,990,543
15,984,748
2,090,270
5
Fiscal years ended March 31,
2015
2016
2017
2018
2019
(in millions, except percentages)
Other financial data:
Average balances:
Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥237,247,664
210,091,493
277,547,638
13,002,955
¥252,715,743
221,135,208
299,270,873
15,285,766
¥239,192,449
223,522,296
307,938,699
15,010,829
¥239,048,981
233,857,052
320,589,932
15,423,078
¥241,407,356
234,643,197
321,292,847
16,076,679
Return on equity and assets:
Earnings applicable to common shareholders as a
percentage of average total assets . . . . . . . . . . . . .
0.55%
Earnings applicable to common shareholders as a
percentage of average total equity . . . . . . . . . . . . .
11.71%
0.27%
5.25%
0.07%
1.35%
0.38%
7.96%
0.22%
4.47%
Dividends per common share as a percentage of
basic earnings per common share . . . . . . . . . . . . .
16.70%
31.15%
120.56%
19.48%
38.16%
Average total equity as a percentage of average
total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income as a percentage of average total
interest-earning assets . . . . . . . . . . . . . . . . . . . . . .
Credit quality data:
Allowance for credit losses . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses as a percentage of
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impaired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impaired loans as a percentage of loans . . . . . . . . . . .
Allowance for credit losses related to impaired loans
as a percentage of impaired loans . . . . . . . . . . . . .
Net loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loan charge-offs as a percentage of average
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average interest rate spread . . . . . . . . . . . . . . . . . . . .
Risk-adjusted capital ratio calculated under Japanese
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAAP(5)
4.68%
0.94%
5.11%
0.89%
4.87%
0.93%
4.81%
0.93%
5.00%
0.95%
¥
1,055,479
¥
1,111,130
¥
1,182,188
¥
764,124
¥
658,184
0.89%
0.90%
1.00%
0.65%
0.56%
¥
1,686,806
¥
1,725,150
¥
1,715,850
¥
1,331,123
¥
1,209,791
1.43%
1.40%
1.45%
1.14%
1.04%
36.00%
42.60%
51.42%
37.14%
32.33%
¥
150,666
¥
156,959
¥
169,809
¥
180,999
¥
129,924
0.13%
0.90%
0.13%
0.85%
0.14%
0.91%
0.15%
0.92%
0.11%
0.93%
15.62%
16.01%
15.85%
16.56%
16.03%
Includes the common shares that were potentially issuable upon conversion of the Class 11 Preferred Stock and stock acquisition rights.
Notes:
(1)
(2) Preferred dividends were ¥57.5 per share and paid semi-annually. In April 2014, we acquired and cancelled all of the issued shares of
First Series of Class 5 Preferred Stock. As a result, there is currently no issued Class 5 Preferred Stock. See Note 17 to our audited
consolidated financial statements included elsewhere in this Annual Report.
(3) Preferred dividends were ¥2.65 per share and paid semi-annually. In August 2014, we acquired all of the issued shares of Class 11
Preferred Stock in exchange for 1,245 shares of our common stock held in treasury, and cancelled the acquired shares. As a result, there
is currently no issued Class 11 Preferred Stock. See Note 17 to our audited consolidated financial statements included elsewhere in this
Annual Report.
(4) Reflects the changes in presentation adopted in the fiscal year ended March 31, 2018, where long-term payables under repurchase
agreements are no longer included in long-term debt but are aggregated with short-term payables under repurchase agreements in
payables under repurchase agreements, and applied to the fiscal years ended March 31, 2015, 2016 and 2017.
(5) Risk-adjusted capital ratios have been calculated in accordance with Japanese banking regulations as applicable on the relevant
calculation date, based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP.
For a description of the applicable capital ratio calculation and other requirements applicable, see “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—Japan—Capital adequacy” and “Item 5.B. Operating and Financial
Review and Prospects—Liquidity and Capital Resources—Capital Adequacy.”
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
6
D. Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider the risks described
in this section, which is intended to disclose all of the risks that we consider material based on the information
currently available to us, as well as all the other information in this Annual Report, including our consolidated
financial statements and related notes, “Item 5. Operating and Financial Review and Prospects,”
“Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk” and “Selected
Statistical Data.”
Our business, operating results and financial condition could be materially and adversely affected by any of
the factors discussed below. The trading price of our securities could decline due to any of these factors. This
Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those described in this section and elsewhere in this Annual Report. See “Forward-Looking
Statements.”
Risks Related to Our Business
Because a large portion of our assets as well as our business operations are in Japan, we may incur
losses if economic conditions in Japan worsen.
Our performance is particularly affected by the general economic conditions of Japan where we are
headquartered and conduct a significant amount of our business. As of March 31, 2019, 63.6% of our total assets
were related to Japanese domestic assets, including Japanese national government and Japanese government
agency bonds, which accounted for 56.0% of our total investment securities portfolio and 8.2% of our total
assets, respectively. Interest and non-interest income in Japan represented 34.9% of our total interest and
non-interest income for the fiscal year ended March 31, 2019. Furthermore, as of March 31, 2019, our loans in
Japan accounted for 55.7% of our total loans outstanding.
There is significant uncertainty surrounding Japan’s economy. For example, Japan’s fiscal health and
sovereign creditworthiness may deteriorate if the Japanese government’s economic measures and the Bank of
Japan’s monetary policies prove ineffective or result in negative consequences. If the prices of Japanese
government bonds decline rapidly, resulting in an unexpectedly sudden increase in interest rates, our investment
securities portfolio as well as our lending, borrowing, trading and other operations may be negatively impacted.
In addition, interest rates may suddenly increase as a result of a decision made by the Bank of Japan to end or
modify its current interest rate policy, including the negative interest rate of minus 0.1% applied to certain
current account amounts that financial institutions hold at the Bank of Japan and the Japanese government bond
purchase program with an aim to keep the yield of 10-year Japanese government bonds around zero percent, or
market expectations relating to any such decision. See “—Risks Related to Our Business—Fluctuations in
interest rates could adversely affect the value or the yield of our bond portfolio.”
Instability in the Japanese stock market and foreign currency exchange rates may also have a significant
adverse impact on our asset and liability management as well as our results of operations. Various other factors,
including the decreasing and aging demographics in Japan, stagnation or deterioration of economic and market
conditions in other countries, growing global competition and trade conflicts, may also have a material negative
impact on the Japanese economy. For a detailed discussion on the business environment in Japan and abroad, see
“Item 5. Operating and Financial Review and Prospects—Business Environment.”
Since our domestic loans in Japan accounted for a significant portion of our loan portfolio, deteriorating or
stagnant economic conditions in Japan may cause adverse effects on our financial results, such as increases in
credit costs, as the credit quality of some borrowers could deteriorate. For example, due to the intensifying global
competition and weakening consumer spending in recent periods, some Japanese companies, including
electronics manufacturers, have experienced significant financial difficulties. For a further discussion,
7
see “—Risks Related to Our Business—We may suffer additional credit-related losses in the future if our
borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or in anticipation
of, our borrowers’ deteriorating repayment abilities prove inappropriate or insufficient.”
Our domestic loan portfolio may also be adversely affected by interest rate fluctuations in Japan. For
example, as a result of the Bank of Japan’s interest rate policy and measures to purchase Japanese government
bonds in the market, the yield on many financial instruments and other market interest rates in Japan have
declined to low or negative levels. If the Bank of Japan’s policy and measures are maintained for an extended
period, or if the Bank of Japan’s negative interest rate is lowered from the current level, market interest rates may
decline further, and our interest rate spread on our domestic loan portfolio may narrow further, reducing our net
interest income.
If the global economy deteriorates, our credit-related losses may increase, and the value of the financial
instruments we hold may decrease, resulting in losses.
Global economic conditions remain volatile, and it is uncertain how the global economy will evolve over
time. Factors that could negatively impact the global market, both developed and emerging, include concerns
over the possible negative impact on global economic activity resulting from changes in the trade policies of
various countries, the potentially serious ramifications of the negotiations on the United Kingdom’s withdrawal
from the European Union, the potential negative effect from the monetary policy changes in the United States,
slowing economic growth in China in the midst of a shift in the government’s economic policy, possible adverse
effects on economic conditions in commodity-exporting countries of a decline in oil and other commodity prices,
and the political turmoil in various regions around world. As of March 31, 2019, based principally on the
domicile of the obligors, assets related to the United States accounted for approximately 16.4% of our total
assets, assets related to Asia and Oceania excluding Japan accounted for approximately 9.2% of our total assets,
and assets related to Europe accounted for approximately 7.1% of our total assets. If the global economy
deteriorates or the global economic recovery significantly slows down again, the availability of credit may
become limited, and some of our borrowers may default on their loan obligations to us, increasing our credit
losses. Some of our credit derivative transactions may also be negatively affected, including the protection we
sold through single name credit default swaps, and index and basket credit default swaps. The notional amounts
of these protections sold as of March 31, 2019 were ¥2.49 trillion and ¥0.66 trillion, respectively. In addition, if
credit market conditions worsen, our capital funding structure may need to be adjusted or our funding costs may
increase, which could have a material adverse impact on our financial condition and results of operations.
Furthermore, we have incurred losses, and may incur further losses, as a result of changes in the fair value
of our financial instruments resulting from weakening market conditions. For example, we recorded
¥355.8 billion of net losses from marketable equity securities, which reflected unrealized losses, or holding
losses, on marketable equity securities, and ¥0.6 billion of impairment losses on available-for-sale debt securities
and other securities for the fiscal year ended March 31, 2019. As of March 31, 2019, approximately 26.6% of our
total assets were financial instruments for which we measure fair value on a recurring basis, and less than 0.5%
of our total assets were financial instruments for which we measure fair value on a non-recurring basis.
Generally, in order to establish the fair value of these instruments, we rely on quoted prices. If the value of these
financial instruments declines, a corresponding loss or write-down may be recognized in our consolidated
statements of income. In addition, because we hold a large amount of investment securities, short-term
fluctuations in the value of our securities may trigger losses or exit costs for us to manage our risk. For more
information on our valuation method for financial instruments, see “Item 5. Operating and Financial Review and
Prospects—Critical Accounting Estimates.”
8
We may suffer additional credit-related losses in the future if our borrowers are unable to repay their
loans as expected or if the measures we take in reaction to, or in anticipation of, our borrowers’ deteriorating
repayment abilities prove inappropriate or insufficient.
When we lend money or commit to lend money, we incur credit risk, which is the risk of losses if our
borrowers do not repay their loans. We may incur significant credit losses or have to provide for a significant
amount of additional allowance for credit losses if:
‰
‰
‰
large borrowers become insolvent or must be restructured;
domestic or global economic conditions, either generally or in particular industries in which large
borrowers operate, deteriorate;
the value of the collateral we hold, such as real estate or securities, declines; or
‰ we are adversely affected by corporate credibility issues among our borrowers, to an extent that is worse
than anticipated.
As a percentage of total loans, impaired loans, which primarily include nonaccrual loans and troubled debt
restructurings, or TDRs, ranged from 1.04% to 1.45% as of the five most recent fiscal year-ends. As of March 31,
2019, impaired loans were ¥1.21 trillion, representing 1.04% of our total outstanding loans. If the economic
conditions in Japan or other parts of the world, or in particular industries, including the energy and real estate
industries, to which we have significant credit risk exposure, worsen, our problem loans and credit-related
expenses may increase. An increase in problem loans and credit-related expenses would adversely affect our
results of operations, weaken our financial condition and erode our capital base.
We may provide additional loans, equity capital or other forms of support to troubled borrowers in order to
facilitate their restructuring and revitalization efforts. We may also forbear from exercising some or all of our
rights as a creditor against them, and we may forgive loans to them in conjunction with their debt restructurings.
We may take these steps even when such steps might not be warranted from the perspective of our short-term or
narrow economic interests or a technical analysis of our legal rights against those borrowers, in light of other
factors such as our longer-term economic interests, and our commitment to supporting the Japanese economy.
These practices may substantially increase our exposure to troubled borrowers and increase our losses. Credit
losses may also increase if we elect, or are forced by economic or other considerations, to sell or write off our
problem loans at a larger discount, in a larger amount or in a different time or manner, than we may otherwise
want.
Although we, from time to time, enter into credit derivative transactions, including credit default swap
contracts, to manage our credit risk exposure, such transactions may not provide the protection against credit
defaults that we intended due to counterparty defaults or similar issues. The credit default swap contracts could
also result in significant losses. As of March 31, 2019, the total notional amount of the protection we sold
through single name credit default swaps and index and basket credit default swaps was ¥3.15 trillion. In
addition, negative changes in financial market conditions may restrict the availability and liquidity of credit
default swaps. For more information on our credit derivative transactions, see Note 24 to our consolidated
financial statements included elsewhere in this Annual Report.
Our loan losses could prove to be materially different from our estimates and could materially exceed our
current allowance for credit losses, in which case we may need to provide for additional allowance for credit
losses and may also record credit losses beyond our allowance. Our allowance for credit losses in our loan
portfolio is based on evaluations of customers’ creditworthiness and the value of collateral we hold. We recorded
¥34.3 billion of provision for credit losses for the fiscal year ended March 31, 2019. While we closely observe
conditions of our individual borrowers and industry trends, our borrowers may incur financial and non-financial
losses that exceed our estimations depending on, for example, domestic and international economic conditions or
commodity price fluctuations. In such case, we may need to provide for additional allowance for credit losses.
9
Also, the regulatory standards or guidance on establishing allowances may also change, causing us to change
some of the evaluations used in determining the allowances. As a result, we may need to provide for additional
allowance for credit losses.
Our efforts to diversify our portfolio to avoid any concentration of credit risk exposures to particular
industries or counterparties may prove insufficient. For example, our credit exposures to the energy and real
estate industries are relatively high in comparison to other industries. The credit quality of borrowers in this
sector do not necessarily correspond to general economic conditions in Japan or other parts of the world, and
adverse fluctuations in oil and other commodity prices or adverse developments in the real estate market may
disproportionately increase our credit costs.
When we believe there is an improvement in asset quality, we may reverse the allowance for credit losses to
a level management deems appropriate and record the amount of reversal in our consolidated statements of
income. For example, for the fiscal year ended March 31, 2019, we recorded ¥43.9 billion and ¥4.5 billion of
reversal of credit losses for the Commercial and Residential segments, respectively, of our loan portfolio.
However, we have historically recorded provision for credit losses rather than recording reversal of credit losses
in most periods, and in future periods we may need to recognize provision for credit losses for these and other
segments of our loan portfolio.
For more information on our loan portfolio, see “Item 5.B. Operating and Financial Review and Prospects—
Liquidity and Capital Resources—Financial Condition—Loan Portfolio.”
Fluctuations in interest rates could adversely affect the value or the yield of our bond portfolio.
The aggregate carrying amount of the Japanese government and corporate bonds and foreign bonds,
including U.S. Treasury bonds, that we held as of March 31, 2019 was 9.5% of our total assets. In particular, the
Japanese national government and Japanese government agency bonds accounted for 8.2% of our total assets as
of March 31, 2019. For a detailed discussion of our bond portfolio, see “Selected Statistical Data—Investment
Portfolio.”
The Bank of Japan has maintained a “quantitative and qualitative monetary easing with yield curve control”
policy and applied a negative interest rate of minus 0.1% to the “Policy-Rate Balances,” which are a part of
current account amounts held by financial institutions at the Bank of Japan, while purchasing Japanese
government bonds to increase its aggregate holding of such bonds by approximately ¥80 trillion each year with
an aim to keep the yield of 10-year Japanese government bonds around zero percent. If the policy is maintained
in Japan for an extended period, or if the Bank of Japan’s negative interest rate or target long-term interest rate is
lowered from the current level, market interest rates may decline further, and the yield on the Japanese
government bonds and other financial instruments that we hold may also decline. On the other hand, the value of
our investment portfolio may decrease if interest rates increase rapidly or significantly because of heightened
market expectations for tapering or cessation of the current policy in Japan. Separate from the Bank of Japan’s
monetary policies, interest rates could also significantly increase in the event that Japanese government bonds
decline in value due to such factors as a decline in confidence in the Japanese government’s fiscal administration
or further issuances of Japanese government bonds in connection with emergency economic measures or in the
event that interest rates on U.S. Treasury securities rise due to such factors as instability in the U.S. government
bond market, additional issuances of U.S. government bonds, or changes in the monetary policy of the Federal
Reserve Board, or FRB, including an increase in the U.S. policy interest rate. If relevant interest rates increase
for these or other reasons, particularly if such increase is unexpected or sudden, we may incur significant losses
on sales of, and valuation losses on, our bond portfolio. Furthermore, if short-term interest rates rise to a larger
extent than long-term interest rates or long-term interest rates decline to a larger extent than short-term interest
rates in the United States due to the monetary policy of the FRB, concerns over the U.S. economic outlook or
other reason, our interest income may be adversely affected. See “Item 5. Operating and Financial Review and
Prospects—Business Environment.”
10
Fluctuations in foreign currency exchange rates may result in transaction losses on translation of
monetary assets and liabilities denominated in foreign currencies as well as foreign currency translation
losses with respect to our foreign subsidiaries and equity method investees.
Fluctuations in foreign currency exchange rates against the Japanese yen create transaction gains or losses
on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies. To the
extent that our foreign currency-denominated assets and liabilities are not matched in the same currency or
appropriately hedged, we could incur losses due to future foreign exchange rate fluctuations. During the fiscal
year ended March 31, 2019, the average balance of our foreign interest-earning assets was ¥96,128.3 billion and
the average balance of our foreign interest-bearing liabilities was ¥61,443.6 billion, representing 39.8% of our
average total interest-earning assets and 26.2% of our average total interest-bearing liabilities during the same
period. Due to foreign currency exchange rate fluctuations, we may incur losses attributable to net transaction
losses on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies,
net losses on currency derivative instruments entered into for trading purposes, and net losses on translation into
Japanese yen of securities accounted for under the fair value option. In addition, we may incur foreign currency
translation losses with respect to our foreign subsidiaries and equity method investees due to fluctuations in
foreign currency exchange rates. The average exchange rate for the fiscal year ended March 31, 2019 was
¥110.91 per U.S.$1.00, compared to ¥110.85 per U.S.$1.00 for the previous fiscal year. The change in the
average exchange rate of the Japanese yen against the U.S. dollar and other foreign currencies had the effect of
decreasing total revenue by ¥21.6 billion, net interest income by ¥9.3 billion and income before income tax
expense by ¥5.4 billion, respectively, while increasing the fair value of trading account securities accounted for
under the fair value option by ¥186.6 billion, for the fiscal year ended March 31, 2019. The Japanese yen was
¥107.79 to the U.S. dollar on June 28, 2019. For more information on foreign exchange gains and losses and
foreign currency translation gains and losses, see “Item 5. Operating and Financial Review and Prospects—
Business Environment” and “Item 5.A. Operating and Financial Review and Prospects—Operating Results.”
If the Japanese stock market or other global markets decline in the future, we may incur losses on our
securities portfolio and our capital ratios will be adversely affected.
A decline in Japanese stock prices could reduce the value of the Japanese domestic marketable equity
securities that we hold, which accounted for 14.1% of our total investment securities portfolio, and 2.1% of our
total assets, as of March 31, 2019. The Nikkei Stock Average, which is the average of 225 blue chip stocks listed
on the Tokyo Stock Exchange, fluctuated throughout the fiscal year ended March 31, 2019, rising to an intra-day
high of ¥24,448.07 on October 2, 2018, declining to an intra-day low of ¥18,948.58 on December 26, 2018, and
rising again to ¥21,205.81 at the end of trading on March 29, 2019. As of June 28, 2019, the closing price of the
Nikkei Stock Average was ¥21,275.92. The Nikkei Stock Average has increased in recent periods, and may
fluctuate significantly and negatively in future periods, as the global economy remains volatile and investors
continue to observe the changes in economic, monetary and trade policies mainly in Japan, the United States,
China, the Eurozone and Asian countries. In addition, weakening or stagnant economic conditions in these and
other regions may have a significant negative impact on Japanese companies, which in turn will cause their stock
prices to decline. Concerns over the impact of geopolitical tensions and conflicts in various parts of the world on
Japanese companies may also adversely affect stock prices in Japan. In addition, the global trend towards further
reduction in risk assets could result in lower stock prices, and the recent trend in Japan towards strengthening
corporate governance may subject public companies to stricter scrutiny. See “Item 5. Operating and Financial
Review and Prospects—Business Environment” and “Item 5.B. Operating and Financial Review and Prospects—
Liquidity and Capital Resources—Investment Portfolio.”
We may become subject to regulatory actions or other legal proceedings relating to our transactions or
other aspects of our operations, which could result in significant financial losses, restrictions on our
operations and damage to our reputation.
We conduct our business subject to ongoing regulation and associated regulatory and legal risks. Global
financial institutions, including us, currently face heightened regulatory scrutiny as a result of the concerns
11
developing in the global financial sector, and growing public pressure to demand even greater regulatory
surveillance following several high-profile scandals and risk management failures in the financial industry. In the
current regulatory environment, we are subject to various regulatory inquiries or investigations from time to time
in connection with various aspects of our business and operations. In addition, multiple government authorities
with overlapping jurisdiction more frequently conduct investigations and take other regulatory actions in
coordination with one another or separately on the same or related matters.
In November 2014, MUFG Bank entered into a consent agreement with the New York State Department of
Financial Services, or DFS, to resolve issues relating to instructions given to PricewaterhouseCoopers LLP, or
PwC, and the disclosures made to DFS in connection with MUFG Bank’s 2007 and 2008 voluntary investigation
of MUFG Bank’s U.S. dollar clearing activity toward countries under U.S. economic sanctions. MUFG Bank had
hired PwC to conduct a historical transaction review report in connection with that investigation, and voluntarily
submitted the report to DFS’s predecessor entity in 2008. Under the terms of the agreement with DFS, MUFG
Bank made a payment of $315 million to DFS, and agreed to take actions on persons involved in the matter at
that time, relocate its U.S. Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, and Office of Foreign
Assets Control, or OFAC, sanctions compliance programs to New York, and extend, if regarded as necessary by
DFS, the period during which an independent consultant is responsible for assessing MUFG Bank’s internal
controls regarding compliance with applicable laws and regulations related to U.S. economic sanctions. In June
2013, MUFG Bank reached an agreement with DFS regarding inappropriate operational processing of U.S. dollar
clearing transactions with countries subject to OFAC sanctions during the period of 2002 to 2007. Under the
terms of the June 2013 agreement, MUFG Bank made a payment of $250 million to DFS and retained an
independent consultant to conduct a compliance review of the relevant controls and related matters in MUFG
Bank’s current operations. In December 2012, MUFG Bank agreed to make a payment of approximately
$8.6 million to OFAC to settle potential civil liability for apparent violations of certain U.S. sanctions regulations
from 2006 to 2007.
On November 9, 2017, MUFG Bank entered into a Stipulation and Consent to the Issuance of a Consent
Order with the U.S. Office of the Comptroller of the Currency, or OCC, under which MUFG Bank agreed to the
entry by the OCC of a Consent Order that includes remedial terms and conditions that are substantively the same
as those included in the consent agreements that MUFG Bank had reached with DFS in June 2013 and November
2014. This Consent Order, which the OCC executed, enables the OCC to supervise MUFG Bank’s plans to
enhance its internal controls and compliance program relating to OFAC sanctions requirements. The Stipulation
and Consent with the OCC followed MUFG’s conversion of the U.S. Branches and Agencies of MUFG Bank and
Mitsubishi UFJ Trust and Banking, including MUFG Bank’s New York Branch, from state-licensed branches
and agencies under the supervision of state regulatory agencies, including DFS, to federally licensed branches
and agencies under the supervision of the OCC. Although, MUFG Bank was engaged in litigation with DFS with
regard to the conversion of its New York Branch license as well as purported violations of law alleged to have
occurred prior to the federal license conversion, in June 2019, MUFG Bank entered into a settlement with
NYDFS to resolve this litigation and made a settlement payment. In February 2019, MUFG Bank entered into a
Consent Order with the OCC relating to deficiencies identified by the OCC in the Bank Secrecy Act/Anti-Money
Laundering compliance program of MUFG Bank’s U.S. branches in New York, Los Angeles, and Chicago.
MUFG Bank is undertaking necessary actions relating to these matters. See “Item 8.A. Financial Information—
Consolidated Statements and Other Financial Information—Legal Proceedings.”
We have received requests and subpoenas for information from government agencies in some jurisdictions
that are conducting investigations into past submissions made by panel members, including us, to the bodies that
set various interbank benchmark rates as well as investigations into foreign exchange related practices of global
financial institutions. Some of the investigations into foreign exchange related practices resulted in our payment
of monetary penalties to the relevant government agencies. We are cooperating with the ongoing investigations
and have been conducting an internal investigation, among other things. In connection with these matters, we and
other financial institutions are involved as defendants in a number of civil lawsuits, including putative class
actions, in the United States.
12
These developments or other similar matters may result in additional regulatory actions against us or
agreements to make significant additional settlement payments. These developments or other matters to which
we are subject from time to time may also expose us to substantial monetary damages, legal defense costs,
criminal and civil liability, and restrictions on our business operations as well as damage to our reputation. The
outcome of such matters, including the extent of the potential impact of any unfavorable outcome on our
financial results, however, is inherently uncertain and difficult to predict. The extent of financial, human and
other resources required to conduct any investigations or to implement any corrective or preventive measures is
similarly uncertain and could be significant. Such resources may also be difficult for us to secure in a timely
manner.
Legal and regulatory changes could have a negative impact on our business, financial condition and
results of operations.
As a global financial services provider, our business is subject to ongoing changes in laws, regulations,
rules, policies, voluntary codes of practice and interpretations in Japan and other markets where we operate.
Major global financial institutions currently face an increasingly stricter set of laws, regulations and standards as
a result of the concerns enveloping the global financial sector. There is also growing political pressure to demand
even greater internal compliance and risk management systems following several high-profile scandals and risk
management failures in the financial industry. We may not be able to enhance our compliance risk management
systems and programs, which, in some cases, are supported by third-party service providers, in a timely manner
or as planned. Our risk management systems and programs may not be fully effective in preventing all violations
of laws, regulations and rules applicable locally or on a global basis to our subsidiaries, offices and branches.
Our failure or inability to comply fully with applicable laws and regulations could lead to fines, public
reprimands, damage to reputation, civil liability, enforced suspension of operations or, in extreme cases,
withdrawal of authorization to operate, adversely affecting our business and results of operations. Legal or
regulatory compliance failure may also adversely affect our ability to obtain regulatory approvals for future
strategic initiatives. Furthermore, failure to take necessary corrective action, or the discovery of violations of
laws in the process of further review of any of the matters mentioned above or in the process of implementing
any corrective measures, could result in further regulatory action.
We could also be required to incur significant expenses to comply with new or revised regulations. For
example, benchmark rate reforms may result in significant costs for making necessary adjustments to our
financial instruments and related operations and also in significant financial losses relating to instruments using
such rates. If we adopt a new information technology system infrastructure in the future, for instance, we may be
required to incur significant additional costs for establishing and implementing effective internal controls, which
may materially and adversely affect our financial condition and results of operations.
Future developments or changes in laws, regulations, rules, policies, voluntary codes of practice and their
effects are expected to require greater capital, human and technological resources as well as significant
management attention, and may require us to modify our business strategies and plans. For example, we are
subject to new bank regulatory standards that were finalized as part of the reforms to “Basel III: A global
regulatory framework for more resilient banks and banking systems,” or Basel III, in December 2017. These new
standards include a minimum leverage ratio requirement, which became applicable to us in March 2019 and
which is expected to be raised in 2022, as well as revisions to risk measurement approaches, which are expected
to be phased in from 2022. We also became subject to minimum total loss-absorbing capacity, or TLAC,
requirements in March 2019, and the minimum requirements are expected to be raised in 2022. For more
information, see “—Risks Related to Our Business—We may not be able to maintain our capital ratios above
minimum required levels, which could result in the suspension of some or all of our operations.” and “Item 4.B.
Information on the Company—Business Overview—Supervision and Regulation—Japan.”
Furthermore, regulatory reforms recently implemented, proposed and currently being debated in the
United States may also significantly affect our business operations. For example, in July 2016, we established
13
MUFG Americas Holdings as a U.S. intermediate holding company, or IHC, and reorganized our U.S. bank and
non-bank subsidiaries under MUFG Americas Holdings pursuant to rules adopted by the FRB in February 2014.
Under the FRB rules, MUFG Americas Holdings is also subject to U.S. capital requirements, capital stress
testing, liquidity buffer requirements, and other enhanced prudential standards comparable to those applicable to
top-tier U.S. bank holding companies of the same size. In April 2019, the FRB proposed modifications to such
requirements and standards as applied to foreign banking organizations, which could result in stricter
requirements and standards for MUFG Americas Holdings. We are continuing to devote resources and
management attention on establishing an appropriate governance structure with effective internal control systems
for MUFG Americas Holdings designed to ensure compliance with the rules on an on-going basis. See “Item 4.B.
Information on the Company—Business Overview—Supervision and Regulation—United States.”
Any adverse changes in the business of MUFG Americas Holdings Corporation, a wholly owned
subsidiary in the United States, could significantly affect our results of operations.
MUFG Americas Holdings, which is a wholly owned subsidiary in the United States formerly called
UnionBanCal Corporation, or UNBC, and which is our IHC in the United States, has historically contributed to a
significant portion of net income attributable to the Mitsubishi UFJ Financial Group. MUFG Americas Holdings
reported net income of $990 million, $1,077 million and $1,073 million for the fiscal years ended December 31,
2016, 2017 and 2018 respectively. Any adverse developments which could arise at MUFG Americas Holdings
may have a significant negative impact on our results of operations and financial condition. For more
information, see “Item 4.B. Information on the Company—Business Overview—Global Commercial Banking
Business Group—MUFG Union Bank, N.A.”
Factors that have negatively affected, and could continue to negatively affect, MUFG Americas Holdings’
results of operations include difficult economic conditions, such as a downturn in the real estate and housing
industries in the United States, particularly in California, the fiscal challenges being experienced by the U.S.
federal and California state governments, substantial competition in the banking markets in the United States and
uncertainty over the U.S. economy, as well as negative trends in debt ratings and interest rate uncertainties. As
was the case in recent periods, declining oil and gas prices could adversely affect the credit conditions of
borrowers in the energy sector and related industries, resulting in an increase in credit costs. In addition, since the
financial crisis in 2008 and 2009, the U.S. banking industry has operated in an extremely low interest rate
environment as a result of the highly accommodative monetary policy of the FRB, which has placed downward
pressure on the net interest margins of U.S. banks, including MUFG Americas Holdings. Although the FRB
gradually raised its policy interest rate between December 2015 and December 2018, interest rates have remained
at relatively low levels in the United States. Sudden fluctuations in interest rates may also negatively affect
MUFG Americas Holdings’ results of operations.
Significant costs may arise from enterprise-wide compliance and risk management requirements under, or
failure to comply with, applicable laws and regulations, such as the U.S. Bank Secrecy Act and related
amendments under the USA PATRIOT Act, and any adverse impact of the implementation of the Dodd-Frank
Act. In addition, the FRB and other U.S. bank regulators have adopted rules to implement the Basel III global
regulatory framework for U.S. banks and bank holding companies which require higher quality of capital, as well
as significantly revise the calculations for risk-weighted assets. The FRB has also adopted rules to implement
various enhanced prudential standards required by the Dodd-Frank Act for larger U.S. bank holding companies,
such as MUFG Americas Holdings. These standards require the larger bank holding companies to meet enhanced
capital, liquidity and leverage standards. Further, the FRB has adopted regulations applicable to foreign banking
organizations operating in the United States, which require MUFG’s and MUFG Bank’s U.S. operations to be
restructured and, subject to certain exceptions, conducted under a single U.S. IHC, with its own capital and
liquidity requirements. Actions management may take in response to these regulatory changes may involve the
issuance of additional capital or other measures. For more information, see “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—United States.”
14
MUFG Union Bank, which is the principal subsidiary of MUFG Americas Holdings, and reportedly other
financial institutions have been the targets of various denial-of-service or other cyber-attacks as part of what
appears to be a coordinated effort to disrupt the operations of financial institutions and potentially test their
cybersecurity in advance of future and more advanced cyber-attacks. These denial-of-service attacks may require
substantial resources to defend against and affect customer satisfaction and behavior. Moreover, MUFG Union
Bank’s information security measures may not be sufficient to defend against cyber-attacks and other
information security breaches, in which case the consequences could be significant in terms of financial,
reputational and other losses. In addition, there have been increasing efforts to breach data security at financial
institutions as well as other types of companies, such as large retailers, or with respect to financial transactions,
including through the use of social engineering schemes such as “phishing.” Even if cyber-attacks and similar
tactics are not directed specifically at MUFG Union Bank, such attacks on other large institutions could disrupt
the overall functioning of the U.S. or global financial system and undermine consumer confidence in banks
generally to the detriment of other financial institutions, including MUFG Union Bank.
Any adverse changes in the business of Bank of Ayudhya, an indirect subsidiary in Thailand, or Bank
Danamon, an indirect subsidiary in Indonesia, could significantly affect our results of operations.
Any adverse changes in the business or management of Bank of Ayudhya Public Company Limited, or
Krungsri, a strategic subsidiary in Thailand in which we hold a 76.88% ownership interest as of March 31, 2019,
or PT Bank Danamon Indonesia, Tbk, or Bank Danamon, a strategic subsidiary in Indonesia in which we hold a
94.1% ownership interest as of May 1, 2019, may negatively affect our financial condition and results of
operations. Factors that may negatively affect the financial condition and results of operations of these
subsidiaries include:
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adverse economic conditions, substantial competition in the banking industry, volatile political and
social conditions, natural disasters including floods, terrorism and armed conflicts, restrictions under
applicable financial systems and regulations, or significant fluctuations in interest rates, foreign
currency exchange rates, stock prices or commodity prices, in Southeast Asia, particularly in their
respective home markets;
the business performance of companies making investments in and entering into markets in the
Southeast Asian region, as well as the condition of economies, financial systems, laws and financial
markets in the countries where such companies primarily operate;
losses from legal proceedings involving them;
credit rating downgrades and declines in stock prices of their borrowers, and bankruptcies of their
borrowers resulting from such factors;
defaults on their loans to individuals; and
costs incurred due to weaknesses in their internal controls and regulatory compliance systems or any of
their subsidiaries.
As of March 31, 2019, the balance of goodwill associated with the acquisition of Krungsri, including
Krungsri’s acquisition of Hattha Kaksekar Limited, a microfinance institution in Cambodia, in September 2016,
was ¥59.0 billion. In May 2019, we completed a series of transactions to increase our ownership interest in Bank
Danamon to 94.1%, as a result of which Bank Danamon became our consolidated subsidiary. If the business of
Krungsri or Bank Danamon deteriorates, we may be required to record impairment losses, which could have a
material adverse effect on our results of operations and financial condition. See “—Risks Related to Our
Business—If the goodwill recorded in connection with our acquisitions becomes impaired, we may be required
to record impairment losses, which may adversely affect our financial results.”
15
Our strategy to expand the range of our financial products and services and the geographic scope of our
business globally may fail if we are unable to anticipate or manage new or expanded risks that entail such
expansion.
We continue to seek opportunities to expand the range of our products and services beyond our traditional
banking, trust, and securities businesses, through development and introduction of new products and services or
through acquisitions of or investments in financial institutions with products and services that complement our
business. For example, we continue to seek opportunities to expand our business outside of Japan. In addition,
the sophistication of financial products and services and management systems has been growing significantly in
recent years. As a result, we are exposed to new and increasingly complex risks, while market and regulatory
expectations that we manage these risks properly continue to rise. Some of the activities that our subsidiaries are
expected to engage in, such as credit extension to less conventional assets and operations as well as derivatives
and foreign currency trading, present substantial risks. In some cases, we have only limited experience with the
risks related to the expanded range of these products and services. In addition, we may not be able to successfully
develop or operate the necessary information technology systems. As a result, we may not be able to foresee the
risks relating to new products and services.
As we expand the geographic scope of our business, we will also be exposed to risks that are unique to
particular jurisdictions or markets. For example, in an effort to further develop our operations in Asia, MUFG
Bank purchased 72.01% of the outstanding shares of Krungsri in December 2013 and acquired additional shares
in January 2015, increasing MUFG Bank’s ownership interest to 76.88%. MUFG Bank has also held an
approximately 20% equity interest in Vietnam Joint Stock Commercial Bank of Industry and Trade since
December 2012 and a 20.0% equity interest in Security Bank Corporation in the Philippines since April 2016. In
addition, MUFG Bank acquired 19.9% of the shares of common stock of PT Bank Danamon Indonesia, Tbk in
December 2017 and increased its shareholding in the bank to 94.1% in May 2019. As we seek to enter new
markets or jurisdictions, we often seek to collaborate with a local business partner by becoming a shareholder as
well as providing management expertise for the local market. In such circumstances, the local business partner
may have business interests that are inconsistent with our interests and, as a result, we may be unable to achieve
the goals initially set out in our strategy for that market. In addition, we may be unable to staff our newly
expanded operations with qualified individuals familiar with local legal and regulatory requirements and business
practices, exposing us to legal, regulatory, operational and other risks.
Our risk management systems may prove to be inadequate and may not work in all cases or to the degree
required locally and globally for all of our subsidiaries, offices and branches. The increasing market, credit,
compliance and regulatory risks in relation to the expanding scope of our products, services and trading activities
or expanding our business beyond our traditional markets, could result in us incurring substantial losses. In
addition, our efforts to offer new products and services or penetrate new markets may not succeed if product or
market opportunities develop more slowly than expected, if our new products and services are not well accepted
among customers, if the profitability of opportunities is undermined by competitive pressures or regulatory
limitations, or if our planned acquisitions, investments or capital alliances are not approved by regulators. For
more information on our recent acquisition and investment transactions, see “Item 5. Operating and Financial
Review and Prospects—Recent Developments.”
Unanticipated economic changes in, and measures taken in response to such changes by, emerging
market countries could result in additional losses.
We are increasingly active, through a network of branches and subsidiaries, in emerging market countries,
particularly countries in Asia, Latin America, Central and Eastern Europe, and the Middle East. For example,
based primarily on the domicile of the obligors, our assets in Europe, Asia and Oceania excluding Japan, and
other areas excluding Japan and the United States, were ¥21,535.3 billion, ¥27,993.0 billion and
¥11,642.7 billion, representing 7.1%, 9.2% and 3.8% of our total assets as of March 31, 2019, respectively. The
economies of emerging market countries can be volatile and susceptible to adverse changes and trends in the
16
global financial markets. For example, a decline in the value of local currencies of these countries could
negatively affect the creditworthiness of some of our borrowers in these countries. The loans we have made to
borrowers and banks in these countries are often denominated in U.S. dollars, euro or other foreign currencies.
These borrowers often do not hedge the loans to protect against fluctuations in the values of local currencies. A
devaluation of the local currency would make it more difficult for a borrower earning income in that currency to
pay its debts to us and other foreign lenders. In addition, some countries in which we operate may attempt to
support the value of their currencies by raising domestic interest rates. If this happens, the borrowers in these
countries would have to devote more of their resources to repaying their domestic obligations, which may
adversely affect their ability to repay their debts to us and other foreign lenders. The limited credit availability
resulting from these conditions may adversely affect economic conditions in some countries. This could cause a
further deterioration of the credit quality of borrowers and banks in those countries and cause us to incur further
losses. In addition, should there be excessively rapid economic growth and increasing inflationary pressure in
some of the emerging market countries, such developments could adversely affect the wider regional and global
economies. Some emerging market countries may also change their monetary or other economic policies in
response to economic and political instabilities or pressures, which are difficult to predict. See
“Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial
Condition.”
If our strategic alliance with Morgan Stanley fails, we could suffer financial or reputational loss.
We have a global strategic alliance with Morgan Stanley, under which we operate two joint venture
securities companies in Japan, engage in joint corporate finance operations in the United States and pursue other
cooperative opportunities. We hold approximately 24.0% of the voting rights in Morgan Stanley as of March 31,
2019 and continue to hold approximately $521.4 million of perpetual non-cumulative non-convertible preferred
stock with a 10% dividend. In addition, we currently have two representatives on Morgan Stanley’s board of
directors.
We initially entered into this strategic alliance in October 2008 with a view towards long-term cooperation
with Morgan Stanley, and currently plan to deepen the strategic alliance. However, due to any unexpected
changes in social, economic or financial conditions, changes in the regulatory environment, or any failure to
integrate or share staff, products or services, or to operate, manage or implement the business strategy of the
securities joint venture companies or other cooperative opportunities as planned, we may be unable to achieve
the expected synergies from this alliance.
If our strategic alliance with Morgan Stanley is terminated, it could have a material negative impact on our
business strategy, financial condition, and results of operations. For example, because we conduct our securities
operations in Japan through the joint venture companies we have with Morgan Stanley, such termination may
result in our inability to attain the planned growth in this line of business.
In addition, with our current investment in Morgan Stanley, we have neither a controlling interest in, nor
control over the business operations of Morgan Stanley. If Morgan Stanley makes any business decisions that are
inconsistent with our interests, we may be unable to achieve the goals initially set out for the strategic alliance.
Furthermore, although we do not control Morgan Stanley, given the magnitude of our investment, if Morgan
Stanley encounters financial or other business difficulties due to adverse changes in the economy, regulatory
environment or other factors, we may suffer a financial loss on our investment or damage to our reputation. For
example, we recorded an impairment loss of ¥579.5 billion on our investment in Morgan Stanley’s common
stock for the fiscal year ended March 31, 2012.
We apply equity method accounting to our investment in Morgan Stanley in our consolidated financial
statements. As a result, Morgan Stanley’s performance affects our results of operations, and Morgan Stanley has
contributed to a significant portion of our net income in recent periods. Rule 3-09 of Regulation S-X requires
Morgan Stanley’s financial statements to be included in this Annual Report. In addition fluctuations in Morgan
17
Stanley’s stock price or in our equity ownership interest in Morgan Stanley may cause us to recognize additional
losses on our investment in Morgan Stanley.
We may incur further losses as a result of financial difficulties relating to other financial institutions,
both directly and through the effect they may have on the overall banking environment and on their
borrowers.
Declining asset quality, capital adequacy and other financial problems of domestic and foreign financial
institutions, including banks, non-bank lending and credit institutions, securities companies and insurance
companies, may lead to severe liquidity and solvency problems, which have in the past resulted in the
liquidation, government control or restructuring of affected institutions. In addition, allegations or governmental
prosecution of improper trading activities or inappropriate business conduct of a specific financial institution
could also negatively affect the public perception of other global financial institutions individually and the global
financial industry as a whole. These developments may adversely affect our financial results.
Financial difficulties relating to financial institutions could adversely affect us because we have extended
loans, some of which may need to be classified as impaired loans, to banks, securities companies, insurance
companies and other financial institutions that are not our consolidated subsidiaries. Our loans to banks and other
financial institutions have been more than 10% of our total loans as of each year-end in the three fiscal years
ended March 31, 2019, with the percentage being 14.4% as of March 31, 2019. We may also be adversely
affected because we are a shareholder of some other banks and financial institutions that are not our consolidated
subsidiaries, including our shareholdings in Japanese regional banks and our 24.0% voting interest in Morgan
Stanley as of March 31, 2019. If some of the financial institutions to which we have exposure experience
financial difficulties, we may need to provide financial support to them even when such support might not be
warranted from the perspective of our narrow economic interests because such institutions may be systemically
important to the Japanese or global financial system.
We may also be adversely affected because we enter into transactions, such as derivative transactions, in the
ordinary course of business, with other banks and financial institutions as counterparties. For example, we enter
into credit derivatives with banks, broker-dealers, insurance companies and other financial institutions for
managing credit risk exposures, for facilitating client transactions, and for proprietary trading purposes. The
notional amount of the protection we sold through these instruments was ¥3.22 trillion as of March 31, 2019.
In addition, financial difficulties relating to financial institutions could indirectly have an adverse effect on
us because:
‰ we may be requested to participate in providing assistance to support distressed financial institutions
that are not our consolidated subsidiaries;
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the government may elect to provide regulatory, tax, funding or other benefits to those financial
institutions to strengthen their capital, facilitate their sale or otherwise, which in turn may increase their
competitiveness against us;
deposit insurance premiums could rise if deposit insurance funds prove to be inadequate;
bankruptcies or government support or control of financial institutions could generally undermine
confidence in financial institutions or adversely affect the overall banking environment;
failures or financial difficulties experienced by other financial institutions could result in additional
regulations or requirements that increase the cost of business for us; and
negative media coverage of the financial industry, regardless of its accuracy and applicability to us,
could affect customer or investor sentiment, harm our reputation and have a materially adverse effect on
our business or the price of our securities.
18
Because of our loans to consumers and our shareholdings in companies engaged in consumer lending,
changes in the business or regulatory environment for consumer finance companies in Japan may further
adversely affect our financial results.
We have a large loan portfolio in the consumer lending industry as well as large shareholdings in
subsidiaries and equity method investees in the consumer finance industry. Our domestic loans to consumers
amount to approximately one-seventh of our total outstanding loans. Of this amount, the consumer loans
provided by Mitsubishi UFJ NICOS, Co., Ltd., which is our primary consumer financing subsidiary, were
¥578.5 billion as of March 31, 2019, compared to ¥589.8 billion as of March 31, 2018.
Mitsubishi UFJ NICOS’s consumer loan portfolio has been adversely affected by a series of regulatory
reforms that were introduced in Japan between 2006 and 2010, which have negatively affected the domestic
consumer lending industry. In December 2006, the Japanese Diet passed legislation to reform the regulations
relating to the consumer lending business, including amendments to the Act Regulating the Receipt of
Contributions, the Receipt of Deposits, and Interest Rates, which, effective June 18, 2010, reduced the maximum
permissible interest rate from 29.2% per annum to 20% per annum. The regulatory reforms also included
amendments to the Money Lending Business Act, which, effective June 18, 2010, abolished the so-called “gray-
zone interest.” Gray-zone interest refers to interest rates exceeding the limits stipulated by the Interest Rate
Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal). Prior to
June 18, 2010, gray-zone interest was permitted under certain conditions set forth in the Money Lending
Business Act. As a result of the regulatory reforms, all interest rates are now subject to the lower limits imposed
by the Interest Rate Restriction Act, compelling lending institutions, including our consumer finance subsidiaries
and equity method investees, to lower the interest rates they charge borrowers. The regulations that became
effective on June 18, 2010 also have had a further negative impact on the business of consumer finance
companies as one of the new regulations requires, among other things, consumer finance companies to limit their
lending to a single customer to a maximum of one third of the customer’s annual income regardless of the
customer’s repayment capability, significantly affecting consumer financing companies.
The regulations and regulatory reforms affecting the consumer finance business were one of the main
factors that contributed to the decrease in interest income attributable to our consumer finance business. Our
interest income attributable to the consumer finance business was approximately ¥190 billion and ¥160 billion
for the fiscal years ended March 31, 2009 and 2010, respectively. However, following the regulatory changes in
June 2010, our interest income attributable to the consumer finance business substantially decreased. For the
fiscal year ended March 31, 2019, our interest income attributable to the consumer finance business was
approximately ¥90 billion.
In addition, as a result of decisions by the Supreme Court of Japan prior to June 18, 2010 imposing stringent
requirements under the Money Lending Business Act for charging gray-zone interest rates, consumer finance
companies have experienced a significant increase in borrowers’ claims for reimbursement of previously
collected interest payments in excess of the limits stipulated by the Interest Rate Restriction Act.
Following the various legal developments in June 2010 and other industry developments, Mitsubishi UFJ
NICOS revised its estimate of allowance for repayment of excess interest by updating management’s future
forecast to reflect new reimbursement claims information and other data. As of March 31, 2017, 2018 and 2019,
we had ¥39.4 billion, ¥23.7 billion and ¥25.0 billion of allowance for repayment of excess interest, respectively.
In recent periods, one of our equity method investees engaged in consumer lending, ACOM CO., LTD., had a
negative impact on net equity in losses of equity method investees in our consolidated statements of income. For
example, ACOM had a negative impact of ¥15.6 billion for the fiscal years ended March 31, 2019. We intend to
carefully monitor future developments and trends.
These developments have adversely affected, and these and any future developments may further adversely
affect, the operations and financial condition of our subsidiaries, equity method investees and borrowers which
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are engaged in consumer lending, which in turn may affect the value of our related shareholdings and loan
portfolio.
Our business may be adversely affected by competitive pressures, which have partly increased due to
regulatory changes and recent market changes in the financial industry domestically and globally.
In recent years, the Japanese financial system has been undergoing significant changes and regulatory
barriers to competition have been reduced. Development of new technologies such as artificial intelligence, or
AI, and blockchain has also allowed non-financial institutions to enter the financial services industry with
alternative services such as electronic settlement services, and these new entrants could become substantial
competition to us. We may be at a competitive disadvantage if we are unable to build a business infrastructure for
new services through digitalization or otherwise as planned. In addition, mergers and restructuring in the
financial sector in Japan may adversely affect our competitive position. Partly to deal with these developments,
as part of our strategy to realign the functions of our subsidiaries, we transferred Mitsubishi UFJ Trust and
Banking’s corporate and other loan-related business to MUFG Bank in April 2018. Our competitive position in
the corporate loan-related market may weaken if we are unable to realize the expected benefits of this and other
realignment measures.
In the overseas markets, development of new technologies such as AI and blockchain has also allowed
non-financial institutions to enter the financial services industry, and such new entrants could become substantial
competition to us. Competition may further increase as U.S. and European financial institutions have recently
been regaining and enhancing their competitive strength. We also face intensifying competition in areas of our
strategic expansion. For example, the Japanese mega banks, including us, and other major international banks
have been expanding their operations in the Asian market, where leading local banks have recently been growing
and increasing their presence. In addition, there has been significant consolidation and convergence among
financial institutions domestically and globally, and this trend may continue in the future and further increase
competition in the market. A number of large commercial banks and other broad-based financial services firms
have merged or formed strategic alliances with, or have acquired, other financial institutions both in Japan and
overseas. As a result of the strategic alliance and the joint venture companies that we formed with Morgan
Stanley, we may be perceived as a competitor by some of the financial institutions with which we had a more
cooperative relationship in the past. If we are unable to compete effectively in this more competitive and
deregulated business environment, our business, results of operations and financial condition will be adversely
affected. For a more detailed discussion of our competition in Japan, see “Item 4.B. Information on the
Company—Business Overview—Competition.”
Future changes in accounting standards or methods could have a negative impact on our business and
results of operations.
Future developments or changes in accounting standards are unpredictable and beyond our control. For
example, in response to the recent instabilities in global financial markets, several international organizations
which set accounting standards have released proposals to revise standards on accounting for financial
instruments. Accounting standards applicable to financial instruments remain subject to debate and revision by
international organizations which set accounting standards. If the current accounting standards change in the
future, the reported values of some of our financial instruments may need to be modified, and such modification
could have a significant impact on our financial results or financial condition. In addition, the bodies that
interpret the accounting standards may change their interpretations, or we may elect to modify our accounting
methods to improve our financial reporting, and such change or modification may also have a significant impact
on our financial results or financial condition. For more information, see “Item 5. Operating and Financial
Review and Prospects—Critical Accounting Estimates.”
We could also be required to incur significant expenses to comply with new accounting standards and
regulations. For example, if we adopt a new accounting system in the future, we may be required to incur
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significant additional costs for establishing and implementing effective internal controls, which may materially
and adversely affect our financial condition and results of operations.
Transactions with counterparties in countries designated by the U.S. Department of State as state
sponsors of terrorism may lead some potential customers and investors in the United States and other
countries to avoid doing business with us or investing in our shares.
We, through our subsidiaries, engage in limited business activities with entities in or affiliated with Iran,
including transactions with counterparties owned or controlled by the Iranian government, and our commercial
banking subsidiary has a representative office in Iran for information gathering purposes only. The U.S.
Department of State has designated Iran and other countries as “state sponsors of terrorism,” and U.S. law
generally prohibits U.S. persons from doing business with such countries. We currently have limited business
activities conducted with entities in or affiliated with such countries. Such business activities are conducted in
accordance with our policies and procedures designed to ensure compliance with regulations applicable in the
jurisdictions in which we operate and with exemptions and general licenses available under U.S. law.
We have transactions with counterparties in or affiliated with countries designated as state sponsors of
terrorism which consist of receiving deposits or holding assets on behalf of individuals residing in Japan who are
citizens of countries designated as state sponsors of terrorism, processing payments to or from entities in or
affiliated with these countries on behalf of our customers, and issuing letters of credit and guarantees in
connection with transactions with entities in or affiliated with such countries by our customers. These
transactions do not have a material impact on our business or financial condition. For a further discussion of
transactions required to be disclosed under the U.S. Iran Threat Reduction and Syria Human Rights Act of 2012,
see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—
United States—Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934.”
We are aware of initiatives by U.S. governmental entities and non-government entities, including
institutional investors such as pension funds, to adopt or consider adopting laws, regulations or policies
prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran and
other countries identified as state sponsors of terrorism. It is possible that such initiatives may result in our being
unable to gain or retain entities subject to such prohibitions as customers, counter-parties or investors in our
shares. In addition, depending on socio-political developments, our reputation may suffer due to our transactions
with counterparties in or affiliated with these countries. The above circumstances could have an adverse effect on
our business and financial condition.
Global financial institutions, including us, have become subject to an increasingly complex set of sanctions
laws and regulations in recent years, and this regulatory environment is expected to continue. Moreover, the
measures proposed or adopted vary across the major jurisdictions, increasing the cost and resources necessary to
design and implement an appropriate global compliance program. The U.S. federal government and some state
governments in the United States have enacted legislation designed to limit economic and financial transactions
with Iran by limiting the ability of financial institutions that may have engaged in any one of a broad range of
activities related to Iran to conduct various transactions in the relevant jurisdictions. In addition, in May 2018, the
United States withdrew from participation in the Joint Comprehensive Plan of Action. Under subsequently issued
executive orders, the United States may impose secondary sanctions against non-U.S. persons who engage in or
facilitate a broad range of transactions and activities involving Iran. The Japanese government has also
implemented a series of measures under the Foreign Exchange and Foreign Trade Act, such as freezing the assets
of persons involved in Iran’s sensitive nuclear activities and development of nuclear weapon delivery systems,
and our most recently modified policies and procedures take into account the current Japanese regulatory
requirements. We continue to implement measures to enhance our policies and procedures to comply with such
legislative and regulatory requirements. There remains a risk of potential regulatory action against us, however, if
regulators perceive the modified policies and procedures not to be in compliance with applicable legislation and
regulations.
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We may not be able to maintain our capital ratios and other regulatory ratios above minimum required
levels, which could result in various regulatory actions, including the suspension of some or all of our
operations.
We, as a holding company, and our Japanese banking subsidiaries are required to maintain risk-weighted
capital ratios and leverage ratios above the levels specified in the guidelines adopted by the FSA to implement
the Basel III framework. As of March 31, 2019, our total risk-adjusted capital ratio was 16.03% compared to the
minimum risk-adjusted capital ratio required of 12.04%, our Tier 1 capital ratio was 13.90% compared to the
minimum Tier 1 capital ratio required of 10.04%, and our Common Equity Tier 1 capital ratio was 12.23%
compared to the minimum Common Equity Tier 1 capital ratio required of 8.54%, each including a capital
conservation buffer of 2.50%, a G-SIB surcharge of 1.50% and a countercyclical buffer of 0.04%. As of the same
date, our leverage ratio was 4.94% compared to the minimum leverage ratio required of 3.00%. Our capital and
leverage ratios are calculated in accordance with Japanese banking regulations based on information derived
from our financial statements prepared in accordance with Japanese GAAP.
The Financial Stability Board has identified us as one of G-SIBs. The banks that are included in the list of
G-SIBs are subject to a capital surcharge to varying degrees depending on the bucket to which each bank is
allocated. As the list of G-SIBs is expected to be updated annually, we may be required to meet stricter capital
ratio requirements.
In December 2017, the Basel Committee on Banking Supervision released the finalized Basel III reforms,
which are designed, among other things, to improve various risk measurement approaches and add a leverage
ratio surcharge for G-SIBs, including us. The finalized risk measurement requirements will be phased in from
2022 and the leverage ratio surcharge will become applicable in 2022.
If our or our Japanese banking subsidiaries’ capital ratios or leverage ratios fall below the required levels,
including various capital buffers, the FSA may require us to take a variety of corrective actions, including
abstention from making capital distributions and suspension of all or a part of our business operations.
In addition, some of our banking subsidiaries are subject to the local capital adequacy ratio and other
regulatory ratio requirements of various foreign countries, including the United States, and if their ratios fall
below the required levels, the local regulators will require them to take a variety of corrective actions.
Factors that will affect our and our bank subsidiaries’ capital ratios or leverage ratios include:
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fluctuations in our or our banking subsidiaries’ portfolios due to deterioration in the creditworthiness of
borrowers and the issuers of equity and debt securities;
difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to
raise capital under terms and conditions similar to prior financings or issuances;
declines in the value of our or our banking subsidiaries’ securities portfolios;
adverse changes in foreign currency exchange rates;
adverse revisions to the capital ratio and other regulatory ratio requirements;
reductions in the value of our or our banking subsidiaries’ deferred tax assets; and
other adverse developments.
Under the FSA guidelines discussed above, there is a transitional measure relating to the inclusion as a
capital item of capital raising instruments issued in or prior to March 2013, and such instruments qualify, and can
be included, as a capital item when calculating capital ratios to the extent permitted by the transitional measure.
Such capital raising instruments may require refinancing upon the expiration of the transition period during
which such instruments can qualify, and can be included, as a capital item in the calculation of capital ratios.
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However, in order for newly issued capital raising instruments, other than common stock, to be included as a
capital item in the calculation of capital ratios under the current FSA guidelines, such instruments must, among
other things, have a clause in their terms and conditions that requires them to be written off or converted into
common stock upon the occurrence of certain events, including when the issuing financial institution is deemed
non-viable or when the issuing financial institution’s capital ratios decline below prescribed levels. As a result,
under certain market conditions, we may be unable to refinance or issue capital raising instruments under terms
and conditions similar to those of capital raising instruments issued in or prior to March 2013. If such
circumstances arise, our and our banking subsidiaries’ capital could be reduced, and our and our bank
subsidiaries’ capital ratios and leverage ratios could decrease.
In March 2019, we became subject to the FSA’s new regulations requiring G-SIBs in Japan to maintain
certain minimum levels of capital and liabilities that are deemed to have loss-absorbing and recapitalization
capacity, or External TLAC, and allocate a certain minimum level of External TLAC to any material subsidiary
within their respective groups of companies, or Internal TLAC. As of March 31, 2019, we maintained 18.16% of
External TLAC on a risk-weighted assets basis compared to the required minimum ratio of 16.00% and 7.90% of
External TLAC on a leverage exposure basis compared to the required minimum ratio of 6.00%. The applicable
minimum ratio requirements are expected to be raised to 18.00% on a risk-weighted assets basis and 6.75% on a
leverage exposure basis on March 31, 2022. Within the MUFG Group, MUFG Bank, Mitsubishi UFJ Trust and
Banking, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. and MUFG Americas Holdings are designated as
our material subsidiaries. We may become subject to various regulatory actions, including restrictions on capital
distributions, if we are unable to maintain our External TLAC ratios or the amount of Internal TLAC allocated to
any of our material subsidiaries in Japan above the minimum levels required by the standards imposed by the
FSA. Our External TLAC ratios and the amount of our Internal TLAC are affected by various factors that affect
our capital ratios and leverage ratios described above. Although we plan to issue TLAC-qualified debt in an
effort to meet the minimum required levels of External TLAC ratios and Internal TLAC amounts, we may fail to
do so if we are unable to issue or refinance TLAC-qualified debt as planned.
For a discussion of the applicable regulatory guidelines and our capital ratios, see “Item 4.B. Information on
the Company—Business Overview—Supervision and Regulation” and “Item 5.B. Operating and Financial
Review and Prospects—Liquidity and Capital Resources—Capital Adequacy.”
If the goodwill recorded in connection with our acquisitions becomes impaired, we may be required to
record impairment losses, which may adversely affect our financial results.
In accordance with U.S. GAAP, we account for our business combinations using the acquisition method of
accounting. We recorded the excess of the purchase price over the fair value of the assets and liabilities of the
acquired companies as goodwill. U.S. GAAP requires us to test goodwill for impairment at least annually, or
more frequently if events or changes in circumstances indicate that goodwill may be impaired. As of March 31,
2019, the total balance of goodwill was ¥433.9 billion. As we expand our business through acquisitions and
investments, we may record additional goodwill in connection with such acquisitions and investments, which
may subsequently be impaired.
For the fiscal years ended March 31, 2016 and 2017, we recognized ¥4.3 billion and ¥6.6 billion,
respectively, in impairment of goodwill relating to a reporting unit within the Trust Assets Business Group
segment as we readjusted our future cash flow projection of the reporting unit in this segment, considering the
relevant subsidiaries’ recent business performance. For the fiscal year ended March 31, 2016, we also recognized
¥151.7 billion in impairment of goodwill relating to the reporting unit other than MUFG Americas Holdings and
Krungsri within the Global Business Group segment as our stock price decreased from ¥743.7 on March 31, 2015
to ¥521.5 on March 31, 2016. Our stock price was adversely impacted by the Bank of Japan’s announcement of
implementation in January 2016 of the negative interest rate on certain current account amounts that financial
institutions hold at the Bank of Japan, and the appreciation of the Japanese yen against other major currencies. In
addition, we recognized ¥177.8 billion in impairment of goodwill relating to the Krungsri reporting unit within
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the Global Business Group segment as Krungsri’s stock price declined from THB44.75 on December 31, 2014 to
THB29.75 on December 31, 2015. Krungsri’s stock price was adversely impacted by the slowing economic
growth in Thailand. Accordingly, the fair values of these reporting units were considered to have fallen below
their carrying amounts. As a result, the carrying amounts of the reporting units’ goodwill exceeded the implied
fair values of the reporting units’ goodwill, and the impairment losses were recognized on the related goodwill.
See “Item 5.B. Operating and Financial Review and Prospects—Operating Results—Impairment of goodwill.”
We may be required to record additional impairment losses relating to goodwill in future periods if the fair
value of any of our reporting units declines below the fair value of related assets net of liabilities. Any additional
impairment losses will negatively affect our financial results, and the price of our securities could be adversely
affected. For a detailed discussion of our periodic testing of goodwill for impairment and the goodwill recorded,
see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates—Accounting for
Goodwill and Intangible Assets.”
A downgrade of our credit ratings could adversely affect our ability to access and maintain liquidity.
Any downgrade of the credit ratings assigned to us or our debt securities by Moody’s, Fitch, Standard &
Poor’s or any other credit rating agency could increase the cost, or decrease the availability, of our funding,
particularly in U.S. dollars and other foreign currencies, adversely affect our liquidity position or net interest
margin, trigger additional collateral or funding obligations, and result in losses of depositors, investors and
counterparties willing or permitted to transact with us, thereby reducing our ability to generate income and
weakening our financial position.
Rating agencies regularly evaluate us and our major subsidiaries as well as our and their respective debt
securities. Their ratings are based on a number of factors, including their assessment of the relative financial
strength of MUFG or of the relevant subsidiary, as well as conditions generally affecting the financial services
industry in Japan or on a global basis, some of which are not entirely within our control. As a result of changes in
their evaluation of these factors or in their rating methodologies, rating agencies may downgrade our ratings or
our subsidiaries’ ratings.
In November 2017, Standard and Poor’s downgraded the long-term credit ratings of MUFG and Mitsubishi
UFJ Securities Holdings by one-notch from A to A-, the long-term credit ratings of MUFG Bank and Mitsubishi
UFJ Trust and Banking by one-notch from A+ to A, and the short-term credit rating of Mitsubishi UFJ Securities
Holdings by one-notch from A-1 to A-2.
Assuming all of the relevant credit rating agencies downgraded the credit ratings of MUFG, MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings by one-notch on March 31, 2019, we
estimate that MUFG and its three main subsidiaries would have been required to provide additional collateral
under their derivative contracts as of the same date of approximately ¥25.5 billion. Assuming a two-notch
downgrade by all of the relevant credit rating agencies occurred on the same date, we estimate that the additional
collateral requirements for MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ
Securities Holdings under their derivative contracts as of the same date would have been approximately
¥51.1 billion. For additional information on the impact of recent downgrades, see “Item 5.B. Operating and
Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Sources of Funding
and Liquidity.”
Our business operations are exposed to risks of natural disasters, terrorism and other disruptions caused
by external events.
As a major financial institution incorporated in Japan and operating in major international financial markets,
our business operations, automatic teller machines, or ATMs, and other information technology systems,
personnel, and facilities and other physical assets are subject to the risks of earthquakes, typhoons, floods and
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other natural disasters, terrorism, and other political and social conflicts, abduction, health epidemics, and other
disruptions caused by external events, which are beyond our control. As a consequence of such external events,
we may be required to incur significant costs and expenses for remedial measures or compensation to customers
or transaction counterparties for resulting losses. We may suffer loss of facility, human and other resources. We
may also suffer loss of business. In addition, such external events may have various other significant adverse
effects, including deterioration in economic conditions, declines in the business performance of our borrowers
and decreases in stock prices, which may result in higher credit costs or impairment or valuation losses on the
financial instruments we hold. These effects could materially and adversely affect our business, operating results
and financial condition.
As with other Japanese companies, we are exposed to heightened risks of large-scale natural disasters,
particularly earthquakes. In particular, a large-scale earthquake occurring in the Tokyo metropolitan area could
result in market disruptions or significant damage to, or losses of, tangible or human assets relating to our
business and counterparties because many of our important business functions and many of the major Japanese
companies and financial markets are located in the area. In addition, such an earthquake could cause a longer-
term economic slowdown and a downgrade of Japan’s sovereign credit rating due to increases in government
spending for disaster recovery measures.
Our risk management policies and procedures may be insufficient to address the consequences of these
external events, resulting in our inability to continue to operate a part or the whole of our business. In addition,
our redundancy and backup measures may not be sufficient to avoid a material disruption in our operations, and
our contingency and business continuity plans may not address all eventualities that may occur in the event of a
material disruption caused by a large-scale natural disaster such as the March 2011 Great East Japan Earthquake,
which led to tsunamis, soil liquefaction and fires, as well as electricity power supply shortages and electricity
power conservation measures resulting from the suspension of the operations of the nuclear power plants.
Failure to safeguard personal and other confidential information may result in liability, reputational
damage or financial losses.
As our operations expand in volume, complexity and geographic scope, we are exposed to increased risk of
confidential information in our possession being lost, leaked, altered or falsified as a result of human or system
error, misconduct, unlawful behavior or scheme, unauthorized access or natural or human-caused disasters. Our
information systems and information management policies and procedures may not be sufficient to safeguard
confidential information against such risks.
As a financial institution in possession of customer information, we are obligated to treat personal and other
confidential information as required by the Act on the Protection of Personal Information, the Act on the Use of
Personal Identification Numbers in the Administration of Government Affairs, the Banking Law and the
Financial Instruments and Exchange Act of Japan, as well as other similar laws and regulations of other
jurisdictions in which we operate. In the event that personal information in our possession about our customers or
employees is leaked or improperly accessed and subsequently misused, we may be subject to liability and
regulatory action. We may have to provide compensation for economic loss and emotional distress arising out of
a failure to protect such information. In addition, such incidents could create a negative public perception of our
operations, systems or brand, which may in turn decrease customer and market confidence and materially and
adversely affect our business, operating results and financial condition.
Moreover, any loss, leakage, alteration or falsification of confidential information, or any malfunction or
failure of our information systems, may result in significant disruptions to our business operations or plans or
may require us to incur significant financial, human and other resources to implement corrective measures or
enhance our information systems and information management policies and procedures.
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Our operations are highly dependent on our information, communications and transaction management
systems and are subject to an increasing risk of cyber-attacks and other information security threats and to
changes in the business and regulatory environment.
Our information, communications and transaction management systems, which include not only our own
proprietary systems but also those third-party systems that are provided for our use or to which our systems are
connected, constitute a core infrastructure for our operations. Given our global operations with an extensive
network of branches and offices, the proper functioning of our information, communications and transaction
management systems is critical to our ability to efficiently and accurately process a large volume of transactions,
ensure adequate internal controls, appropriately manage various risks, and otherwise service our clients and
customers.
Cyber-attacks, unauthorized access and computer viruses are becoming increasingly more sophisticated and
more difficult to predict, detect and prevent. For instance, bank internal financial transaction systems or
automatic teller machines may become the target of cyber-attacks for monetary gain, and bank internal
information systems may become the target of confidential information theft. In addition, banks’ websites or
customer internet banking systems may become the target of cyber-attacks for political and other purposes. These
cyber threats, as well as our failure to appropriately and timely anticipate and deal with changes associated with
technological advances and new systems and tools introduced in response to industry, regulatory and other
developments, could cause disruptions to, and malfunctions of, such systems and result in unintended releases of
confidential and proprietary information stored in or transmitted through the systems, interruptions in the
operations of our clients, customers and counterparties, and deterioration in our ability to service our clients and
customers. In addition, our banking and other transaction management systems may not meet all applicable
business and regulatory requirements in an environment where such requirements are becoming increasingly
sophisticated and complicated. Furthermore, our system development or improvement projects, many of which
are critical to our ability to operate in accordance with market and regulatory standards, may not be completed as
planned due to the complexity and other difficulty relating to such projects. These consequences could result in
financial losses, including costs and expenses incurred in connection with countermeasures and improvements as
well as compensation to affected parties, lead to regulatory actions, diminish our clients’ and customers’
satisfaction with and confidence in us, and harm our reputation in the market, which could in turn adversely
affect our business, financial condition and results of operations. Moreover, significant financial, human and
other resources may be required to design, implement and enhance measures to manage cyber and information
security risks and comply with regulatory requirements.
Risks Related to Owning Our Shares
It may not be possible for investors to effect service of process within the United States upon us or our
directors or management members, or to enforce against us or those persons judgments obtained in
U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws.
We are a joint stock company incorporated under the laws of Japan. Almost all of our directors or
management members reside outside the United States. Many of our assets and the assets of these persons are
located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to
effect service of process within the United States upon us or these persons or to enforce, against us or these
persons, judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or
state securities laws.
We believe there is doubt as to the enforceability in Japan, in original actions or in actions brought in
Japanese courts to enforce judgments of U.S. courts, of claims predicated solely upon the U.S. federal or state
securities laws mainly because the Civil Execution Act of Japan requires Japanese courts to deny requests for the
enforcement of judgments of foreign courts if foreign judgments fail to satisfy the requirements prescribed by the
Civil Execution Act, including:
‰
the jurisdiction of the foreign court be recognized under laws, regulations, treaties or conventions;
26
‰
‰
‰
proper service of process be made on relevant defendants, or relevant defendants be given appropriate
protection if such service is not received;
the judgment and proceedings of the foreign court not be repugnant to public policy as applied in Japan;
and
there exist reciprocity as to the recognition by a court of the relevant foreign jurisdiction of a final
judgment of a Japanese court.
Judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or
state securities laws may not satisfy these requirements.
Risks Related to Owning Our American Depositary Shares
As a holder of American Depositary Shares, you have fewer rights than a shareholder of record in our
shareholder register since you must act through the depositary to exercise these rights.
The rights of our shareholders under Japanese law to take actions such as voting, receiving dividends and
distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal
rights are available only to shareholders of record. Because the depositary, through its custodian, is the record
holder of the shares underlying the American Depositary Shares, or ADSs, only the depositary can exercise
shareholder rights relating to the deposited shares. ADS holders, in their capacity, will not be able to directly
bring a derivative action, examine our accounting books and records and exercise appraisal rights. We have
appointed The Bank of New York Mellon as depositary, and we have the authority to replace the depositary.
Pursuant to the deposit agreement among us, the depositary and a holder of ADSs, the depositary will make
efforts to exercise voting or any other rights associated with shares underlying ADSs in accordance with the
instructions given by ADS holders, and to pay to ADS holders dividends and distributions collected from us.
However, the depositary can exercise reasonable discretion in carrying out the instructions or making
distributions, and is not liable for failure to do so as long as it has acted in good faith. Therefore, ADS holders
may not be able to exercise voting or any other rights in the manner that they had intended, or may lose some or
all of the value of the dividends or the distributions. Moreover, the depositary agreement that governs the
obligations of the depositary may be amended or terminated by us and the depositary without ADS holders’
consent, notice, or any reason. As a result, ADS holders may be prevented from having the rights in connection
with the deposited shares exercised in the way ADS holders had wished or at all.
ADS holders are dependent on the depositary to receive our communications. We send to the depositary all
of our communications to ADS holders, including annual reports, notices and voting materials, in Japanese.
ADS holders may not receive all of our communications with shareholders of record in our shareholder register
in the same manner or on an equal basis. In addition, ADS holders may not be able to exercise their rights as
ADS holders due to delays in the depositary transmitting our shareholder communications to ADS holders. For a
detailed discussion of the rights of ADS holders and the terms of the deposit agreement, see Exhibit 2(c) to this
Annual Report.
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Item 4.
Information on the Company.
A. History and Development of the Company
Mitsubishi UFJ Financial Group, Inc.
MUFG is a bank holding company incorporated as a joint stock company (kabushiki kaisha) under the
Companies Act of Japan. We are the holding company for MUFG Bank, Ltd. (formerly, The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), Mitsubishi UFJ Trust and Banking Corporation, Mitsubishi UFJ Securities Holdings Co.,
Ltd., Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Mitsubishi UFJ NICOS Co., Ltd., and other companies
engaged in a wide range of financial businesses.
On April 2, 2001, The Bank of Tokyo-Mitsubishi, Ltd., Mitsubishi Trust and Banking Corporation, or
Mitsubishi Trust Bank, and Nippon Trust and Banking Co., Ltd. established Mitsubishi Tokyo Financial Group,
Inc., or MTFG, to be a holding company for the three entities. Before that, each of the banks had been a publicly
traded company. On April 2, 2001, through a stock-for-stock exchange, they became wholly-owned subsidiaries
of MTFG, and the former shareholders of the three banks became shareholders of MTFG. Nippon Trust and
Banking was later merged into Mitsubishi Trust Bank.
On June 29, 2005, the merger agreement between MTFG and UFJ Holdings, Inc. was approved at the
general shareholders meetings of MTFG and UFJ Holdings. As the surviving entity, MTFG was renamed
“Mitsubishi UFJ Financial Group, Inc.” The merger of the two bank holding companies was completed on
October 1, 2005.
On September 30, 2007, Mitsubishi UFJ Securities Holdings, which was then called “Mitsubishi UFJ
Securities Co., Ltd.,” or MUS, became our wholly-owned subsidiary through a share exchange transaction.
On October 13, 2008, we formed a global strategic alliance with Morgan Stanley and, as part of the alliance,
made an equity investment in Morgan Stanley in the form of convertible and non-convertible preferred stock, and
subsequently appointed a representative to Morgan Stanley’s board of directors.
On October 21, 2008, we completed a tender offer for outstanding shares of ACOM CO., LTD. common
stock, raising our ownership in ACOM to approximately 40%.
On November 4, 2008, Bank of Tokyo-Mitsubishi UFJ completed the acquisition of all of the shares of
common stock of UnionBanCal Corporation, or UNBC, not previously owned by Bank of Tokyo-Mitsubishi UFJ
and, as a result, UNBC became a wholly-owned indirect subsidiary of MUFG.
On May 1, 2010, we and Morgan Stanley integrated our securities and investment banking businesses in
Japan into two joint venture securities companies, one of which is Mitsubishi UFJ Morgan Stanley Securities.
Mitsubishi UFJ Morgan Stanley Securities was created by spinning off the wholesale and retail securities
businesses conducted in Japan from Mitsubishi UFJ Securities Holdings and subsequently assuming certain
operations in Japan from a subsidiary of Morgan Stanley.
On June 30, 2011, we converted all of our Morgan Stanley’s convertible preferred stock into Morgan
Stanley’s common stock, resulting in our holding approximately 22.4% of the voting rights in Morgan Stanley.
Further, we appointed a second representative to Morgan Stanley’s board of directors on July 20, 2011.
Following the conversion on June 30, 2011, Morgan Stanley became our equity-method affiliate. As of
March 31, 2019, we held approximately 24.0% of the voting rights in Morgan Stanley and had two
representatives appointed to Morgan Stanley’s board of directors. We and Morgan Stanley continue to pursue a
variety of business opportunities in Japan and abroad in accordance with the global strategic alliance.
On December 18, 2013, we acquired approximately 72.0% of the total outstanding shares of Krungsri
through Bank of Tokyo-Mitsubishi UFJ. As a result of the transaction, Krungsri has become a consolidated
subsidiary of Bank of Tokyo-Mitsubishi UFJ.
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On July 1, 2014, we integrated Bank of Tokyo-Mitsubishi UFJ’s operations in the Americas region with
UNBC’s operations, and changed UNBC’s corporate name to “MUFG Americas Holdings Corporation.” On the
same day, Union Bank, N.A., which is MUFG Americas Holdings’ principal subsidiary and our primary
operating subsidiary in the United States, was also renamed “MUFG Union Bank, N.A..” On July 1, 2016,
MUFG Americas Holdings was designated as our U.S. intermediate holding company to comply with the FRB’s
enhanced prudential standards.
On January 5, 2015, Bank of Tokyo-Mitsubishi UFJ integrated its Bangkok branch with Krungsri through a
contribution in kind of the Bank of Tokyo-Mitsubishi UFJ Bangkok branch business to Krungsri, and Bank of
Tokyo-Mitsubishi UFJ received newly issued shares of Krungsri common stock. As a result of this transaction,
Bank of Tokyo-Mitsubishi UFJ’s ownership interest in Krungsri increased to 76.9%.
On October 1, 2017, we acquired all of the shares of common stock of Mitsubishi UFJ NICOS which we did
not previously own and, as a result, Mitsubishi UFJ NICOS became a wholly-owned subsidiary of MUFG.
On December 29, 2017, Bank of Tokyo-Mitsubishi UFJ initially acquired 19.9% of the shares of common
stock of PT Bank Danamon Indonesia, Tbk. On May 1, 2019, MUFG Bank, Ltd. completed a series of
transactions to increase its ownership interest in Bank Danamon to 94.1%, as a result of which Bank Danamon
became MUFG Bank’s consolidated subsidiary.
On April 1, 2018, we changed Bank of Tokyo-Mitsubishi UFJ’s corporate name to “MUFG Bank, Ltd.”
On April 16, 2018, we transferred Mitsubishi UFJ Trust and Banking’s corporate loan-related businesses to
MUFG Bank. The corporate loan-related businesses include the corporate loan, project finance and real estate
finance businesses, and any related foreign exchange and remittance services, but do not include pension-related
services, the corporate agency business, or the real estate-related businesses.
On October 31, 2018, Mitsubishi UFJ Trust and Banking entered into a Share Sale Deed with
Commonwealth Bank of Australia, or CBA, and its wholly-owned subsidiary Colonial First State Group Limited,
or CFSGL, to acquire 100% of the shares in each of nine subsidiaries of CFSGL, which collectively represent
CBA’s global asset management business known as Colonial First State Global Asset Management, or
CFSGAM, from CFSGL for an aggregate purchase price of approximately AU$4.0 billion, or ¥328 billion,
subject to certain conditions precedent, including required regulatory approvals.
On March 1, 2019, MUFG Bank agreed with DVB Bank SE in Germany to acquire DVB Bank’s aviation
finance business, subject to regulatory approvals other conditions. The transaction is expected to be completed
during the second half of the fiscal year ending March 31, 2020.
Our registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan, and our telephone
number is 81-3-3240-8111.
For a discussion of recent developments, see “Item 5. Operating and Financial Review and Prospects—
Recent Developments.”
MUFG Bank, Ltd.
MUFG Bank is a major commercial banking organization in Japan that provides a broad range of domestic
and international banking services from its offices in Japan and around the world. MUFG Bank’s registered head
office is located at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan, and its telephone number is
81-3-3240-1111. MUFG Bank is a joint stock company (kabushiki kaisha) incorporated in Japan under the
Companies Act. The bank changed its name to MUFG Bank, Ltd. from The Bank of Tokyo-Mitsubishi UFJ, Ltd.
as of April 1, 2018.
29
MUFG Bank was formed through the merger, on January 1, 2006, of Bank of Tokyo-Mitsubishi and UFJ
Bank Limited after their respective parent companies, MTFG and UFJ Holdings, merged to form MUFG on
October 1, 2005.
Bank of Tokyo-Mitsubishi was formed through the merger, on April 1, 1996, of The Mitsubishi Bank,
Limited and The Bank of Tokyo, Ltd.
The origins of Mitsubishi Bank can be traced to the Mitsubishi Exchange Office, a money exchange house
established in 1880 by Yataro Iwasaki, the founder of the Mitsubishi industrial, commercial and financial group.
In 1895, the Mitsubishi Exchange Office was succeeded by the Banking Division of the Mitsubishi Goshi
Kaisha, the holding company of the “Mitsubishi group” of companies. Mitsubishi Bank had been a principal
bank to many of the Mitsubishi group companies but broadened its relationships to cover a wide range of
Japanese industries, small and medium-sized companies and individuals.
Bank of Tokyo was established in 1946 as a successor to The Yokohama Specie Bank, Ltd., a special
foreign exchange bank established in 1880. When the government of Japan promulgated the Foreign Exchange
Bank Law in 1954, Bank of Tokyo became the only bank licensed under that law. Because of its license, Bank of
Tokyo received special consideration from the Ministry of Finance in establishing its offices abroad and in many
other aspects relating to foreign exchange and international finance.
UFJ Bank was formed through the merger, on January 15, 2002, of The Sanwa Bank, Limited and The
Tokai Bank, Limited.
Sanwa Bank was established in 1933 when the three Osaka-based banks, the Konoike Bank, the Yamaguchi
Bank, and the Sanjyushi Bank merged. Sanwa Bank was known as a city bank having the longest history in
Japan, since the foundation of Konoike Bank can be traced back to the Konoike Exchange Office established in
1656. The origin of Yamaguchi Bank was also a money exchange house, established in 1863. Sanjyushi Bank
was founded by influential fiber wholesalers in 1878. The corporate philosophy of Sanwa Bank had been the
creation of premier banking services especially for small and medium-sized companies and individuals.
Tokai Bank was established in 1941 when the three Nagoya-based banks, the Aichi Bank, the Ito Bank, and
the Nagoya Bank merged. In 1896, Aichi Bank took over businesses of the Jyuichi Bank established by
wholesalers in 1877 and the Hyakusanjyushi Bank established in 1878. Ito Bank and Nagoya Bank were
established in 1881 and 1882, respectively. Tokai Bank had expanded the commercial banking business to
contribute to economic growth mainly of the Chubu area in Japan, which is known for its manufacturing
industries, especially automobiles.
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Trust and Banking is a major trust bank in Japan, providing trust and banking services to
meet the financing and investment needs of clients in Japan and the rest of Asia, as well as in the United States
and Europe. Mitsubishi UFJ Trust and Banking’s registered head office is located at 4-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-8212, Japan, and its telephone number is 81-3-3212-1211. Mitsubishi UFJ Trust and
Banking is a joint stock company (kabushiki kaisha) incorporated in Japan under the Companies Act.
Mitsubishi UFJ Trust and Banking was formed on October 1, 2005 through the merger of Mitsubishi Trust
Bank and UFJ Trust Bank Limited. As the surviving entity, Mitsubishi Trust Bank was renamed “Mitsubishi UFJ
Trust and Banking Corporation.”
Mitsubishi Trust Bank traces its history to The Mitsubishi Trust Company, Limited, which was founded by
the leading members of the Mitsubishi group companies in 1927. The Japanese banking and financial industry
was reconstructed after World War II and, in 1948, Mitsubishi Trust Bank was authorized to engage in the
commercial banking business, in addition to its trust business, under the new name Asahi Trust & Banking
Corporation. In 1952, the bank changed its name again to “The Mitsubishi Trust and Banking Corporation.”
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Nippon Trust and Banking and The Tokyo Trust Bank, Ltd., which were previously subsidiaries of Bank of
Tokyo-Mitsubishi, was merged into Mitsubishi Trust Bank on October 1, 2001.
UFJ Trust Bank was founded in 1959 as The Toyo Trust & Banking Company, Limited, or Toyo Trust
Bank. The Sanwa Trust & Banking Company, Limited, which was a subsidiary of Sanwa Bank, was merged into
Toyo Trust Bank on October 1, 1999. The Tokai Trust & Banking Company, Limited, which was a subsidiary of
Tokai Bank, was merged into Toyo Trust Bank on July 1, 2001. Toyo Trust Bank was renamed “UFJ Trust Bank
Limited” on January 15, 2002.
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Securities Holdings is a wholly-owned subsidiary of MUFG. Mitsubishi UFJ Securities
Holdings functions as an intermediate holding company of MUFG’s global securities and investment banking
businesses. Mitsubishi UFJ Securities Holdings’ registered head office is located at 5-2, Marunouchi 2-chome,
Chiyoda-ku, Tokyo 100-0005, Japan, and its telephone number is 81-3-6213-2550. Mitsubishi UFJ Securities
Holdings is a joint stock company (kabushiki kaisha) incorporated in Japan under the Companies Act. Mitsubishi
UFJ Securities Holdings has major overseas operating entities in London, New York, Hong Kong and Singapore.
In March 2019, Mitsubishi UFJ Securities Holdings established a new indirect subsidiary, MUFG Securities
(Europe) N.V., in Amsterdam and opened a new branch in Paris to provide securities services to its clients across
Europe.
In April 2010, Mitsubishi UFJ Securities Holdings, which was previously called “Mitsubishi UFJ Securities
Co., Ltd.,” or MUS, became an intermediate holding company by spinning off its securities and investment
banking business operations to a wholly-owned operating subsidiary established in December 2009, currently
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. Upon the consummation of the corporate spin-off
transaction, the intermediate holding company was renamed “Mitsubishi UFJ Securities Holdings Co., Ltd.” and
the operating subsidiary was renamed “Mitsubishi UFJ Securities Co., Ltd.” The operating subsidiary was
subsequently renamed Mitsubishi UFJ Morgan Stanley Securities in May 2010 upon integration of our securities
operations in Japan with those of Morgan Stanley.
MUS was formed through the merger between Mitsubishi Securities Co., Ltd. and UFJ Tsubasa
Securities Co., Ltd. on October 1, 2005, with Mitsubishi Securities being the surviving entity. The surviving
entity was renamed “Mitsubishi UFJ Securities Co., Ltd.” and, in September 2007, became our wholly-owned
subsidiary through a share exchange transaction.
Mitsubishi Securities was formed in September 2002 through the merger of Bank of Tokyo-Mitsubishi’s
securities subsidiaries and affiliate, KOKUSAI Securities Co., Ltd., Tokyo-Mitsubishi Securities Co., Ltd. and
Tokyo-Mitsubishi Personal Securities Co., Ltd., and Mitsubishi Trust Bank’s securities affiliate, Issei
Securities Co., Ltd. In July 2005, MTFG made Mitsubishi Securities a directly-held subsidiary by acquiring all of
the shares of Mitsubishi Securities common stock held by Bank of Tokyo-Mitsubishi and Mitsubishi Trust Bank.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley Securities is our core securities and investment banking subsidiary.
Mitsubishi UFJ Morgan Stanley Securities was created in May 2010 as one of the two Japanese joint venture
securities companies between Morgan Stanley and us as part of our global strategic alliance. Mitsubishi UFJ
Morgan Stanley Securities succeeded to the investment banking operations conducted in Japan by a subsidiary of
Morgan Stanley and the wholesale and retail securities businesses conducted in Japan by MUS. MUFG, through
Mitsubishi UFJ Securities Holdings, holds 60% voting and economic interests in Mitsubishi UFJ Morgan Stanley
Securities. Mitsubishi UFJ Morgan Stanley Securities’ registered head office is located at 5-2 Marunouchi
2-chome, Chiyoda-ku, Tokyo, 100-0005 Japan, and its telephone number is 81-3-6213-8500. Mitsubishi UFJ
Morgan Stanley Securities is a joint stock company (kabushiki kaisha) incorporated in Japan under the
Companies Act.
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In April 2019, Mitsubishi UFJ Morgan Stanley Securities and Mitsubishi UFJ Morgan Stanley PB Securities
Co., Ltd., a subsidiary of Mitsubishi UFJ Morgan Stanley Securities holding 75% of its shares with the remaining
25% held by MUFG Bank, agreed on a merger whereby Mitsubishi UFJ Morgan Stanley Securities will be the
surviving company. In connection with the planned merger, MUFG Bank is expected to transfer its 25% equity
interest in Mitsubishi UFJ Morgan Stanley PB Securities to Mitsubishi UFJ Morgan Stanley Securities.
For more information on our joint venture securities companies, see “—B. Business Overview—Global
Strategic Alliance with Morgan Stanley.”
Mitsubishi UFJ NICOS Co., Ltd.
Mitsubishi UFJ NICOS is a major credit card company in Japan that issues credit cards, including those
issued under the MUFG, NICOS and DC brands, and provides a broad range of credit card and other related
services for its card members in Japan. Mitsubishi UFJ NICOS is a consolidated subsidiary of MUFG. Mitsubishi
UFJ NICOS’s registered head office is located at 33-5, Hongo 3-chome, Bunkyo-ku, Tokyo 113-8411, Japan, and
its telephone number is 81-3-3811-3111. Mitsubishi UFJ NICOS is a joint stock company (kabushiki kaisha)
incorporated in Japan under the Companies Act.
On August 1, 2008, Mitsubishi UFJ NICOS became a wholly-owned subsidiary of MUFG through a share
exchange transaction. On the same day, we entered into a share transfer agreement with Norinchukin Bank under
which we sold some of our shares of Mitsubishi UFJ NICOS common stock to Norinchukin Bank. In March
2011, we and Norinchukin Bank made additional equity investments in Mitsubishi UFJ NICOS in proportion to
our and Norinchukin Bank’s respective beneficial ownership of approximately 85% and 15%, respectively. On
October 1, 2017, MUFG acquired all of Norinchukin Bank’s ownership interest in Mitsubishi UFJ NICOS and,
as a result, Mitsubishi UFJ NICOS is currently a wholly-owned subsidiary of MUFG.
Mitsubishi UFJ NICOS was formed through the merger, on April 1, 2007, of UFJ NICOS Co., Ltd. and
DC Card Co., Ltd. As the surviving entity, UFJ NICOS Co., Ltd. was renamed “Mitsubishi UFJ NICOS Co.,
Ltd.”
UFJ NICOS was formed through the merger, on October 1, 2005, of Nippon Shinpan Co., Ltd. and
UFJ Card Co., Ltd. Originally founded in 1951 and listed on the Tokyo Stock Exchange in 1961, Nippon Shinpan
was a leading company in the consumer credit business in Japan. Nippon Shinpan became a subsidiary of MUFG
at the time of the merger with UFJ Card.
Prior to the merger between MTFG and UFJ Holdings in October 2005, DC Card was a subsidiary of MTFG
while UFJ Card was a subsidiary of UFJ Holdings.
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B. Business Overview
We are one of the world’s largest and most diversified financial groups with total assets of ¥305.23 trillion
as of March 31, 2019. The Group is comprised of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi
UFJ Morgan Stanley Securities (through Mitsubishi UFJ Securities Holdings), Mitsubishi UFJ NICOS and other
subsidiaries and affiliates, for which we are the holding company. As a bank holding company, we are regulated
under the Banking Law of Japan. Our services include commercial banking, trust banking, securities, credit
cards, consumer finance, asset management, leasing and many more fields of financial services. In Japan, we
operate through approximately 600 business locations as of March 31, 2019. In addition, as of the same date, the
Group had the largest overseas network among Japanese banks, consisting of approximately 1,200 business
locations in more than 50 countries.
MUFG’s role as the holding company is to strategically manage and coordinate the activities of our business
groups. Group-wide strategies are determined by the holding company and executed by our subsidiaries.
In May 2017, we announced “MUFG Re-Imaging Initiative” which was designed to achieve sustainable
growth and enhance our corporate value through various measures, including an integrated group-based
management approach and digitization and other technological enhancements. The measures also included
realignment of the functions of our subsidiaries in an effort to increase effectiveness in accumulating and
applying the expertise within the Group and to enhance efficiency in offering and providing a diverse array of
sophisticated financial products and services to customers through collaboration among our subsidiaries. In May
2017, Mitsubishi UFJ Trust and Banking acquired MUFG Bank’s equity interest in Mitsubishi UFJ Investor
Services & Banking (Luxembourg) S.A to make the Luxembourg company its wholly owned subsidiary. In April
2018, Mitsubishi UFJ Trust and Banking acquired MUFG Bank’s equity interest and Mitsubishi UFJ Securities
Holdings’ equity interest in Mitsubishi UFJ Kokusai Asset Management Co., Ltd. to make the asset management
company its wholly owned subsidiary. As a result, Mitsubishi UFJ Trust and Banking operates as the Group’s
primary asset management and administration subsidiary. In April 2018, Mitsubishi UFJ Trust and Banking
transferred its corporate loan-related businesses to MUFG Bank as part of an initiative to focus the corporate
loan-related businesses within the Group at MUFG Bank. In addition, in April 2019, Mitsubishi UFJ Morgan
Stanley Securities and Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd. agreed on a merger, whereby
Mitsubishi UFJ Morgan Stanley Securities will be the surviving company, with an aim to strengthen our wealth
management business.
In May 2018, we announced our new medium-term business plan for the three-year period ending
March 31, 2021, which is discussed below in this Item 4.B. As part of our new medium-term business plan, we
have reorganized our business groups in an effort to further integrate the expertise and capabilities of our
subsidiaries to respond to the needs of our customers more effectively and efficiently.
Medium-Term Business Plan
Basic Company Policy
Under the current medium-term business plan for the three-year period ending March 31, 2021, we aim to
deliver optimal value to all of our stakeholders through simple, speedy and transparent group-integrated
operations.
We are seeking to improve our group management approach by shifting from our previous group
collaboration and group-driven management approach to a new integrated group-based management approach.
Specifically, in an effort to respond to constantly changing customer needs in an appropriate manner, we have
reorganized our business groups into new customer-based business groups as discussed below. At the same time,
we are seeking to clarify the roles of group companies through functional realignment, product and service
quality enhancement as well as solutions capability improvement.
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We intend to deploy management resources necessary for achieving these goals with an enhanced focus
during the three-year period, particularly during the first half of the period. During this three-year period, we will
seek to lay a solid foundation for a new future-oriented business platform. We aim to establish a new business
growth model which meets our stakeholders’ expectations by the end of the fiscal year ending March 31, 2024.
MUFG’s Vision ~ Our Corporate Vision Beyond “Re-Imagining” Initiative
We aim to deliver the best value to all stakeholders through simple, speedy and
transparent* group-integrated operations. Also, we will contribute to the realization
of sustainable growth and a better society by promoting solution-oriented business.
(1) Engage in the needs and issues of customers and society, and provide optimized solutions.
(2) Redefine ideal legal entities and the group, and develop a sustainable business model
unique to MUFG.
(3) Provide a workplace where each employee can realize his or her talent development.
(4) Based on the results achieved above, respond to shareholders’ expectations and enhance
a reliable relationship with them.
* Transparent: universal, barrier-free open personnel communications between legal entities, and between company branches and the
Head Office, regardless of title and position. It also implies an understanding of MUFG corporate vision.
Group Business Strategy
Under our current medium-term business plan, we are implementing “Eleven Transformation
Initiatives”—specific strategic initiatives designed to enable us to cope with adverse changes in the domestic or
overseas business environment and to achieve sustainable growth. Each initiative constitutes a pillar for our
strategy involving business operations that (1) have large growth potential, (2) allow us to expand on our group
capabilities to the fullest extent, and, (3) are expected to grow as a core business of the group or a foundation for
such a business. Our group operating companies, business groups and corporate center functions will collaborate
on the implementation of these initiatives with an aim to improve our profitability.
Additionally, we have established a new business group focused on retail and small and medium-sized
enterprise banking businesses outside of Japan with the goal to effectively capture the market growth in the
United States and Southeast Asia. Under our previous medium-term business plan, we took strategic steps
towards building a business platform in South East Asia through the expansion of Krungsri’s business in
Thailand and our strategic investments in Security Bank in the Philippines and Bank Danamon in Indonesia. We
seek to enhance the enterprise value of each of MUFG Union Bank in the United States and our strategic partner
banks, including VietinBank in Vietnam and other banks in South East Asia, as well as our Japanese banking
subsidiaries through synergies expected to be achieved by sharing and deploying across these banks their
respective strengths and expertise.
Eleven Transformation Initiatives
(1) Digitalization Strategy
Enhanced use of digital technologies is a critical part of our overall transformation strategy, and we intend
to develop and implement a wide range of measures to enhance our digital technology use to improve top-line
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performance and operational efficiency. We seek to improve our marketing and consulting capabilities through
the use of big data, to increase the efficiency of the front-office operations at branches through an overhaul of our
online banking system for corporate customers, and to enhance our productivity through migration to digital
channels for the housing loan business and expanded use of robotics and artificial intelligence.
(2) Channel Strategy and Business Process Re-engineering (BPR)
We strive to enhance customer user interface, or the usability of our systems for customers, and user
experience, or the experience of service recipients, while improving our productivity. We aim to achieve both of
these goals through full utilization of digital technologies and business process re-engineering, or an overhaul of
business operations through review and analysis of all existing business activities and work processes. We seek
to advance our overall user channels combining Internet-based and physical branch channels by improving the
usability of our Internet-based channels for transactions so as to increase customer use while establishing
specialty bank branches called “MUFG NEXT,” streamlining our branch network and converting branches into
integrated branches that offer services of MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ
Morgan Stanley Securities at a single location.
(3) Wealth Management Strategy
We are pursuing a business structure focused on fee-based businesses to achieve stable profits by servicing
the rising customer needs for asset management and administration services and inheritance services in Japan’s
aging society with a declining birthrate through a collaboration between the corporate and retail units and
through a group-based integrated approach. We seek to establish a business model where teams of professionals
from MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Morgan Stanley Securities will take
the lead in providing various solutions at a one-stop location.
(4) Enhancement of Relationship Manager & Product Office (RM-PO) Model for Corporate Marketing
We seek to provide solutions optimized to meet customer needs by integrating the corporate lending
operations of MUFG Bank and Mitsubishi UFJ Trust and Banking through functional realignment where
relationship managers are expected to work on understanding the business management issues faced by
customers as “RMs from MUFG” and the product office, a unit that is responsible for planning, developing and
providing products and services, is expected to deepen its expertise.
(5) Real Estate Value Chain Strategy
We aim to provide solutions to meet various customer needs arising in the real estate value chain, or the
business cycle for real estate assets including sale, purchase, development, tenant leasing and asset management,
on a continuous basis through a group-based integrated approach. We endeavor to provide additional value
through efforts made at our branches to gain knowledge on real estate needs and to use it to obtain brokerage and
asset management businesses. In the asset management business, we seek to strengthen our real asset
management capabilities.
(6) Asset Management Business
We seek to provide group-wide integrated asset management services to our customers. We aim to develop
competitive products, expand our product line-up, and enhance our human resource portfolio necessary for such
development and expansion. In addition, in an effort to become a globally recognized asset management
institution, we endeavor to strengthen our asset management business by enhancing our human resources,
products and solutions.
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(7) Institutional Investors Business
We aim to provide a wide range of services to satisfy diverse professional needs for asset management and
administration services through a group-based integrated approach, while seeking to expand across the group the
customer relationships maintained with institutional investors by each of MUFG Bank, Mitsubishi UFJ Trust and
Banking, Mitsubishi UFJ Morgan Stanley Securities, and our business groups.
(8) Global Corporate & Investment Banking (GCIB) Business Model Reform
We seek to achieve sustainable growth for our global corporate and investment banking business, where we
provide sophisticated financial services combining corporate banking services, including deposits and loans, and
investment banking services, including capital markets financing and mergers and acquisitions. We aim to meet
the needs of non-Japanese corporate customers conducting business globally and to improve the overall return on
our portfolio by constantly adjusting loan and other assets. In addition, we intend to shift the focus of our
management approach from quantity to quality through origination and distribution business operations under the
integrated platform between MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities.
(9) Enhancement of Overseas Operations
We plan to shift our management approach from the previous approach based on geographical regions and
operating entities to a new approach based on customers and businesses and seek to strengthen our business-
driven management approach across the group. In addition, in an effort to establish a business structure that
enables us to flexibly adapt to changes in the business environment, we seek to reduce expenses, enhance our
overseas branch and office network, and centralize and standardize our procedures and systems.
(10) Human Resources Strategy
We seek to manage our human resources globally in a group-based integrated manner through acceleration
of personnel allocation and transfers across the group in line with our business strategy and establishment of a
human resources division responsible for overseeing our domestic and overseas human resource management.
(11) Enhancement of Corporate Center Operations
We plan to shift our management of the corporate center operations from the previous approach of
integrated management by MUFG and MUFG Bank to a new approach of integrated management by MUFG,
MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Morgan Stanley Securities in an effort to
optimize the use of our management resources on a group-based integrated basis and achieve low cost operations.
Business Groups
Under the current medium-term business plan, our business groups are reorganized as follows in an effort to
further integrate the expertise and capabilities of our subsidiaries to respond to the needs of our customers more
effectively and efficiently.
Retail & Commercial Banking Business Group
The Retail & Commercial Banking Business Group integrates the domestic retail and commercial banking
businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi
UFJ NICOS and other group companies of MUFG. This business group offers retail and small and medium–sized
enterprise customers in Japan an extensive array of commercial banking, trust banking and securities products
and services.
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Business Environment and Strategy
In the domestic market in which we operate, unfavorable conditions remain such as the negative impact of
the Bank of Japan’s negative interest rate policy on the financial market and intensified competition. In addition,
demographic changes, including Japan’s aging population with a declining birthrate, and technological
developments, including artificial intelligence and digitalization, can change the way banking and other financial
services are used in Japan. With a goal of becoming “the top financial group in the retail and commercial banking
business segment in Japan, achieving sustainable growth along with customers and society,” we seek to enhance
and integrate the capabilities of our group companies to deliver value that exceeds customer expectations and
improve customer satisfaction.
In the wealth management business, which is one of our key strategic focus areas, we are implementing
measures to improve our group company structure for offering wealth management solutions, including asset
management, asset and business succession transfer, and real estate services. For example, with an aim to
strengthen our wealth management business, we plan to merge Mitsubishi UFJ Morgan Stanley Securities and
Mitsubishi UFJ Morgan Stanley PB Securities.
Responding to the Needs of Retail Customers
For retail customers, we provide a wide range of products and services, such as bank deposits, loans, asset
management and administration services, investment products and settlement services. We describe some of our
products and services below.
‰ Housing Loans. MUFG Bank offers housing loans with various loan terms and interest rates. MUFG
Bank also offers “Loans with Supplemental Health Insurance for Seven Major Illnesses” through a third
party insurance company to help with loan payments in case of unexpected major illnesses such as
cancer or heart attacks. As part of our group-wide collaboration initiative, Mitsubishi UFJ Trust and
Banking began to offer “Mitsubishi UFJ Net Home Loan” (a housing loan product of MUFG Bank
available only online and exclusively to customers of Mitsubishi UFJ Trust and Banking) as an agent of
MUFG Bank in April 2018.
‰ Consumer Loans. MUFG Bank offers “Card Loans” (consumer loans the proceeds of which are
disbursed to approved borrowers with a bank-issued card through an automated machine) and “Purpose-
Specific Term Loans,” depending on customers’ needs.
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Investment Products. In order to promote a shift in customer preference from savings to asset building,
we seek to offer products that effectively serve the asset building and asset management needs of
customers at various stages of their life. As part of this effort, MUFG Bank started to offer fund wrap
products as an agent of Mitsubishi UFJ Trust and Banking in November 2017. In addition, in January
2018, MUFG Bank started to offer investment products that qualify for “Tsumitate NISA” tax
exemption on capital gains and dividend income for the investment up to 0.4 million yen per year for up
to 20 years under Japanese tax law. The original NISA, or Nippon Individual Savings Account, program
was introduced in 2014, providing for tax exemption on capital gains and dividend income for the
investment up to 1.2 million yen per year for up to 5 years. We offer investment products that qualify
for tax exemption under the original NISA program as well.
Products and Services for Payments. Mitsubishi UFJ NICOS offers a variety of credit cards. In addition,
debit cards are available to MUFG Bank account holders.
Insurance Products. MUFG Bank acts as a sales channel for a variety of insurance products, including
annuity insurance, single premium whole life insurance, flat-rate premium whole life insurance, medical
insurance, cancer insurance and nursing-care insurance, of insurance companies in Japan.
Services Relating to Inheritance, Gift and Real Estate. Mitsubishi UFJ Trust and Banking offers
testamentary trust, inheritance planning, inheritance procedure support, and other related services.
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MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities also offer inheritance-related products and
services, serving as sales agents of Mitsubishi UFJ Trust and Banking. Mitsubishi UFJ Trust and
Banking and Mitsubishi UFJ Real Estate Services offer real estate brokerage services for both
investment and business properties and residential properties.
We provide those services through an extensive network of branches in Japan, mostly in the greater Tokyo,
Nagoya and Osaka areas. MUFG Bank and Mitsubishi UFJ Trust and Banking had a total of 733 branches in
Japan as of March 31, 2019. MUFG Bank and Mitsubishi UFJ Trust and Banking also have a nationwide ATM
network consisting of MUFG Bank’s and Mitsubishi UFJ Trust and Banking’s own ATMs located at their
branches and third-party ATMs located at convenience stores and other locations.
We also offer direct banking channels. MUFG Bank and Mitsubishi UFJ Trust and Banking provide internet
banking services which enable customers to perform a range of banking activities, such as checking account
balances, making time deposits, transferring money and purchasing invest products, through the banks’
respective websites using personal computers and mobile devices. In addition, Jibun Bank, a direct bank which
was founded by MUFG Bank in collaboration with KDDI Corporation in June 2008, offers bank deposits,
housing loans, settlement services and other products and services through the internet and phone.
Responding to the Needs of Small and Medium-Sized Enterprises
For small and medium-sized enterprises, we provide various financial solutions, such as bank deposits,
loans, and fund management, remittance and foreign exchange services. We also help our customers develop
business strategies, such as overseas expansions, inheritance-related business transfers and stock listings.
In addition, we provide asset and business succession solutions to small and medium-sized enterprise
owners. Based on our view that smooth succession of the businesses of small and medium-sized enterprises
owned by aging owners is critical to the sustainability and development of Japanese industry, we offer solutions
for successions of businesses to unrelated persons, including through mergers and acquisitions and initial public
offerings, and for successions of businesses to related persons. We also offer solutions designed to assist business
owners with successions of assets using testamentary trusts, real estate transactions and other means. Through
further integration of the retail and commercial banking capabilities of MUFG Bank, Mitsubishi UFJ Trust and
Banking, MUFG Securities Holdings and other group companies, we strive to provide seamless solutions on a
group-wide basis.
Japanese Corporate & Investment Banking Business Group
The Corporate Banking Business Group covers the large Japanese corporate businesses of MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings, including the transaction banking,
investment banking, trust banking and securities businesses. We offer large Japanese corporations advanced
financial solutions designed to respond to their diversified and globalized needs and to contribute to their
business and financial strategies. We provide those solutions through our global network of MUFG Group
companies.
With our goal to “Be the First Call Business Partner for Large Japanese Corporate Clients,” we strive to
strengthen our solutions capabilities through an approach designed to provide effective solutions using our
specialized industry-specific expertise and knowledge and through further integration and more effective
collaboration among the MUFG Group companies on a global basis.
Transaction Banking
We provide cash management, payment, trade finance and other commercial banking products and services
for corporate business transactions. Through these products and services, we seek to provide sophisticated
financial solutions that enable efficient execution of transactions to meet the strategic needs of our customers.
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Investment Banking
We provide mergers and acquisitions advisory, equity and bond underwriting, and other investment banking
services to our Japanese corporate customers. A large part of our investment banking business in Japan is
conducted by Mitsubishi UFG Morgan Stanley Securities, which was formed in May 2010 through the
integration of the domestic wholesale and retail securities businesses previously conducted by Mitsubishi UFJ
Securities and the investment banking business previously conducted by Morgan Stanley Japan. See “—Global
Strategic Alliance with Morgan Stanley” below.
Trust Banking
We provide real estate brokerage, registrar and transfer agency, and other trust banking services to our
Japanese corporate customers. Our solutions also include securitization of real estate, receivables and other
assets. Mitsubishi UFJ Trust and Banking’s experience and know-how in real estate brokerage and appraisal
services, corporate real estate strategy consulting, shareholder registry management services, shareholder and
investor relations consulting, and consulting services relating to executive stock compensation programs using
trust schemes enable us to offer solutions tailored to the financial strategies of each customer.
Asset Management & Investor Services Business Group
The Asset Management & Investor Services Business Group covers the asset management and asset
administration businesses of Mitsubishi UFJ Trust and Banking and MUFG Bank. By integrating the trust
banking expertise of Mitsubishi UFJ Trust and Banking and the global strengths of MUFG Bank. the business
group offers a full range of asset management and administration services for corporations and pension funds,
including pension fund management and administration, advice on pension structures, and payments to
beneficiaries, and also offers investment trusts for retail customers.
We aim to expand our asset management and asset administration services business by enhancing the
quality of our products and services, effectively utilizing the broad customer base of the MUFG Group, and
improving our operational efficiency through IT technology.
Asset Management
Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Kokusai Asset Management, and MU Investments Co.,
Ltd provide institutional investors with a wide range of investment options such as equities, bonds and alternative
products. In addition, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Kokusai Asset Management
provide retail investors with investment trust products through our group companies and business partners
outside of the MUFG Group, such as securities companies and regional banks.
We are adopting an inorganic expansion strategy especially for our non-Japanese investment capability in an
effort to be a global top-level asset manager with competitive products and solutions capabilities. Our existing
strategic alliances through minority investments, including our alliances with AMP Capital Holdings Limited in
Australia and SWS MU FUND MANAGEMENT in China, have contributed to our asset management business
expansion.
In October 2018, Mitsubishi UFJ Trust and Banking entered into a Share Sale Deed with Commonwealth
Bank of Australia, or CBA, and its wholly-owned subsidiary Colonial First State Group Limited, or CFSGL, to
acquire 100% of the shares in each of nine subsidiaries of CFSGL, which collectively represent CBA’s global
asset management business known as Colonial First State Global Asset Management, or CFSGAM, from
CFSGL, subject to certain conditions precedent, including required regulatory approvals. This transaction is our
first majority investment in an asset manager and is expected to close in mid-2019. CFSGAM is a global asset
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management firm with AU$212 billion, or ¥17.4 trillion in assets under management, or AuM, and is currently
the third largest asset management firm by AuM in Asian markets excluding Japan. CFSGAM offers products
across equities, alternatives and fixed income and has specialist capabilities in Asian and emerging markets as
well as in the infrastructure field.
Asset Administration
Under the brand of “MUFG Investor Services,” Mitsubishi UFJ Trust and Banking, MUFG Bank,
Mitsubishi UFJ Investor Services & Banking (Luxembourg), MUFG Investor Services Holdings Limited, MUFG
Capital Analytics and MUFG Investor Services(US),LLC offer a full suite of global asset administration services,
including fund administration, custody, securities lending, financing and foreign exchange services as a one-stop
shop.
Global Corporate & Investment Banking Business Group
The Global Corporate & Investment Banking Business Group covers the corporate, investment and
transaction banking businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings. Through a global
network of offices and branches, we provide non-Japanese large corporate and financial institution customers
with a comprehensive set of solutions that meet their increasingly diverse and sophisticated financing needs.
Through the new integrated operations management structure between the Global Corporate & Investment
Banking Business Group and the Global Markets Business Group, we aim to offer financing and investment
opportunities based on our understanding of institutional investor needs.
The expansion of the global corporate and investment banking business has been an important pillar of the
MUFG Group’s growth strategy. Aiming to further enhance our presence in the global financial market, we have
shifted our strategic approach from one where each of our group companies individually promoted its global
business to one where our group companies collaborate through integration of their capabilities. The new
approach is designed to enable us to exercise our comprehensive expertise to provide our customers with value-
added solutions and services more effectively.
In March 2019, MUFG Bank agreed to purchase from DVB Bank SE in Germany its aviation finance client
lending portfolio and the related operating infrastructure. In connection with this agreement, BOT Lease Co.,
Ltd., a consolidated subsidiary of MUFG Bank, agreed to purchase from DVB Bank its aviation investment
management and asset management business. The closing of these transactions are expected to occur during the
second half of the fiscal year ending March 31, 2020, subject to regulatory approvals and other conditions.
Aviation finance is a key growth pillar for us and, through the acquisition, we aim to enhance our Global
Corporate & Investment Banking Business platform in terms of higher returns, portfolio diversification and
solution offering to our clients.
Corporate Banking
Through our global network of offices and branches, we provide a full range of corporate banking solutions,
such as project finance, export credit agency finance, and financing through asset-backed commercial paper. Our
primary customers include large corporations, financial institutions, sovereign and multinational organizations,
and institutional investors that are headquartered outside of Japan.
Investment Banking
We provide investment banking services such as debt and equity issuance and M&A-related services, to
help our customers develop their financial strategies and realize their business goals. In order to meet customers’
various financing needs, we have established a customer-oriented coverage model through which our product
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experts coordinate with one another to offer innovative financing services globally. We have further integrated
the management of the operations of our commercial banking and securities subsidiaries to enhance
collaboration. We are one of the world’s top providers of project finance, one of the core businesses of the Global
Corporate & Investment Banking Business Group. We provide sophisticated professional services in arranging
limited-recourse finance and offering financial advice in various sectors, including natural resources, power, and
infrastructure, backed by our experience, expertise, knowledge, and global network.
Transaction Banking
We provide commercial banking products and services for large corporations and financial institutions in
managing and processing domestic and cross-border payments, mitigating risks in international trade, and
providing working capital optimization. We have established a Transaction Banking Unit, which oversees the
entire transaction banking operations globally, in order to enhance governance, management and quality of
services in these operations. The Transaction Banking Unit provides customers with support for their domestic,
regional and global trade finance and cash management programs through our extensive global network.
Global Commercial Banking Business Group
The Global Commercial Banking Business Group provides a comprehensive array of financial products and
services such as loans, deposits, fund transfers, investments and asset management services for local retail, small
and medium-sized enterprise, and corporate customers across the Asia-Pacific region through our major local
commercial banking subsidiaries and affiliates outside of Japan referred to as “Partner Banks.” Our Partner
Banks include MUFG Union Bank in the United States, Krungsri in Thailand, Bank Danamon in Indonesia,
VietinBank in Vietnam and Security Bank in the Philippines.
The network among the Partner Banks covers a vast market, consisting of five countries with population
totaling approximately 840 million. The market is expected to expand further as the GDP growth rates are
relatively high in these countries and financial needs are expected to increase as average income rise in the
ASEAN countries.
We believe that our network, which combines the global reach of the MUFG Group companies with strong
regional presence of the Partner Banks each carrying an established brand, provides us with unique competitive
advantages. Through sharing and integration of the expertise and capabilities of the Partner Banks, we seek to
achieve synergy effects and capture the business opportunities arising from the economic growth of the region.
MUFG Union Bank, N.A.
MUFG Union Bank is the primary subsidiary of MUFG Americas Holdings, which is our wholly owned
subsidiary and which is a bank holding company in the United States. MUFG Union Bank is the primary
operating entity of MUFG Bank in the United States. MUFG Union Bank provides a comprehensive range of
banking, consumer finance, investment, asset management, and other financial products and services to
individual consumers, small and medium-sized enterprises, and large corporations primarily in California,
Oregon, Washington, and Texas as well as nationally and internationally through 370 branches (consisting of
343 retail branches and five commercial branches, as well as 22 financial centers of PurePoint, an online banking
division of MUFG Union Bank).
In July 2014, MUFG Bank’s operations in the Americas region were integrated with MUFG Americas
Holdings’ operations. As a result, MUFG Americas Holdings oversees MUFG Bank’s operations in the Americas
region.
In July 2016, MUFG Americas Holdings was designated as MUFG’s U.S. intermediate holding company, or
IHC, to comply with the FRB’s enhanced prudential standards. As of that date, MUFG Bank, Mitsubishi UFJ
41
Trust and Banking and Mitsubishi UFJ Securities Holdings transferred to MUFG Americas Holdings their
ownership interests in their U.S. subsidiaries and affiliates, namely, BTMU Capital Corporation, BTMU
Securities, Inc., MUFG Americas Capital Company, Morgan Stanley MUFG Loan Partners, LLC, MUFG Fund
Services (USA) LLC, and MUFG Securities Americas Inc.
In July 2017, MUFG Bank and Mitsubishi UFJ Trust and Banking transferred to MUFG Americas Holdings
their ownership interests in other U.S. subsidiaries and affiliates, namely, BTMU Leasing & Finance, Inc.,
BTMU LF Capital LLC, MUFG Capital Analytics, LLC, and MUFG Investors Services(US), LLC.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Any adverse changes in
the business of MUFG Americas Holdings Corporation, an indirect wholly-owned subsidiary in the United
States, could significantly affect our results of operations.”
Bank of Ayudhya Public Company Limited (Krungsri)
Krungsri is a strategic subsidiary of MUFG Bank in Thailand. Krungsri provides a comprehensive range of
banking, consumer finance, investment, asset management, and other financial products and services to retail
consumers, small and medium-sized enterprises, and large corporations mainly in Thailand through 701 branches
(consisting 660 banking branches, 39 automobile finance business branches and two overseas branches) and
other service outlets nationwide. In addition, Krungsri’s consolidated subsidiaries include the largest credit card
issuer in Thailand with a total of 9.3 million credit card, sales finance and personal loan accounts in its portfolio,
a major auto finance provider, a fast growing asset management company, and a leading microfinance service
provider in Thailand.
MUFG owns a 76.88% ownership interest in Krungsri through MUFG Bank as of March 31, 2019. By
combining Krungsri’s local franchise with competitive presence in the retail and small and medium-sized
enterprise banking markets in Thailand with MUFG Bank’s global financial expertise, we seek to offer a wider
range of high-value financial products and services to a more diverse and larger customer base.
In March 2017, Krungsri established a subsidiary, Krungsri Finnovate Company Limited, with a key
mission to support and promote FinTech startups in Thailand and Southeast Asian countries in the forms of
accelerator and academic collaboration, startup project management and corporate venture capital.
In September 2017, Krungsri was designated as a Domestic Systemically Important Bank by the Bank of
Thailand based on the central bank’s assessment of Krungsri based on its asset size and its contribution to the
country’s economy and financial system.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Any adverse changes in
the business of Bank of Ayudhya, an indirect subsidiary in Thailand, or Bank Danamon, an indirect subsidiary in
Indonesia, could significantly affect our results of operations.”
PT Bank Danamon Indonesia, Tbk. (“Bank Danamon”)
Bank Danamon is a strategic subsidiary of MUFG Bank in Indonesia. Bank Danamon provides a
comprehensive range of banking and other financial products and services to retail consumers, small and
medium-sized enterprises, and large corporations in Indonesia. It operates an extensive distribution network
spread out from Aceh to Papua, with more than 1,100 branches and service outlets. In addition, Bank Danamon
provides financing for automotive and consumer goods through PT Adira Dinamika Multi Finance Tbk, a
subsidiary of Bank Danamon, as well as general insurance products through PT Asuransi Adira Dinamika,
another subsidiary of Bank Danamon.
In December 2017, MUFG Bank acquired 19.9% of the outstanding shares of Bank Danamon.
Subsequently, MUFG Bank increased its shareholding in Bank Danamon to 40.0% in August 2018 and further to
94.0% in April 2019. In addition, in April 2019, MUFG Bank acquired shares of common stock of PT Bank
42
Nusantara Parahyangan Tbk, or Bank BNP, an Indonesia bank, increasing its shareholding in the bank from 7.9%
to 99.9%. In May 2019, Bank BNP was merged into Bank Danamon. As a result of MUFG Bank’s acquisition of
additional shares in Bank Danamon in April 2019, Bank Danamon became our consolidated subsidiary, effective
as of April 29, 2019.
Our investment in Bank Danamon represents another milestone for our growth strategy in Southeast Asia
with the goal of realizing our unique and unparalleled business model based on the established local networks of
our Partner Banks, and MUFG’s global network to provide holistic financial services to a wider range of
customers. Through this investment, we aim to diversify and expand our local retail and small and medium-sized
enterprise business portfolio by seizing opportunities expected to arise from Indonesia’s current economic
growth and long-term economic growth prospects.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business— Any adverse changes in
the business of Bank of Ayudhya, an indirect subsidiary in Thailand, or Bank Danamon, an indirect subsidiary in
Indonesia, could significantly affect our results of operations.” and “Item 5. Operating and Financial Review and
Prospects—Recent Developments.”
Other Activities in Southeast Asia
We have been expanding our operations in Southeast Asia with an effort to further develop our businesses
abroad. In addition to MUFG Union Bank, Krungsri and Bank Danamon, we have strategic business and capital
alliances with other banks in Southeast Asia, including VietinBank in Vietnam and Security Bank in the
Philippines, as our Partner Banks.
VietinBank provides a wide range of financial services to consumers, small businesses, middle-market and
large companies through its branch network predominantly in Vietnam. We own a 19.7% equity interest in
VietinBank.
Security Bank provides a wide range of financial services to consumers, small businesses, middle-market
and large companies through its branch network in the Philippines. We own a 20% equity interest in Security
Bank.
See “Item 5. Operating and Financial Review and Prospects—Recent Developments” and “Item 3.D. Key
Information—Risk Factors—Risks Related to Our Business—Our strategy to expand the range of our financial
products and services and the geographic scope of our business globally may fail if we are unable to anticipate or
manage new or expanded risks that entail such expansion.”
Global Markets Business Group
The Global Markets Business Group covers the customer business and the treasury operations of MUFG
Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings. The customer business
includes sales and trading in fixed income instruments, currencies and equities as well as other investment
products, and origination and distribution of financial products. The treasury operations include asset and liability
management as well as global investments for the MUFG Group.
Customer Business
‰
Sales and Trading in Fixed Income Instruments, Currencies and Equities. We provide financing,
hedging, and investment solutions to our retail, corporate, institutional, and governmental customers
through sales and trading in financial market products such as fixed income instruments, currencies, and
equities. Our innovative financial products and services are designed to respond to increasingly
sophisticated requirements of our diverse customers and are provided through our global network of
offices and branches.
43
‰
Investment Products for Non-Institutional Customers in Japan. We provide investment products such as
mutual funds, and structured bonds, notes and deposits to non-institutional customers in Japan. We offer
solutions using these investment products to help customers better manage their assets and
liabilities. This business is conducted through the new integrated operations management structure
among the Global Markets Business Group, the Asset Management & Investor Service Business Group,
the Retail & Commercial Banking Business Group, and the Japanese Corporate and Investment Banking
Business Group. To enhance our products and sales support capability, in the fiscal year ended
March 31, 2019, the Global Markets Business Group started to collaborate with the Retail &
Commercial Banking Business Group in the retail and small and medium-sized enterprise client
businesses.
‰ Origination and Distribution. We provide financing solutions to institutional customers through
origination and distribution of financial products such as syndicated loans and securities issuances. This
business is conducted through the new integrated operations management structure between the Global
Markets Business Group and the Global Corporate and Investment Banking Business Group.
Treasury Operations
‰
Asset and Liability Management. Through our treasury operations, we seek to manage interest rate and
liquidity risks residing in our balance sheets through, among other things, transactions designed to
manage the profit and loss impact attributable to market movements based on our balance sheet analyses
and forecasts. Such transactions include investments in high quality liquid securities such as Japanese
government bonds and U.S. Treasury bonds and trading in other financial products such as interest rate
swaps and cross currency swaps.
‰ Global Investment. Through our treasury operations, we also seek to enhance our profitability by
diversifying our portfolio and strategically investing in financial products including corporate bonds and
funds.
Strategy under the Current Medium-Term Business Plan
Under the current medium-term business plan, for the three-year period ending March 31, 2021, the Global
Markets Business Group intends to undertake the following four initiatives designed to promote the MUFG
Group’s structural reforms.
‰
‰
‰
The Global Markets Business Group plans to improve its business portfolio by adjusting its focus to
growth areas and new areas, including the sales and trading business targeting institutional customers as
well as the origination and distribution business under the new integrated operations management
structure with the Global Corporate and Investment Banking Business Group. In addition, the Global
Markets Business Group plans to build a sustainable growth model for the investment products business
targeting non-institutional investors in Japan under the new integrated operations management structure
with the Asset Management & Investor Service Business Group, the Retail & Commercial Banking
Business Group and the Japanese Corporate and Investment Banking Business Group.
The Global Markets Business Group aims to reform the sales and trading business targeting corporate
customers through enhancement of our financial solutions capabilities by more effectively coordinating
capital markets transactions and global markets transactions and through reduction in transactions
dependent on our balance sheets.
The Global Markets Business Group strives to enhance the framework for collaboration and cooperation
between MUFG’s treasury operations unit and its counterparts at MUFG’s major subsidiaries to support
the MUFG Group’s sustainable growth by integrating the expertise in market risk management on a
group-wide basis and applying a unified approach to liquidity risk management.
44
‰
The Global Markets Business Group strives to establish business frameworks and infrastructure
designed to optimize and enhance integration and flexibility of the booking functions for global markets
transactions among MUFG’s major subsidiaries and to accelerate digitalization.
Global Strategic Alliance with Morgan Stanley
As of March 31, 2019, we held approximately 405 million shares of Morgan Stanley’s common stock
representing approximately 24.0 % of the voting rights in Morgan Stanley and Series C Preferred Stock with a
face value of approximately $521.4 million and 10% dividend. As of the same date, we had two representatives
appointed to Morgan Stanley’s board of directors. We adopted the equity method of accounting for our
investment in Morgan Stanley beginning with the fiscal year ended March 31, 2012.
In conjunction with Morgan Stanley, we formed two securities joint venture companies in May 2010 to
integrate our respective Japanese securities companies. We converted the wholesale and retail securities
businesses conducted in Japan by Mitsubishi UFJ Securities into Mitsubishi UFJ Morgan Stanley Securities.
Morgan Stanley contributed the investment banking operations conducted in Japan by its former wholly-owned
subsidiary, Morgan Stanley Japan, to Mitsubishi UFJ Morgan Stanley Securities, and converted the sales and
trading and capital markets businesses conducted in Japan by Morgan Stanley Japan into an entity called Morgan
Stanley MUFG Securities, Co., Ltd. We hold a 60% economic interest in Mitsubishi UFJ Morgan Stanley
Securities and Morgan Stanley MUFG Securities, and Morgan Stanley holds a 40% economic interest in
Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. We hold a 60% voting interest
and Morgan Stanley holds a 40% voting interest in Mitsubishi UFJ Morgan Stanley Securities, and we hold a
49% voting interest and Morgan Stanley holds a 51% voting interest in Morgan Stanley MUFG Securities.
Morgan Stanley’s and our economic and voting interests in the securities joint venture companies are held
through intermediate holding companies. We have retained control of Mitsubishi UFJ Morgan Stanley Securities
and we account for our interest in Morgan Stanley MUFG Securities under the equity method due to our
significant influence over Morgan Stanley MUFG Securities. The board of directors of Mitsubishi UFJ Morgan
Stanley Securities has fifteen members, nine of whom are designated by us and six of whom are designated by
Morgan Stanley. The board of directors of Morgan Stanley MUFG Securities has ten members, six of whom are
designated by Morgan Stanley and four of whom are designated by us. The CEO of Mitsubishi UFJ Morgan
Stanley Securities is designated by us and the CEO of Morgan Stanley MUFG Securities is designated by
Morgan Stanley.
We have also expanded the scope of our global strategic alliance with Morgan Stanley into other
geographies and businesses, including (1) a loan marketing joint venture that provides clients in the United States
with access to the world-class lending and capital markets services from both companies, (2) business referral
arrangements in Asia, Europe, the Middle East and Africa, covering capital markets, loans, fixed income sales
and other businesses, (3) global commodities referral arrangements whereby MUFG Bank and its affiliates refer
clients in need of commodities-related hedging solutions to certain affiliates of Morgan Stanley, and (4) an
employee secondment program to share best practices and expertise in a wide range of business areas.
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd., in which Mitsubishi UFJ Morgan Stanley
Securities holds 75%, and MUFG Bank holds the remaining 25%, of the voting rights, has an agreement with
Morgan Stanley. Mitsubishi UFJ Morgan Stanley PB Securities leverages MUFG’s broad customer base, utilizes
Morgan Stanley’s global and high quality insight, and furthers its collaborations with other group companies by
strengthening its coordination with Mitsubishi UFJ Morgan Stanley Securities. It aims for further development of
its wealth management business, which is one of the largest in Japan. In April 2019, Mitsubishi UFJ Morgan
Stanley Securities and Mitsubishi UFJ Morgan Stanley PB Securities agreed on a merger, whereby Mitsubishi
UFJ Morgan Stanley Securities will be the surviving company.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—If our strategic alliance
with Morgan Stanley fails, we could suffer financial or reputational loss.”
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Competition
We face strong competition in all of our principal areas of operation. The structural reforms in financial
industry regulations and recent developments in financial markets have resulted in some significant changes in
the Japanese financial system and prompted banks to merge or reorganize their operations. In addition,
development of new technologies such as artificial intelligence and blockchain has also allowed non-financial
institutions to enter the financial services industry with alternative services, thus changing the nature of
competition from other financial institutions as well as from other types of businesses. See “Item 3.D. Key
Information—Risk Factors—Risks Related to Our Business—Our business may be adversely affected by
competitive pressures, which have partly increased due to regulatory changes and recent market changes in the
financial industry domestically and globally.”
Japan
Since their formation in 2000 and 2001, the so-called Japanese “mega bank” groups, including us, the
Mizuho Financial Group and the Sumitomo Mitsui Financial Group, have continued to expand their businesses
and take measures designed to enhance their financial group capabilities. For example, in July 2013, Mizuho
Bank, Ltd. and Mizuho Corporate Bank, Ltd. merged, and the merged entity presently operates under the
corporate name of “Mizuho Bank, Ltd.” In November 2015, SMBC Trust Bank, Ltd., a subsidiary of Sumitomo
Mitsui Financial Group, acquired the retail banking business of Citibank Japan, Ltd.
Competition among the mega bank groups are expected to continue in various financial sectors as they have
recently announced plans to expand, or have expanded, their respective businesses. For example, in the securities
sector, in May 2010, in conjunction with Morgan Stanley, we created two securities joint venture companies in
Japan, Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities, by integrating the
operations of Mitsubishi UFJ Securities and Morgan Stanley Japan. In January 2013, Mizuho Securities and
Mizuho Investors Securities Co., Ltd. merged. For a discussion of the two securities joint venture companies
created by us and Morgan Stanley, see “—B. Business Overview—Global Strategic Alliance with Morgan
Stanley.”
In the retail business sector, customers often have needs for a broad range of financial products and services,
such as investment trusts and insurance products. Recently, competition has increased due to the development of
new products and distribution channels. For example, Japanese banks compete with one another by developing
innovative proprietary computer technologies that allow them to deliver basic banking services in a more
efficient manner and to create sophisticated new products in response to customer demand. Competition has also
increased since the introduction in January 2014 of the Japanese individual savings account system, generally
referred to as the NISA program, which currently offers tax exemptions on capital gains and dividend income for
investments up to ¥1.2 million a year for a maximum of five years. In addition, in December 2015, Sumitomo
Mitsui Trust Bank, Ltd. acquired Citi Cards Japan, Inc., which previously operated the credit card business of
Citigroup Inc. in Japan.
In the private banking sector, competition among the mega bank groups has intensified as a result of recent
corporate actions designed to strengthen their operations. We made Mitsubishi UFJ Merrill Lynch PB Securities
Co., Ltd. a wholly owned subsidiary in December 2012 to enhance our private banking services for high
net-worth customers, and changed its name to Mitsubishi UFJ Morgan Stanley PB Securities, Ltd. in March
2014. In April 2019, we announced a plan to merge Mitsubishi UFJ Morgan Stanley PB Securities into
Mitsubishi UFJ Morgan Stanley Securities. Sumitomo Mitsui Banking Corporation acquired the former Société
Générale Private Banking Japan, Ltd. from Société Générale S.A. and changed its name to SMBC Trust Bank,
Ltd. in October 2013.
In the consumer finance sector, recent regulatory reforms and legal developments have negatively impacted
the business environment, resulting in failures of several consumer finance companies and intensified
46
competition among consumer finance companies that have remained in business, particularly among those
affiliated with the mega banks. In April 2012, Promise Co., Ltd. became a wholly owned subsidiary of the
Sumitomo Mitsui Financial Group, and changed its name as SMBC Consumer Finance Co., Ltd. in July 2012.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our loans to
consumers and our shareholdings in companies engaged in consumer lending, changes in the business or
regulatory environment for consumer finance companies in Japan may further adversely affect our financial
results.”
The trust assets business is an area that is becoming increasingly competitive because of regulatory changes
in the industry that have expanded the products and services that can be offered since the mid-2000s. In addition,
there is growing corporate demand for changes in the trust regulatory environment, such as reforms of the
pension system and related accounting regulations under Japanese GAAP. Competition may increase in the
future as changes are made to respond to such corporate demand and regulatory barriers to entry are lowered.
Competition is also expected to intensify as a result of recent integrations and entrants in the industry. For
example, in August 2015, JP Asset Management Co., Ltd. was established as a joint venture with the Japan Post
Group, Sumitomo Mitsui Trust Bank and Nomura Holdings, Inc. holding 50%, 30% and 20% equity interests,
respectively, in the joint venture. In October 2016, the Mizuho Financial Group integrated Mizuho Asset
Management Co., Ltd., Shinko Asset Management Co., Ltd. and the asset management business of Mizuho
Trust & Banking Co., Ltd., all of which were asset management subsidiaries of the Mizuho Financial Group in
Japan, and DIAM Co., Ltd., which was an asset management joint venture between the Mizuho Financial Group
and Dai-ichi Life Insurance Company in Japan. In July 2016, the Sumitomo Mitsui Financial Group made
Sumitomo Mitsui Asset Management Co., Ltd. a consolidated subsidiary through the acquisition of additional
equity interest in the asset management company. In March 2017, the Mizuho Financial Group announced plans
to integrate Trust and Custody Services Bank, Ltd., its trust bank subsidiary specialized in the asset
administration business, with Japan Trustee Services Bank, Ltd., which is a trust bank joint venture between
Sumitomo Mitsui Trust Holdings and Resona Bank, Ltd. specialized in the asset administration business. In May
2018, the Sumitomo Mitsui Financial Group announced a planned merger between Sumitomo Mitsui Asset
Management and Daiwa SB Investments Ltd.
In recent years, the Japanese government has identified several governmental financial institutions as
candidates to privatize. Under the current postal privatization law, Japan Post Bank and Japan Post Insurance
may enter into new business areas upon obtaining government approvals, and if Japan Post Holdings’ equity
holdings decrease to 50% or below, the two companies will be allowed to enter into new business areas upon
submission of a notice to the government. In such case, the Japan Post Group companies may seek to enter into
new financial businesses and increasingly compete with us. Japan Post Holdings currently holds approximately
89% of the shares of Japan Post Bank. Japan Post Holdings’ equity holding in Japan Post Insurance decreased
from around 89% to around 64% through a public offering of shares in April 2019. In addition, the Japanese
government is expected to decrease its shareholding in Japan Post Holdings to just above one-third, which is the
minimum shareholding required for the Japanese government under the law, in September 2019. In addition,
Japan Post Bank is one of the world’s largest holders of deposits, which provide a cost-effective source of
funding for the bank. In April 2019, the cap imposed by law on the amount of deposits that Japan Post Bank may
accept from each customer was raised from an aggregate of ¥13 million to ¥13 million in ordinary deposits plus
¥13 million in time deposits. See “—B. Business Overview—The Japanese Financial System—Government
Financial Institutions.”
The mega bank groups face significant competition with other financial groups as well as companies that
have traditionally not been engaged in banking services. For example, the Nomura Group has been a major
player in the securities market in Japan. In addition, various Japanese non-bank financial institutions and
non-financial companies have entered into the Japanese banking sector. For example, Orix Corporation, a
non-bank financial institution, as well as the Seven & i Holdings Co., Ltd., Sony Corporation and Aeon Co., Ltd.,
which were non-financial companies, offer various banking services, often through non-traditional distribution
channels. Further, development of new technologies such as artificial intelligence, or AI, and blockchain has also
47
allowed non-financial institutions to enter financial services industry with alternative services such as electronic
settlement services, and these new entrants could become substantial competition to us.
Foreign
In the United States, we face substantial competition in all aspects of our business. We face competition
from other large U.S. and non-U.S. money-center banks, as well as from similar institutions that provide
financial services. Through MUFG Union Bank, we currently compete principally with U.S. and non-U.S.
money-center and regional banks, thrift institutions, asset management companies, investment advisory
companies, consumer finance companies, credit unions and other financial institutions.
In other international markets, we face competition from commercial banks and similar financial
institutions, particularly major international banks and the leading domestic banks in the local financial markets
in which we conduct business. For example, Japanese mega banks, including us, and other major international
banks have been expanding their operations in the Asian market, where leading local banks also have been
growing and increasing their presence recently. Furthermore, we are aiming to expand our retail and small and
medium-sized enterprise businesses along with our corporate banking business in Southeast Asia through our
acquisition of Krungsri in Thailand and Bank Danamon in Indonesia as well as our strategic investments in
VietinBank in Vietnam and Security Bank in the Philippines, and to compete with leading local banks in such
businesses. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Our strategy to
expand the range of our financial products and services and the geographic scope of our business globally may
fail if we are unable to anticipate or manage new or expanded risks that entail such expansion.” For a discussion
of recent developments, see “Item 5. Operating and Financial Review and Prospects—Recent Developments.”
In addition, we may face further competition as a result of recent investments, mergers and other business
tie-ups among global financial institutions, including, for example, our recent acquisitions of, and business and
capital alliances with, asset management, administration and custody services companies.
The Japanese Financial System
Japanese financial institutions may be categorized into three types:
‰
the central bank, namely the Bank of Japan;
‰
‰
private banking institutions; and
government financial institutions.
The Bank of Japan
The Bank of Japan’s role is to maintain price stability and the stability of the financial system to ensure a
solid foundation for sound economic development.
Private Banking Institutions
Private banking institutions in Japan are commonly classified into two categories (the following numbers
are based on information published by the FSA available as of May 1, 2019):
‰
‰
ordinary banks (123 ordinary banks and 56 foreign commercial banks with ordinary banking
operations); and
trust banks (14 trust banks, including two Japanese subsidiaries of foreign financial institutions).
Ordinary banks in turn are classified as city banks, of which there are four, including MUFG Bank, and
regional banks, of which there are 104 and other banks, of which there are 15. In general, the operations of
ordinary banks correspond to commercial banking operations in the United States. City banks and regional banks
are distinguished based on head office location as well as the size and scope of their operations.
48
The city banks are generally considered to constitute the largest and most influential group of banks in
Japan. Generally, these banks are based in large cities, such as Tokyo and Osaka, and operate nationally through
networks of branch offices. The city banks provide a wide variety of banking and other financial products and
services to large corporate customers, including the major industrial companies in Japan, as well as small and
medium-sized companies and retail customers.
With some exceptions, the regional banks tend to be much smaller in terms of total assets than the city
banks. Each of the regional banks is based in one of the Japanese prefectures and extends its operations into
neighboring prefectures. Their customers are mostly regional enterprises and local public utilities. The regional
banks also lend to large corporations. In line with the recent trend among financial institutions toward mergers or
business tie-ups, various regional banks have announced or are currently negotiating or pursuing integration
transactions.
Trust banks, including Mitsubishi UFJ Trust and Banking, provide various trust services relating to money
trusts, pension trusts and investment trusts and offer other services relating to real estate, stock transfer agency
and testamentary services, as well as banking services.
In recent years, almost all of the city banks have consolidated with other city banks and, in some cases,
integrated with trust banks. Consolidation or integration among these banks was achieved, in most cases, through
the use of a bank holding company.
In addition to ordinary banks and trust banks, other private financial institutions in Japan, including banks
operated by non-financial companies, shinkin banks, or credit associations, and credit cooperatives, are engaged
primarily in making loans to small businesses and individuals.
Government Financial Institutions
There are a number of government financial institutions in Japan, which are corporations wholly owned or
majority-owned by the government and operate under the government’s supervision. Their funds are provided
mainly from government sources. Certain types of operations undertaken by these institutions have been or are
planned to be assumed by, or integrated with the operations of, private corporations through privatizations and
other measures.
Among them are the following:
‰
‰
‰
The Development Bank of Japan, which was established for the purpose of contributing to the economic
development of Japan by extending long-term loans, mainly to primary and secondary sector industries,
and which was reorganized as a joint stock company in October 2008 as part of its ongoing privatization
process, with the government being required by law to continue to hold 50% or more of the shares in the
bank until the completion of certain specified investment operations, which the bank is required to
endeavor to achieve by March 2026, and more than one-third for an unspecified period thereafter;
Japan Finance Corporation, which was formed in October 2008, through the merger of the international
financial operations of the former Japan Bank for International Cooperation, National Life Finance
Corporation, Agriculture, Forestry and Fisheries Finance Corporation, and Japan Finance Corporation
for Small and Medium Enterprise, for the primary purposes of supplementing and encouraging the
private financing of exports, imports, overseas investments and overseas economic cooperation, and
supplementing private financing to the general public, small and medium-sized enterprises and those
engaged in agriculture, forestry and fishery. In April 2012, Japan Finance Corporation spun off its
international operations to create Japan Bank for International Cooperation as a separate government-
owned entity;
Japan Housing Finance Agency, which was originally established in June 1950 as the Government
Housing Loan Corporation for the purpose of providing housing loans to the general public, and which
49
was reorganized as an incorporated administrative agency and started to specialize in securitization of
housing loans in April 2007; and
‰
The Japan Post Group companies, a group of joint stock companies including Japan Post Bank, which
were formed in October 2007 as part of the Japanese government’s privatization plan for the former
Japan Post, a government-run public services corporation, which had been the Postal Service Agency
until March 2003. In November 2015, approximately 11% of the outstanding shares of each of Japan
Post Bank, Japan Post Insurance and Japan Post Holdings were sold to the public, and these companies
are currently listed on the Tokyo Stock Exchange. In September 2017, an additional 22% of the
outstanding shares of Japan Post Holdings were sold to the public. The Japanese government is expected
to further decrease its shareholding in Japan Post Holdings to just above one-third, which is the
minimum shareholding required for the Japanese government by law, in September 2019.
Supervision and Regulation
Japan
Supervision. The FSA is responsible for supervising and overseeing financial institutions, making policy
for the overall Japanese financial system and conducting insolvency proceedings with respect to financial
institutions. The Bank of Japan, as the central bank for financial institutions, also has supervisory authority over
banks in Japan, based primarily on its contractual agreements and transactions with the banks.
The Banking Law. Among the various laws that regulate financial institutions, the Banking Law and its
subordinated orders and ordinances are regarded as the fundamental law for ordinary banks and other private
financial institutions. The Banking Law addresses capital adequacy, inspections and reporting to banks and bank
holding companies, as well as the scope of business activities, disclosure, accounting, limitation on granting
credit and standards for arm’s length transactions for them. Bank holding companies, banks and other financial
institutions are required to establish an appropriate system to better cope with conflicts of interest that may arise
from their business operations.
Legislation has recently been passed by, or introduced to, the Diet to amend various financial regulation
related laws, including the Banking Law, which includes certain deregulations on restrictions for shareholdings
by banks. For example, although a bank is generally prohibited from holding more than 5% of the outstanding
shares of another company (other than certain financial institutions) under the Banking Law, the bank may be
exempt from such requirement and allowed to hold more than 5% of the outstanding shares of such company
under amendments to the Banking Law that became effective in April 2014, if, among other exempted cases, a
bank’s shareholding contributes to revitalizing a company’s business or the local economy related to such
company. In May 2016, the Diet passed legislation to amend the Banking Law to allow banks and bank holding
companies with the FSA’s approval to hold controlling interests in certain financial technology companies. The
amendments became effective as of April 1, 2017. As a result of the amendments, banks and bank holding
companies may now acquire and hold more than 5% of the voting rights in certain financial technology
companies, subject to the approval of the Commissioner of the FSA. In May 2017, a bill to amend the Banking
Law was passed by the Diet, with the aim to promote affiliation and cooperation between financial institutions
and financial technology companies while securing the protection of customers. The amendment became
effective in June 2018. Further, a bill to amend the Banking Law was passed by the Diet in May 2019 and, under
the amendments, it is expected that banks will be allowed to engage in certain information provision services
relating to customer and other information.
Bank holding company regulations. A bank holding company is prohibited from carrying out any business
other than the management of its subsidiaries and other incidental businesses. A bank holding company may have
any of the following as a subsidiary: a bank, a securities company, an insurance company, a foreign subsidiary
that is engaged in the banking, securities or insurance business and any company that is engaged in a finance-
related business, such as a credit card company, a leasing company, investment advisory company, or financial
50
technology company as permitted by the April 1, 2017 amendments to the Banking Law. Certain companies that
are designated by a ministerial ordinance as those that cultivate new business fields may also become the
subsidiaries of a bank holding company.
In addition, under the April 1, 2017 amendments to the Banking Law, a bank holding company (i) is
required to perform certain specified functions as a bank holding company to ensure effective management of its
subsidiaries and (ii) is allowed to engage in certain specified common operations of its subsidiaries so as to
improve the efficiency of the operations of its group companies.
Capital adequacy. The capital adequacy guidelines adopted by the FSA that are applicable to Japanese
bank holding companies and banks with international operations closely follow the risk-weighted approach
introduced by the Basel Committee on Banking Supervision of the Bank for International Settlements.
Basel II, as adopted by the FSA, has been applied to Japanese banks since March 31, 2007. Basel III, as
adopted by the FSA, has been applied to Japanese banking institutions with international operations conducted
through their foreign offices since March 31, 2013. Basel III is built on “three pillars”: (1) minimum capital
requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market
discipline through the disclosure of information.
The Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global
regulatory framework, which has been referred to as “Basel III,” in July and September 2010. In December 2010,
the Basel Committee agreed on the details of the Basel III rules. The agreement on Basel III includes the
following: (1) raising the quality of capital to ensure banks are able to better absorb losses both on a going
concern basis and on a gone concern basis, (2) increasing the risk coverage of the capital framework, in particular
for trading activities, securitizations, exposures to off-balance sheet vehicles and counterparty credit exposures
arising from derivatives, (3) raising the level of minimum capital requirements, including an increase in the
minimum common equity requirement from 2% to 4.5%, which was phased in between January 1, 2013 and the
end of the calendar year 2014, and a capital conservation buffer of 2.5%, which was phased in between
January 1, 2016 and the end of the calendar year 2018, bringing the total common equity requirement to 7%,
(4) introducing an internationally harmonized leverage ratio to serve as a backstop to the risk-based capital
measure and to contain the build-up of excessive leverage in the system, (5) raising standards for the supervisory
review process (Pillar 2) and public disclosures (Pillar 3), together with additional guidance in the areas of
valuation practices, stress testing, liquidity risk management, corporate governance and compensation,
(6) introducing minimum global liquidity standards consisting of both a short term liquidity coverage ratio and a
longer term structural net stable funding ratio, and (7) promoting the build-up of capital buffers that can be drawn
down in periods of stress, including both a capital conservation buffer and a countercyclical buffer to protect the
banking sector from periods of excess credit growth.
Under Basel III, Common Equity Tier 1, Tier 1 and total capital ratios are used to assess capital adequacy,
which ratios are determined by dividing applicable capital components by risk-weighted assets. Total capital is
defined as the sum of Tier 1 and Tier 2 capital.
Under Basel III, Tier 1 capital is defined to include Common Equity Tier 1 and Additional Tier 1 capital.
Common Equity Tier 1 capital is a new category of capital primarily consisting of:
‰
‰
‰
‰
common stock,
capital surplus,
retained earnings, and
accumulated other comprehensive income.
Regulatory adjustments including certain intangible fixed assets, such as goodwill, and defined benefit
pension fund net assets (prepaid pension costs) will be deducted from Common Equity Tier 1 capital.
51
Additional Tier 1 capital generally consists of Basel III compliant preferred securities and, during the
transition period, other capital that meets Tier I requirements under the former Basel II standards, net of
regulatory adjustments.
Tier 2 capital generally consists of:
‰ Basel III compliant subordinated obligations,
‰
during the transition period, capital that meets Tier II requirements under the former Basel II standards,
‰
‰
allowances for credit losses, and
non-controlling interests in subsidiaries’ Tier 2 capital instruments.
In order to qualify as Tier 1 or Tier 2 capital under Basel III, applicable instruments such as preferred shares
and subordinated debt must have a clause in their terms and conditions that requires them to be written-off or
forced to be converted into common stock upon the occurrence of certain trigger events.
Risk-weighted assets are the sum of risk-weighted assets compiled for credit risk purposes, quotient of
dividing the amount equivalent to market risk by 8%, and quotient of dividing the amount equivalent to
operational risk by 8%, and also include any amount to be added due to transitional measures as well as floor
adjustments, if necessary. Risk-weighted assets include the capital charge of the credit valuation adjustment, or
CVA, the credit risk related to asset value correlation multiplier for large financial institutions, the 250% risk-
weighted threshold items not deducted from Common Equity Tier 1 capital, and certain Basel II capital
deductions that were converted to risk-weighted assets under Basel III, such as securitizations and significant
investments in commercial entities. Certain Basel III provisions were adopted by the FSA with transitional
measures and became effective March 31, 2013.
The capital ratio standards applicable to us are as follows:
‰
‰
‰
a minimum total capital ratio of 8.0%,
a minimum Tier 1 capital ratio of 6.0%, and
a minimum Common Equity Tier 1 capital ratio of 4.5%.
These minimum capital ratios are applicable to MUFG on a consolidated basis and to MUFG Bank and
Mitsubishi UFJ Trust and Banking on a consolidated as well as stand-alone basis.
We have been granted an approval by the FSA to exclude the majority of our investment in Morgan Stanley
from being subject to double gearing adjustments. The approval was granted for a 10-year period, but the
approval amount will be phased out by 20% each year starting from March 31, 2019. As of March 31, 2019, a
full application of double gearing adjustments with respect to our investment in Morgan Stanley would have
reduced our Common Equity Tier 1 capital ratio by approximately 0.9%.
The Financial Stability Board identified us as a global systematically important bank, or G-SIB, in its most
recent annual report published in November 2018, and is expected to update the list of G-SIB annually. In
December 2015, the FSA also designated us as a G-SIB as well as a domestic systemically important bank
generally referred to as a “D-SIB.”
Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer and G-SIB
surcharge requirements became applicable to Japanese banking institutions with international operations
conducted through foreign offices, including us. The requirements as of March 31, 2019 consist of a capital
conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.04% in addition to the
4.50% minimum Common Equity Tier 1 capital ratio.
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In December 2017, the Group of Central Bank Governors and Heads of Supervision released final Basel III
reforms. The reforms are designed, among other things, to help reduce excessive variability in risk-weighted
assets among banks and improve the comparability and transparency of banks’ risk-based capital ratios. The
reforms endorsed by the Group of Central Bank Governors and Heads of Supervision include the following
elements:
‰
‰
‰
‰
‰
‰
a revised standardized approach for credit risk, which is designed to improve the robustness and risk
sensitivity of the existing approach;
revisions to the internal ratings-based approach for credit risk, where the use of the most advanced
internally modelled approaches for low-default portfolios will be limited;
revisions to CVA framework, including the removal of the internally modelled approach and the
introduction of a revised standardized approach;
a revised standardized approach for operational risk, which will replace the existing standardized
approaches and the advanced measurement approaches;
revisions to the measurement of the leverage ratio and a leverage ratio buffer for G-SIBs, which will
take the form of a Tier 1 capital buffer set at 50% of a G-SIB’s risk-weighted capital buffer; and
an aggregate output floor, which is designed to ensure that banks’ risk-weighted assets generated by
internal models are no lower than 72.5% of risk-weighted assets as calculated by the Basel III
framework’s standardized approaches. Banks will also be required to disclose their risk-weighted assets
based on these standardized approaches.
Most of the reforms are expected to become effective on January 1, 2022, subject to implementation through
legislation and regulation in each of the relevant jurisdictions, including Japan.
In January 2019, the Group of Central Bank Governors and Heads of Supervision approved the Basel
Committee on Banking Supervision’s finalized market risk capital framework. The approved market risk
framework is expected to become effective on January 1, 2022, subject to implementation through legislation and
regulation in each of the relevant jurisdictions, including Japan.
For a discussion on our capital ratios, see “Item 5.B. Operating and Financial Review and Prospects—
Liquidity and Capital Resources—Capital Adequacy.”
Leverage ratio.
Japanese banks and bank holding companies with international operations are required to
disclose their leverage ratios calculated in accordance with the methodology prescribed in the FSA guidance that
has been adopted to implement the relevant Basel III standard. The leverage ratio is designed for monitoring and
preventing the build-up of excessive leverage in the banking sector and is expressed as the ratio of Tier 1 capital
to total balance sheet assets adjusted in accordance with the FSA guidance. In December 2017, the Group of
Central Bank Governors and Heads of Supervision announced final Basel III reforms. The announced reforms
include the revisions to the measurement of the leverage ratio and a 3.00% minimum leverage ratio requirement,
plus a G-SIB leverage ratio buffer equal to 50% of the applicable G-SIB capital surcharge. The announcement
sets forth implementation dates of January 1, 2018 for the minimum leverage ratio requirement and January 1,
2022 for the G-SIB leverage ratio buffer requirement. In Japan, the minimum leverage ratio requirement as of
March 31, 2019 is 3.00%.
Total loss-absorbing capacity.
In November 2015, the Financial Stability Board issued the final Total
Loss-Absorbing Capacity, or TLAC, standard for G-SIBs, including us. The Financial Stability Board’s TLAC
standard is designed to ensure that if a G-SIB fails, it has sufficient loss-absorbing and recapitalization capacity
available in resolution to implement an orderly resolution that minimizes impacts on financial stability, ensures
the continuity of critical functions, and avoids exposing public funds to loss. The Financial Stability Board’s
TLAC standard defines a minimum requirement for the instruments and liabilities that should be readily
available to absorb losses in resolution.
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The Japanese TLAC Standard, which was published by the FSA in March 2019 and became applicable to
G-SIBs in Japan on March 31, 2019, and the FSB’s TLAC standard require entities designated as Domestic
Resolution Entities for Covered SIBs to meet certain minimum external total loss-absorbing capacity, or External
TLAC, requirements and to cause any of their material subsidiaries in Japan deemed systemically important by
the FSA or their foreign subsidiaries subject to TLAC or similar requirements in the relevant jurisdictions to
maintain certain minimum level of capital and debt having internal total loss-absorbing and recapitalization
capacity, or Internal TLAC.
In the Japanese TLAC Standard, the FSA has designated the relevant ultimate holding companies in Japan
as Domestic Resolution Entities for the Covered SIBs and, in our case, MUFG as the Domestic Resolution Entity
for our Group, making MUFG subject to the External TLAC requirements in Japan. The FSA has also designated
MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Morgan Stanley Securities as MUFG’s
material subsidiaries in Japan, which are subject to the Internal TLAC requirements applicable to MUFG.
External TLAC debt generally consists of Basel III compliant regulatory capital, including, during the
transition period, capital that meets the applicable regulatory capital requirements under the former Basel II
standards, and the Japanese TLAC Standard compliant obligations, net of regulatory adjustments. Internal TLAC
debt generally consists of Basel III compliant regulatory capital, including, during the transition period, capital
that meets the applicable regulatory capital requirements under the former Basel II standards, and the Japanese
TLAC Standard compliant subordinated obligations, net of regulatory adjustments. The Japanese TLAC Standard
does not require that, in order for unsecured senior debt issued by the Domestic Resolution Entity of a Japanese
G-SIB to qualify as External TLAC debt, such debt be subject to any contractual write-down, write-off or
conversion provisions or to any subordination provisions so long as its creditors are recognized as structurally
subordinated to the creditors of its subsidiaries and affiliates by the FSA on the ground that the amount of
excluded liabilities of such Domestic Resolution Entity ranking pari passu with, or junior to, its unsecured senior
liabilities does not, in principle, exceed 5% of the aggregate amount of its External TLAC. In contrast, Internal
TLAC debt incurred by a material subsidiary of a Japanese G-SIB is required to be subject to contractual loss
absorption provisions and to be subordinated to such subsidiary’s excluded liabilities.
The Financial Stability Board’s TLAC standard requires a G-SIB to hold TLAC in an amount not less than
16% of its risk-weighted assets and 6% of the applicable Basel III leverage ratio denominator by January 1, 2019,
and not less than 18% of its risk-weighted assets and 6.75% of the applicable Basel III leverage ratio
denominator by January 1, 2022.
The Japanese TLAC Standard requires a Japanese G-SIB, including us, to hold external TLAC debt in an amount
not less than 16% of its risk-weighted assets and 6% of the applicable Basel III leverage ratio denominator on and after
March 31, 2019, and not less than 18% of its risk-weighted assets and 6.75% of the applicable Basel III leverage ratio
denominator on and after March 31, 2022. Under the FSA TLAC Standard, Japanese G-SIBs are or will be allowed to
count the Japanese Deposit Insurance Fund Reserves in an amount equivalent to 2.5% of their consolidated risk-
weighted assets from 2019 and 3.5% of their consolidated risk-weighted assets from 2022 as external TLAC.
Under the Japanese TLAC Standard, the FSA may order the Domestic Resolution Entity of a Japanese
G-SIB to submit a report outlining an improvement plan if the External TLAC ratio of the Domestic Resolution
Entity or the Internal TLAC of its material subsidiaries in Japan falls below the minimum requirements. If the
FSA further deems it necessary to ensure improvement, the FSA may issue a business improvement order to such
Domestic Resolution Entity.
The Domestic Resolution Entity may also be subject to a capital distribution constraints plan if the capital
buffers are used and reduced below the required level to make up for its required External TLAC on a risk-
weighted assets basis.
See “Item 3.D Key Information—Risk Factors—Risks Related to Our Business—may not be able to
maintain our capital ratios and other regulatory ratios above minimum required levels, which could result in
various regulatory actions, including the suspension of some or all of our operations.”
54
Prompt corrective action system. Under the prompt corrective action system, the FSA may take corrective
action, if a bank or a bank holding company fails to meet the minimum capital adequacy ratio or leverage ratio.
These actions include requiring such bank or bank holding company to formulate and implement capital
improvement measures, requiring it to reduce assets or the bank’s business operations or take other specific
actions, and issuing an order to dispose of shares of its subsidiaries or suspend all or part of the bank’s business
operations.
Capital distribution constraints system. Under the capital distribution constraints system, the FSA may
order a bank or a bank holding company to submit and carry out a capital distribution constraints plan, if the
bank or the bank holding company fails to hold Common Equity Tier 1 capital required as applicable capital
buffers. A capital distribution plan must be determined to be reasonably designed to restore the required capital
buffers by restricting capital distributions, such as dividends, share buybacks and bonus payments, up to a certain
amount depending on the level of the deficit in the required capital buffers of the bank or the bank holding
company.
Prompt warning system. Under the prompt warning system, the FSA may take precautionary measures to
maintain and promote the sound operations of financial institutions, even before those financial institutions
become subject to prompt corrective actions. These measures require a financial institution to enhance
profitability, credit risk management, stability and cash flows.
Deposit insurance system and government measures for troubled financial institutions. The Deposit
Insurance Act is intended to protect depositors if a financial institution fails to meet its obligations. The Deposit
Insurance Corporation was established in accordance with the Deposit Insurance Act.
City banks, including MUFG Bank, regional banks, trust banks, including Mitsubishi UFJ Trust and
Banking, and various other credit institutions participate in the deposit insurance system on a compulsory basis.
Under the Deposit Insurance Act, the maximum amount of protection is ¥10 million per customer within
one bank. The ¥10 million maximum applies to all deposits except for non-interest bearing deposits, which are
non-interest bearing deposits redeemable on demand and maintained by depositors primarily in settlement
accounts for payment and settlement purposes. Deposits in settlement accounts are fully protected without a
maximum amount limitation. Certain types of deposits are not covered by the deposit insurance system, such as
foreign currency deposits and negotiable certificates of deposit. As of April 1, 2019, the Deposit Insurance
Corporation charged an insurance premium equal to 0.045% per year on the deposits in the settlement accounts,
and a premium equal to 0.032% per year on the deposits in other accounts.
Under the Deposit Insurance Act, a Financial Reorganization Administrator can be appointed by the Prime
Minister if a bank’s liabilities exceed its obligations or has suspended, or is likely to suspend, repayment of
deposits. The Financial Reorganization Administrator will take control of the assets of the troubled bank, dispose
of the assets and search for another institution willing to take over the troubled bank’s business. The troubled
bank’s business may also be transferred to a “bridge bank” established by the Deposit Insurance Corporation to
enable the troubled bank’s operations to be maintained and continue temporarily, and the bridge bank will seek to
transfer the troubled bank’s assets to another financial institution or dissolve the troubled bank. The Deposit
Insurance Corporation protects deposits, as described above, either by providing financial aid for costs incurred
by the financial institution succeeding the insolvent bank or by paying insurance money directly to depositors.
The financial aid provided by the Deposit Insurance Corporation may take the form of a monetary grant, loan or
deposit of funds, purchase of assets, guarantee or assumption of debt, subscription for preferred stock, or loss
sharing.
The Deposit Insurance Act also provides for exceptional measures to cope with systemic risk in the financial
industry. Where the Prime Minister recognizes that the failure of a bank which falls into any of (i) through
55
(iii) below may cause an extremely grave problem to the maintenance of the financial order in Japan or the
region where such bank is operating, or systemic risk, if none of the measures described in (i) through (iii) below
is implemented, the Prime Minister may, following deliberation by the Financial Crisis Response Council,
confirm (nintei) the need to take any of the following measures: (i) if the bank does not fall into either of the
categories described in (ii) or (iii) below, the Deposit Insurance Corporation may subscribe for shares or
subordinated bonds of, or extend subordinated loans to the bank, or subscribe for shares of the bank holding
company of the bank, in order to enhance the bank’s regulatory capital (“Item 1 measures” (dai ichigo sochi));
(ii) if the bank has suspended, or is likely to suspend, repayment of deposits, or its liabilities exceed its assets,
financial aid exceeding the pay-off cost may be made available to such bank (“Item 2 measures” (dai nigo
sochi)); and (iii) if the bank has suspended, or is likely suspend, repayment of deposits, and its liabilities exceed
its assets, and the systemic risk cannot be avoided by the measures mentioned in (ii) above, the Deposit Insurance
Corporation may acquire all of the bank’s shares (“Item 3 measures” (dai sango sochi)). The expenses for the
implementation of the above measures will be borne by the banking industry, with an exception under which the
Japanese government may provide partial subsidies for such expenses.
Under the new orderly resolution regime established by amendments to the Deposit Insurance Act that were
promulgated in June 2013 and became effective on March 6, 2014, financial institutions, including banks,
insurance companies and securities companies and their holding companies, are subject to the regime. Further,
where the Prime Minister recognizes that the failure of a financial institution which falls into either of (a) or
(b) below may cause a significant disruption to the Japanese financial market or system in Japan if measures
described in (a) or measures described in (b) are not taken, the Prime Minister may, following deliberation by the
Financial Response Crisis Council, confirm (nintei) that any of the following measures need to be applied to the
financial institution:
(a)
(b)
if the financial institution is not a financial institution whose liabilities exceed its assets, the financial
institution shall be placed under the special supervision by the Deposit Insurance Corporation over the
financial institution’s business operations and management and the disposal of the financial
institution’s assets, and the Deposit Insurance Corporation may provide the financial institution with
loans or guarantees necessary to avoid the risk of significant disruption to the financial system in
Japan, or subscribe for shares or subordinated bonds of, or extend subordinated loans to, the financial
institution, taking into consideration the financial condition of the financial institution (“Specified Item
1 measures” (tokutei dai ichigo sochi) under Article 126-2, Paragraph 1, Item 1 of the Deposit
Insurance Act); or
if the financial institution is a financial institution whose liabilities exceed, or are likely to exceed, its
assets or which has suspended, or is likely to suspend, payments on its obligations, the financial
institution shall be placed under the special supervision by the Deposit Insurance Corporation over the
financial institution’s business operations and management and the disposal of the financial
institution’s assets, and the Deposit Insurance Corporation may provide financial aid necessary to assist
a merger, business transfer, corporate split or other reorganization in respect of such failed financial
institution (“Specified Item 2 measures” (tokutei dai nigo sochi) under Article 126-2, Paragraph 1,
Item 2 of the Deposit Insurance Act).
If the Prime Minister confirms that any of the measures set out in (b) above needs to be applied to a failed
financial institution, the Prime Minister may order that the failed financial institution’s business operations and
management and the disposal of the failed financial institution’s assets be placed under the special control of the
Deposit Insurance Corporation under Article 126-5 of the Deposit Insurance Act. The business or liabilities of the
financial institution subject to the special supervision or the special control of the Deposit Insurance Corporation
as set forth above may also be transferred to a “bridge financial institution” established by the Deposit Insurance
Corporation to enable the financial institution’s operations to be maintained and continue temporarily, or the
financial institution’s liabilities to be repaid, and the bridge financial institution will seek to transfer the financial
institution’s business or liabilities to another financial institution or dissolve the financial institution. The
financial aid provided by the Deposit Insurance Corporation to assist a merger, business transfer, corporate split
or other reorganization in respect of the failed financial institution set out in (b) above may take the form of a
56
monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription for
preferred stock or subordinated bonds, subordinated loan, or loss sharing. If the Deposit Insurance Corporation
has provided such financial assistance, the Prime Minister may designate the movable assets and claims of the
failed financial institution as not subject to attachment under Article 126-16 of the Deposit Insurance Act, and
such merger, business transfer, corporate split or other reorganization may be conducted outside of the court-
administrated insolvency proceedings. If the financial institution subject to the special supervision or the special
control by the Deposit Insurance Corporation as set forth above has liabilities that exceed, or are likely to exceed,
its assets, or has suspended, or is likely to suspend, payments on its obligations, the financial institution may
transfer all or a material portion of its business or all or a material portion of shares of its subsidiaries or
implement corporate split or certain other corporate actions with court permission in lieu of any shareholder
resolutions under Article 126-13 of the Deposit Insurance Act. In addition, the Deposit Insurance Corporation
must request other financial institution creditors of the failed financial institution to refrain from exercising their
rights against the failed financial institution until measures necessary to avoid the risk of significant disruption to
the financial system in Japan have been taken, if it is recognized that such exercise of their rights is likely to
make the orderly resolution of the failed financial institution difficult.
The expenses for implementation of the measures under this regime will be borne by the financial industry,
with an exception under which the Japanese government may provide partial subsidies for such expenses within
the limit to be specified in the government budget in cases where it is likely to cause extremely serious hindrance
to the maintenance of the credit system in Japan or significant turmoil in the Japanese financial market or system
if such expenses are to be borne only by the financial industry.
According to the announcement made by the FSA in March 2014, (i) Additional Tier 1 instruments and
Tier 2 instruments under Basel III issued by a bank must be written down or converted into common shares when
the Prime Minister confirms (nintei) that Item 2 measures (dai nigo sochi), Item 3 measures (dai sango sochi), or
Specified Item 2 measures (tokutei dai nigo sochi) need to be applied to the bank and (ii) Additional Tier 1
instruments and Tier 2 instruments under Basel III issued by a bank holding company must be written down or
converted into common shares when the Prime Minister confirms (nintei) that Specified Item 2 measures (tokutei
dai nigo sochi) need to be applied to the bank holding company.
Further, in an explanatory paper outlining the FSA’s approach for the introduction of the TLAC framework
in Japan published by the FSA in April 2016 and revisions to the paper published by the FSA in April 2018,
collectively the FSA TLAC Approach, and the TLAC standard set forth in the regulatory notices and related
materials for the implementation of the TLAC requirements in Japan published by the FSA in March 2019, or the
Japanese TLAC Standard, the FSA expressed its view that single point of entry, or SPE, resolution, in which a
single national resolution authority applies its resolution tools to the ultimate holding company in Japan of a
financial group, would be the preferred strategy for resolution of Japanese G-SIBs and a domestic systemically
important bank, or D-SIBs, deemed to be in particular need for a cross-border resolution arrangement and of
particular systemic significance to the Japanese financial system if it fails (such G-SIBs and D-SIBs, collectively,
“Covered SIBs”). However, it is uncertain which measure is to be taken in a given case, including whether or not
the SPE resolution strategy will actually be elected and implemented in a given case, and the actual measures to
be taken will be determined on a case-by-case basis considering the actual condition of the relevant Japanese
G-SIB in distress. Under a possible model of resolution of a Japanese G-SIB based on the SPE resolution strategy
as described in the Japanese TLAC Standard, if the FSA determines that a material subsidiary in Japan of a
financial institution that is a Japanese G-SIB is non-viable due to material deterioration in its financial condition
and issues an order concerning restoration of financial soundness, including recapitalization and restoration of
liquidity of such material subsidiary, to the ultimate holding company in Japan designated by the FSA as
Domestic Resolution Entity for the financial institution under Article 52-33, Paragraph 1 of the Banking Act of
Japan (Act No. 59 of 1981), the material subsidiary’s Internal TLAC instruments will be written off or, if
applicable, converted into equity in accordance with the applicable contractual loss absorption provisions of such
Internal TLAC instruments. Following the write-off or conversion of Internal TLAC instruments, if the Prime
Minister recognizes that the financial institution’s liabilities exceed, or are likely to exceed, its assets, or that it
has suspended, or is likely to suspend, payments on its obligations, as a result of the financial institution’s loans
57
to, or other investment in, the material subsidiary becoming subject to loss absorption or otherwise, and further
recognizes that the failure of such financial institution is likely to cause a significant disruption to the Japanese
financial market or system, the Prime Minister may, following deliberation by the Financial Crisis Response
Council, confirm that measures set forth in Article 126-2, Paragraph 1, Item 2 of the Deposit Insurance Act,
generally referred to as Specified Item 2 Measures (tokutei dai nigo sochi), need to be applied to the financial
institution for its orderly resolution. Any such confirmation by the Prime Minister also triggers the point of
non-viability clauses of Additional Tier 1 and Tier 2 instruments issued by the financial institution, causing such
instruments to be written off or, if applicable, converted into equity.
Upon the application of Specified Item 2 Measures (tokutei dai nigo sochi), a financial institution will be
placed under the special supervision by, or if the Prime Minister so orders, under the special control of, the
Deposit Insurance Corporation. In an orderly resolution, the Deposit Insurance Corporation would control the
operation and management of a financial institution’s business, assets and liabilities, including the potential
transfer to a bridge financial institution established by the Deposit Insurance Corporation as its subsidiary, or
such other financial institution as the Deposit Insurance Corporation may determine, of the financial institution’s
systemically important assets and liabilities, which we expect in the case of MUFG would include the shares of
our material subsidiaries based on the Japanese TLAC Standard. The Prime Minister may prohibit creditors of
the financial institution from attaching any of our assets and claims which are to be transferred to a bridge
financial institution or another financial institution pursuant to Article 126-16 of the Deposit Insurance Act.
Based on the Japanese TLAC Standard, it is currently expected that the External TLAC eligible senior notes
issued by the financial institution will not be transferred to a bridge financial institution or other transferee in the
orderly resolution process but will remain as such financial institution’s liabilities subject to court-administered
insolvency proceedings. On the other hand, in an orderly resolution process, the shares of material subsidiaries of
such financial institution may be transferred to a bridge financial institution or other transferee, and such
financial institution would only be entitled to receive consideration representing the fair value of such shares,
which could be significantly less than the book value of such shares. Following such business transfer, the
recoverable value of such financial institution’s residual assets in court-administered insolvency proceedings may
not be sufficient to fully satisfy any payment obligations that such financial institution may have under its
liabilities, including the External TLAC eligible senior notes.
Recovery and resolution plan.
In November 2018, the Financial Stability Board published the latest list of
G-SIBs, which includes us. The list is annually updated by the Financial Stability Board. A recovery and
resolution plan must be put in place for each G-SIB, and the plans must be regularly reviewed and updated. In
Japan, under the Banking Law and the Comprehensive Guidelines for Supervision of Major Banks, etc., financial
institutions identified as G-SIBs must, as part of their crisis management, prepare and submit a recovery plan,
including triggers for the recovery plan and an analysis of recovery options, to the FSA. The Comprehensive
Guidelines also provide that resolution plans for such financial institutions are prepared by the FSA. We
submitted our recovery plan to the FSA in December 2018.
Liquidity Coverage Ratio.
Japanese banks and bank holding companies with international operations are
required to disclose their LCRs calculated in accordance with the methodology prescribed in the FSA guidance
that has been adopted to implement the relevant Basel III standard. The LCR is a measure to determine whether a
bank has a sufficient amount of high-quality liquid assets, which are assets that can be converted easily and
immediately into cash in private markets in order to meet the bank’s liquidity needs, to survive in a 30-day
financial stress scenario, including sizable deposit outflows, inability to issue new bonds or access the interbank
market, stoppage of the collateralized funding market, need for additional collateral in connection with derivative
transactions, and significant outflows of cash under commitment lines to customers. Once a bank or bank holding
company fails to meet the minimum LCR of 100%, it is required to immediately report such failure to the FSA. If
the FSA deems the financial condition of the bank or bank holding company to be serious, the FSA may issue a
business improvement order. A minimum LCR of 100% is currently required.
Net Stable Funding Ratio. The NSFR is a measure to determine whether a bank has sustainable and long-
term liabilities and capital for its assets and activities. The Basel Committee on Banking Supervision issued the
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final standard of NSFR in October 2014. In Japan, details of the NSFR requirements are currently under
discussion.
Inspection and reporting. The FSA has the authority to order reporting from, and inspect, banks and
banking holding companies in Japan. Based on its “Principles and Approaches of Inspection and Supervision,”
the FSA seeks to evaluate the effectiveness of the operations and functions of financial institutions, supervise
financial institutions based on proactive and forward-looking analyses, facilitate best practices among financial
institutions, focus monitoring on high-priority issues, and integrate on- and off-site monitoring. The FSA is
expected to abolish the Financial Institutions Inspection Manual which has traditionally been understood to set
forth the minimum standard for the operations of financial institutions in Japan.
Furthermore, the Securities and Exchange Surveillance Commission of Japan, or SESC, inspects banks in
connection with their securities business as well as financial instruments business operators, such as securities
firms. The Bank of Japan also conducts inspections of banks. The Bank of Japan Law provides that the Bank of
Japan and financial institutions may agree as to the form of inspection to be conducted by the Bank of Japan.
Laws limiting shareholdings of banks. The provisions of the Antimonopoly Act that generally prohibit a
bank from holding more than 5% of another company’s voting rights do not apply to a bank holding company.
However, the Banking Law prohibits a bank holding company and its subsidiaries from holding, on an
aggregated basis, more than 15% of the voting rights of companies other than those which can legally become
subsidiaries of bank holding companies. There have recently been amendments to various financial regulation
related laws, including the Banking Law, which includes certain deregulations on restrictions for shareholdings
by banks, as described above.
In addition, a bank is prohibited from holding shares in other companies exceeding the aggregate of its
Common Equity Tier 1 capital amount and Additional Tier 1 capital amount.
Restrictions on exposures to single large counterparties. The Banking Law prohibits banks and bank
holding companies (on a consolidated basis with their subsidiaries and affiliates) from having exposures
exceeding 25% of the sum of their Tier 1 and Tier 2 capital to a single counterparty (on a consolidated basis with
its subsidiaries and specially related parties as defined in the law). The Enforcement Order and the Enforcement
Ordinance of the Banking Law are expected to be amended in light of the Basel Committee on Banking
Supervision’s final standard published in April 2014, which, among other things, prohibits a large exposure
exceeding 25% of Tier 1 capital and a G-SIB’s exposure to another G-SIB exceeding 15% of Tier 1 capital,
requires recognition of exposures to credit risk mitigation providers and introduces a look-through approach for
exposures to collective investment undertakings.
Financial Instruments and Exchange Act. The Financial Instruments and Exchange Act provides
protection for investors and also regulates sales of a wide range of financial instruments and services, requiring
financial institutions to improve their sales rules and strengthen compliance frameworks and procedures. Among
the instruments that the Japanese banks deal in, derivatives, foreign currency-denominated deposits, and variable
insurance and annuity products are subject to regulations covered by the sales-related rules of conduct under the
law.
Article 33 of the Financial Instruments and Exchange Act generally prohibits banks from engaging in
securities transactions. However, bank holding companies and banks may, through a domestic or overseas
securities subsidiary, conduct all types of securities businesses, with appropriate approval from the FSA.
Similarly, registered banks are permitted to provide securities intermediation services and engage in certain other
similar types of securities related transactions, including retail sales of investment funds and government and
municipal bonds.
Subsidiaries of bank holding companies engaging in the securities business are subject to the supervision of
the FSA as financial instruments business operators. The Prime Minister has the authority to regulate the
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securities industry and securities companies, which authority is delegated to the Commissioner of the FSA under
the Financial Instruments and Exchange Act. In addition, the SESC, an external agency of the FSA, is
independent from the FSA’s other bureaus and is vested with the authority to conduct day-to-day monitoring of
the securities markets and to investigate irregular activities that hinder fair trading of securities, including
inspections of securities companies as well as banks in connection with their securities business. Furthermore,
the Commissioner of the FSA delegates certain authority to the Director General of the Local Finance Bureau to
inspect local securities companies and their branches. A violation of applicable laws and ordinances may result in
various administrative sanctions, including revocation of registration, suspension of business, administrative
monetary penalty or an order to discharge any director or executive officer who has failed to comply with
applicable laws and ordinances. Securities companies are also subject to the rules and regulations of the Japanese
stock exchanges and the Japan Securities Dealers Association, a self-regulatory organization of securities
companies.
Act on Sales, etc. of Financial Instruments. The Act on Sales, etc. of Financial Instruments was enacted to
protect customers from incurring unexpected losses as a result of purchasing financial instruments. Under this
act, sellers of financial instruments have a duty to their potential customers to explain important matters such as
the nature and magnitude of risks involved regarding the financial instruments that they intend to sell. If a seller
fails to comply with the duty, there is a rebuttable presumption that the loss suffered by the customer due to the
seller’s failure to explain is equal to the amount of decrease in the value of the purchased financial instruments.
Anti-money laundering laws. Under the Act on Prevention of Transfer of Criminal Proceeds, specified
business operators, including financial institutions, are required to verify customer identification data, preserve
transaction records, and file Suspicions Transaction Reports with the FSA or other regulatory authorities in cases
where any asset received through their business operations is suspected of being criminal proceeds.
Most recent amendments to the Act, which became effective on October 1, 2016, included, among others,
(1) enhancement of customer due diligence including identification of beneficial owners who are natural persons
controlling corporate customers through voting rights or other means, and (2) stricter requirements for the risk-
based approach through assessment of money laundering and terrorist financing risks and application of adequate
resources effectively to mitigate such risks.
In February 2018, the FSA issued “Guidelines on Anti-Money Laundering and Terrorist Financing” to
require financial institutions to further strengthen their management of anti-money laundering and terrorist
financing functions and their risk-based approach used in such functions.
Further, recent amendments to the Enforcement Ordinance of the Act introduced requirements relating to
online KYC processes in November 2018 and are expected to strengthen the requirements for KYC processes for
customers residing in remote areas in April 2020.
Acts concerning trust business conducted by financial institutions. Under the Trust Business Act, joint
stock companies that are licensed by the Prime Minister as trust companies, including non-financial companies,
are allowed to conduct trust business. In addition, under the Act on Provision, etc. of Trust Business by Financial
Institutions, banks and other financial institutions, as permitted by the Prime Minister, are able to conduct trust
business. The Trust Business Act provides for a separate type of registration for trustees who conduct only
administration type trust business. The Trust Business Act also provides for various duties imposed on the trustee
in accordance with and in addition to the Trust Act.
Regulatory developments relating to lending to small and medium-sized firms and others. The Act
Concerning Temporary Measures to Facilitate Financing for Small and Medium-sized Firms and Others required
financial institutions, among other things, to make an effort to reduce their customers’ burden of loan repayment
by employing methods such as modifying the term of loans at the request of eligible borrowers, including small
and medium-sized firms and individual home loan borrowers. This legislation also required financial institutions
to internally establish a system to implement the requirements of the legislation and periodically make public
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disclosure of and report to the relevant authority on the status of implementation. Although this legislation
expired on March 31, 2013, the FSA continues to encourage financial institutions to continue to provide support
to small and medium-sized firms by the Supervisory Policy and Ordinance for Enforcement of the Baking Law in
order to encourage financial institutions to modify the terms of loans, provide smooth financing, and take active
roles in supporting operations of such firms.
Act on the Protection of Personal Information. With regard to protection of personal information, the Act
on the Protection of Personal Information requires, among other things, Japanese banking institutions to limit the
use of personal information to the stated purposes and to properly manage the personal information in their
possession, and forbids them from providing personal information to third parties without consent. If a bank
violates certain provisions of the act, the FSA may advise or order the bank to take proper action. In addition, the
Banking Law and the Financial Instruments and Exchange Act contain certain provisions with respect to
appropriate handling of customer information.
Act on the Use of Personal Identification Numbers in the Administration of Government Affairs. Pursuant
to the Act on the Use of Personal Identification Numbers in the Administration of Government Affairs, which
became effective in October 2015, the Japanese government has adopted a Social Security and Tax Number
System, which is designed to (1) improve social security services, (2) enhance public convenience in obtaining
government services, and (3) increase the efficiency of the administration of government affairs. Under this
system, a 12-digit unique number is assigned to each resident of Japan to identify and manage information
relating to the resident for government service and tax purposes. Financial institutions are required to implement
measures to ensure that such customer information will be protected from inappropriate disclosure and other
unauthorized use.
Act Concerning Protection of Depositors from Illegal Withdrawals Made by Counterfeit or Stolen
Cards. The Act on Protection, etc. of Depositors and Postal Saving Holders from Unauthorized Automated
Withdrawal, etc. Using Counterfeit Cards, etc. and Stolen Cards, etc. requires financial institutions to establish
internal systems to prevent illegal withdrawals of deposits made using counterfeit or stolen bank cards. The act
also requires a financial institution to compensate depositors for any amount illegally withdrawn using stolen
bank cards except in certain cases, including those where the financial institution can verify that it acted in good
faith without negligence and there was gross negligence on the part of the relevant depositor. In addition, the act
provides that illegal withdrawals with counterfeit bank cards are invalid unless the financial institution acted in
good faith without negligence and there was gross negligence on the part of the relevant account holder.
Government reforms to restrict maximum interest rates on consumer lending business.
In December 2006,
the Diet passed legislation to reform the regulations relating to the consumer lending business, including
amendments to the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates which,
effective June 18, 2010, reduced the maximum permissible interest rate from 29.2% per annum to
20% per annum. The regulatory reforms also included amendments to the Law Concerning Lending Business
which, effective June 18, 2010, abolished the so-called “gray-zone interest.” Gray-zone interest refers to interest
rates exceeding the limits stipulated by the Interest Rate Restriction Act (between 15% per annum to
20% per annum depending on the amount of principal). Prior to June 18, 2010, gray-zone interests were
permitted under certain conditions set forth in the Law Concerning Lending Business. As a result of the
regulatory reforms, all interest rates are now subject to the lower limits imposed by the Interest Rate Restriction
Act, compelling lending institutions, including our consumer finance subsidiaries and equity method investees, to
lower the interest rates they charge borrowers. Furthermore, the new regulations, which became effective on
June 18, 2010, require, among other things, consumer finance companies to limit their lending to a single
customer to a maximum of one third of the customer’s annual income regardless of the customer’s repayment
capability.
In addition, as a result of decisions made by the Supreme Court of Japan prior to June 18, 2010, imposing
stringent requirements for charging such gray-zone interest rates, consumer finance companies have been
responding to borrowers’ claims for reimbursement of previously collected interest payments in excess of the
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limits stipulated by the Interest Rate Restriction Act. See “Item 3.D. Key Information—Risk Factors—Risks
Related to Our Business—Because of our loans to consumers and our shareholdings in companies engaged in
consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan
may further adversely affect our financial results.”
Act on Special Provisions of the Income Tax Act, the Corporation Tax Act and the Local Tax Act Incidental
to Enforcement of Tax Treaties. Pursuant to the Amendments to the Act on Special Provisions of the Income
Tax Act, the Corporation Tax Act and the Local Tax Act Incidental to Enforcement of Tax Treaties, which
became effective in January 2017, financial institutions are required to collect certain information from their
accountholders, including jurisdictions of tax residence, and report such information to the National Tax Agency
in accordance with the Common Reporting Standard as developed by the Organization for Economic
Co-operation and Development.
Recent Regulatory Actions.
In May 2019, we received a decision from the European Commission
requiring MUFG Bank to pay a fine due to an infringement of European Union competition law in 2010 and
2011 by a forex trader formerly employed at MUFG Bank’s London Branch. In June 2019, we also received a
decision from a Swiss regulator requiring MUFG Bank to pay a fine due to an infringement of Swiss competition
law by the same forex trader. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—
We may become subject to regulatory actions or other legal proceedings relating to our transactions or other
aspects of our operations, which could result in significant financial losses, restrictions on our operations and
damage to our reputation.”
United States
As a result of our operations in the United States, we are subject to extensive U.S. federal and state
supervision and regulation.
Overall supervision and regulation. We are subject to supervision, regulation and examination with
respect to our U.S. operations by the FRB pursuant to the U.S. Bank Holding Company Act of 1956, as amended,
or the BHCA, and the International Banking Act of 1978, as amended, or the IBA, because we and MUFG Bank
are bank holding companies and foreign banking organizations, as defined pursuant to those statutes. The FRB
functions as our “umbrella” supervisor under amendments to the BHCA effected by the Gramm-Leach-Bliley
Act of 1999, which among other things:
‰
‰
prohibited further expansion of the types of activities in which bank holding companies, acting directly
or through non-bank subsidiaries, may engage;
authorized qualifying bank holding companies to opt to become “financial holding companies,” and
thereby acquire the authority to engage in an expanded list of activities; and
‰ modified the role of the FRB by specifying new relationships between the FRB and the functional
regulators of non-bank subsidiaries of both bank holding companies and financial holding companies.
The BHCA generally prohibits each of a bank holding company and a foreign banking organization that
maintains branches or agencies in the United States from, directly or indirectly, acquiring more than 5% of the
voting shares of any company engaged in non-banking activities in the United States unless the bank holding
company or foreign banking organization has elected to become a financial holding company, as discussed
above, or the FRB has determined, by order or regulation, that such activities are so closely related to banking as
to be a proper incident thereto and has granted its approval to the bank holding company or foreign banking
organization for such an acquisition. The BHCA also requires a bank holding company or foreign banking
organization that maintains branches or agencies in the United States to obtain the prior approval of an
appropriate federal banking authority before acquiring, directly or indirectly, the ownership of more than 5% of
the voting shares or control of any U.S. bank or bank holding company. In addition, under the BHCA, a
U.S. bank or a U.S. branch or agency of a foreign bank is prohibited from engaging in various tying
arrangements involving it or its affiliates in connection with any extension of credit, sale or lease of any property
or provision of any services.
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In October 2008, we, MUFG Bank, Mitsubishi UFJ Trust and Banking and MUFG Americas Holdings
initially attained financial holding company status. In August 2016, Mitsubishi UFJ Trust and Banking
relinquished its financial holding company status. Financial holding company status is subject to periodic
regulatory review. A financial holding company is authorized to engage in an expanded list of activities deemed
to be financial in nature or incidental to such financial activity as well as certain specified non-banking activities
deemed to be closely related to banking. In order to maintain the status as a financial holding company, a bank
holding company must continue to meet certain standards established by the FRB. Those standards require that a
financial holding company exceed the minimum standards applicable to bank holding companies that have not
elected to become financial holding companies. These higher standards include meeting the “well capitalized”
and “well managed” standards for financial holding companies as defined in the regulations of the FRB. Failure
to meet these standards, due to inadequate capital management or shortcomings in operations, results in
restrictions on the ability to engage in expanded activities as a financial holding company. In addition, a financial
holding company must ensure that its U.S. banking subsidiaries meet certain minimum standards under the
Community Reinvestment Act of 1977.
U.S. branches and agencies of subsidiary Japanese banks. Under the authority of the IBA, our banking
subsidiaries, MUFG Bank and Mitsubishi UFJ Trust and Banking, operate five branches, two agencies and seven
representative offices in the United States. MUFG Bank operates branches in Los Angeles, California; Chicago,
Illinois; and two branches in New York, New York; agencies in Houston and Dallas, Texas; and representative
offices in Washington, D.C; San Francisco, California; Seattle, Washington; Atlanta, Georgia; Minnetonka,
Minnesota; Jersey City, New Jersey; and Florence, Kentucky. Mitsubishi UFJ Trust and Banking operates a
branch in New York, New York.
The IBA provides, among other things, that the FRB may examine U.S. branches and agencies of foreign
banks, and each branch and agency shall be subject to on-site examination by the appropriate federal or state
bank supervisor as frequently as would a U.S. bank. The IBA also provides that if the FRB determines that a
foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate
authorities in its home country, or if there is reasonable cause to believe that the foreign bank or its affiliate has
committed a violation of law or engaged in an unsafe or unsound banking practice in the United States, the FRB
may order the foreign bank to terminate activities conducted at a branch or agency in the United States.
U.S. branches and agencies of foreign banks must be licensed, and are also supervised and regulated, by a
state or by the Office of the Comptroller of the Currency, or the OCC, the federal regulator of U.S. national
banks. The OCC is an independent bureau of the U.S. Department of the Treasury. Effective November 7, 2017,
all of the branches and agencies of MUFG Bank and Mitsubishi UFJ Trust and Banking in the United States
converted from state-licensed branches and agencies to federally-licensed branches and agencies supervised and
regulated by the OCC. See “Item 8.A. Financial Information—Legal Proceedings.”
When opening a federal branch or agency, a foreign bank must establish and maintain a deposit account
with an FRB member bank of at least (1) the amount of capital that would be required of a national bank being
organized at the same location or (2) five percent of the total liabilities of the federal branch or agency, including
acceptances but excluding (i) accrued expenses and (ii) amounts due and other liabilities to offices, branches, and
subsidiaries of the foreign bank, whichever is greater. Federally-licensed branches and agencies must also submit
written reports concerning their assets and liabilities and other matters, to the extent required by the OCC or the
FRB, and are examined at periodic intervals by the OCC and the FRB.
U.S. banking subsidiaries. We indirectly own and control one U.S. bank, MUFG Union Bank, N.A.
(known prior to July 1, 2014 as Union Bank, N.A.), through MUFG Bank and its subsidiary, MUFG Americas
Holdings, a registered bank holding company.
MUFG Union Bank is a national bank subject to the supervision, examination and regulatory authority of
the OCC pursuant to the National Bank Act.
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In regulating national banks such as MUFG Union Bank, the OCC has the power to examine those banks;
approve or deny applications for new charters, branches, capital, or other changes in corporate or banking
structure; take supervisory actions against national banks that do not comply with laws and regulations or that
otherwise engage in unsound practices; remove officers and directors, negotiate agreements to change banking
practices, and issue cease and desist orders as well as civil money penalties; and issue rules and regulations, legal
interpretations, and corporate decisions governing investments, lending, and other practices. The OCC’s staff of
bank examiners conducts on-site reviews and provides sustained supervision of national banks. Examiners
analyze loan and investment portfolios, funds management, capital, earnings, liquidity, and sensitivity to market
risk for national banks. Examiners also review internal controls, internal and external audit, and compliance with
law, and evaluate management’s ability to identify and control risk.
In addition, the FDIC insures the deposits of MUFG Union Bank up to legally specified maximum amounts.
In the event of a failure of an FDIC-insured bank, the FDIC is virtually certain to be appointed as receiver, and
would resolve the failure under provisions of the Federal Deposit Insurance Act. In the liquidation or other
resolution of a failed FDIC-insured depository institution, deposits in its U.S. offices and other claims for
administrative expenses and employee compensation are afforded priority over other general unsecured claims,
including deposits in offices outside the United States, non-deposit claims in all offices and claims of a parent
company. Moreover, under longstanding FRB policy, a bank holding company is expected to act as a source of
financial strength for its banking subsidiaries and to commit resources to support such banks.
Bank capital requirements and capital distributions. MUFG Union Bank is subject to applicable risk-
based and leverage capital guidelines issued by U.S. regulators for banks and bank holding companies. In
addition, MUFG Bank and Mitsubishi UFJ Trust and Banking, as foreign banking organizations that have U.S.
branches and agencies and that are controlled by us, are subject to the FRB’s requirements that they be “well-
capitalized” based on Japan’s risk based capital standards. MUFG Union Bank, MUFG Bank, Mitsubishi UFJ
Trust and Banking, and MUFG Americas Holdings are all “well capitalized” as defined under, and otherwise
comply with, all U.S. regulatory capital requirements applicable to them. The Federal Deposit Insurance
Corporation Improvement Act of 1991, or FDICIA, provides, among other things, for expanded regulation of
insured depository institutions, including banks, and their parent holding companies. As required by FDICIA, the
federal banking agencies have established five capital tiers ranging from “well capitalized” to “critically
undercapitalized” for insured depository institutions. As an institution’s capital position deteriorates, the federal
banking regulators may take progressively stronger actions, such as further restricting affiliate transactions,
activities, asset growth or interest payments. In addition, FDICIA generally prohibits an insured depository
institution from making capital distributions, including the payment of dividends, or the payment of any
management fee to its holding company, if the insured depository institution would be undercapitalized after
making such distribution or paying such dividend or fee.
The availability of dividends from insured depository institutions in the United States is limited by various
other statutes and regulations. The National Bank Act and other federal laws prohibit the payment of dividends
by a national bank under various circumstances and limit the amount a national bank can pay without the prior
approval of the OCC. In addition, state-chartered banking institutions are subject to dividend limitations imposed
by applicable federal and state laws.
Other regulated U.S. subsidiaries. Our non-bank subsidiaries that engage in securities-related activities in
the United States are regulated by appropriate functional regulators, such as the SEC, any self-regulatory
organizations of which they are members, and the appropriate state regulatory agencies. These non-bank
subsidiaries are required to meet separate minimum capital standards as imposed by those regulatory authorities.
Anti-Money Laundering Initiatives, the Bank Secrecy Act and the USA PATRIOT Act. A major focus of
U.S. governmental policy relating to financial institutions in recent years has been, and continues to be, aimed at
preventing money laundering and terrorist financing. The USA PATRIOT Act of 2001, as incorporated into the
Bank Secrecy Act, substantially broadened the scope of U.S. anti-money laundering laws and regulations by
imposing significant new compliance and due diligence obligations, creating new crimes and penalties and
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expanding the extra-territorial jurisdiction of the United States. The U.S. Department of the Treasury has issued a
number of regulations that impose obligations on financial institutions to maintain appropriate policies,
procedures and controls to detect, prevent and report potential money laundering and terrorist financing,
including the collection of beneficial ownership information. The bank regulatory agencies carefully scrutinize
the adequacy of an institution’s compliance with these regulations and, as a result, there have been an increased
number of regulatory enforcement actions. A financial institution’s failure to maintain and implement adequate
policies, procedures and controls to prevent and detect money laundering and terrorist financing could have
serious legal and reputational consequences for the institution, including the incurrence of expenses to enhance
the relevant programs, the imposition of limitations on the scope of its operations and the imposition of fines and
other monetary penalties. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We
may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects
of our operations, which could result in significant financial losses, restrictions on our operations and damage to
our reputation.”
Foreign Corrupt Practices Act.
In recent years, U.S. regulatory and enforcement agencies including the
SEC and the U.S. Department of Justice have significantly increased their enforcement efforts of the Foreign
Corrupt Practices Act, or the FCPA. The FCPA prohibits U.S. securities issuers, U.S. domestic entities, and
parties doing substantial business within the United States (including their shareholders, directors, agents,
officers, and employees) from giving, offering, or promising anything of value to foreign public officials in order
to obtain or retain any business advantage. The FCPA also requires U.S. securities issuers to maintain adequate
books and records in such a way that they fairly reflect all transactions and dispositions of assets. Enforcement
efforts have targeted a wide range of U.S. and foreign-based entities and have been based on a broad variety of
alleged fact patterns, and in a number of cases have resulted in the imposition of substantial criminal and civil
penalties or in agreed payments in settlement of alleged violations. Failure to maintain adequate anti-bribery
policies, procedures, internal controls, and books and records globally could have serious legal and reputational
consequences for the institution, including the incurrence of expenses to enhance the relevant programs, as well
as the imposition of civil and criminal penalties.
Regulatory Reform Legislation.
In response to the global financial crisis and the perception that lax
supervision of the financial industry in the United States may have been a contributing cause, legislation
designed to reform the system for supervision and regulation of financial firms doing business in the
United States, the so-called Dodd-Frank Act, was signed into law on July 21, 2010. The Dodd-Frank Act is
complex and extensive in its coverage and contains a wide range of provisions that affect financial institutions
operating in the United States, including our U.S. operations. Included among these provisions are sweeping
reforms designed to reduce systemic risk presented by very large financial firms, promote enhanced supervision,
regulation, and prudential standards for financial firms, establish comprehensive supervision of financial
markets, impose new limitations on permissible financial institution activities and investments, expand regulation
of the derivatives markets, protect consumers and investors from financial abuse, and provide the government
with the tools needed to manage a financial crisis. Key provisions that impact our operations are summarized
below. However, certain regulatory rules under the Dodd-Frank Act are not yet finalized, require further
interpretive guidance by the relevant supervisory agencies, or do not yet require us to fully implement
compliance procedures. Accordingly, while the legislation has an impact on our operations, including the
imposition of significant compliance costs, we are unable to assess with certainty the full degree of impact of the
Dodd-Frank Act on our operations at this time.
Among the components of the Dodd-Frank Act that have impacted or may impact our operations are the
provisions relating to enhanced prudential standards, including capital, liquidity and structural requirements, the
“Volcker Rule,” derivatives regulation, credit reporting, resolution plans, incentive-based compensation, the
establishment of the Consumer Financial Protection Bureau, and debit interchange fees. Although certain of the
regulatory rules regarding the foregoing components are still pending, as noted above, based on information
currently available to us, other than the Volcker Rule and derivatives regulations as discussed below, the impact
of these components is expected to be mainly limited to our U.S. operations and not to be material to us on a
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consolidated basis. We intend to continue to monitor developments relating to the Dodd-Frank Act and the
potential impact on our activities inside and outside of the United States.
With respect to the Dodd-Frank Act provisions related to enhanced prudential standards, in February 2014
the FRB issued final rules that established enhanced prudential standards for the U.S. operations of foreign
banking organizations such as MUFG. These rules required us to organize by July 1, 2016 all of our U.S. bank
and non-bank subsidiaries, with certain limited exceptions, under a U.S. IHC that is subject to U.S. capital
requirements and enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding
companies of the same size. Under these rules, we were required to change the structure of our U.S. operations,
including the manner in which we oversee and manage those operations, and may be required to inject additional
capital into our U.S. operations. We have designated MUFG Americas Holdings as our IHC.
MUFG Americas Holdings is subject to various U.S. prudential requirements and has become subject to
others with the designation of MUFG Americas Holdings as our IHC as of July 1, 2016. MUFG Americas
Holdings was previously subject to risk-based and leverage capital requirements, liquidity requirements, and
other enhanced prudential standards applicable to large U.S. bank holding companies. MUFG Americas Holdings
was also subject to capital planning and stress testing requirements. MUFG Americas Holdings is now subject to
the capital planning and stress testing requirements and certain enhanced prudential standards applicable to IHCs.
On June 22, 2017, the FRB released the results of the 2017 Dodd-Frank Act stress tests. It found that, even in the
severely adverse economic stress test scenario, MUFG Americas Holdings would maintain capital ratios well
above the required minimum levels. On June 28, 2017, the FRB announced that it had no objections to the capital
plan submitted by MUFG Americas Holdings as part of the 2017 Comprehensive Capital Analysis and Review,
or CCAR. The FRB announced early in 2017 that MUFG Americas Holdings would not be subject to the
qualitative portion of the CCAR.
The FRB has the authority to examine an IHC and any of its subsidiaries. U.S. leverage requirements
applicable to the IHC took effect beginning in January 2018. MUFG Americas Holdings is subject to a
requirement to maintain an LCR equal to at least 100% based on total projected net cash outflows over a
30-calendar day period, effectively using net cash outflow assumptions equal to 70% of the outflow assumptions
prescribed for internationally active banking organizations. Our combined U.S. operations, including MUFG
Bank’s and Mitsubishi UFJ Trust and Banking’s branches, are also subject to certain requirements related to
liquidity and risk management.
The Volcker Rule was issued in final form by the Federal Reserve in December 2013. Under the Volcker
Rule, we are required to cease conducting certain proprietary trading activities, which means trading in securities
and financial instruments for our own account, subject to certain exceptions, including market-making, hedging,
and underwriting activities if such activities are conducted within a rigorous compliance framework. We are also
restricted from engaging in certain activities regarding hedge funds and private equity funds, or covered funds.
While the Volcker Rule excludes restrictions on such activities conducted solely outside of the United States, the
regulatory definition of such exempted activities is narrow and complex and in some cases requires further
clarification. Our proprietary trading and covered funds activities are generally executed outside of the
United States, but certain activities within the United States could potentially have fallen within the scope of the
Rule. We have undertaken steps that we believe are appropriate to bring our activities and investments into
compliance with the Rule. In June 2018, the five Volcker Rule agencies each subsequently approved a notice of
proposed rulemaking seeking comments and proposing certain modifications to certain aspects of the Volcker
Rule. Although we are continuing to consider the effect of any proposed changes, given the limited amount of
restricted activities in which we engage within the United States, we do not expect any final changes to the
Volcker Rule to be material to our operations.
U.S. regulators continue to issue final regulations and regulatory determinations governing swaps and
derivatives markets as contemplated by the Dodd-Frank Act. To date, MUFG Bank and Mitsubishi UFJ
Securities International, plc, have registered as swap dealers with the U.S. Commodity Futures Trading
Commission, or CFTC. Depending on the finalization of regulations and regulatory determinations governing
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swaps and derivatives markets under the Dodd-Frank Act, as well as the activities of our other subsidiaries
located inside and outside of the United States, our other subsidiaries may have to register as swap dealers with,
or be subject to the regulations of, the CFTC and/or SEC. Regulation of swap dealers by the CFTC and SEC
imposes numerous corporate governance, business conduct, capital, margin, reporting, clearing, execution, and
other regulatory requirements on our operations, which may adversely impact our derivatives businesses and
make us less competitive than those competitors that are not subject to the same regulations. Although many
regulations applicable to swap dealers are already in effect, it is difficult to assess the full impact of these
requirements because some of the most important regulatory determinations have not yet been implemented or
finalized. For example, U.S. regulators have adopted guidance and rules on the application of U.S. regulations to
activities of registered swap dealers outside of the United States. The extraterritorial application of swap dealer
regulatory requirements imposes significant operational and compliance burdens on our swaps activities outside
of the United States.
On June 14, 2018, the FRB approved a final rule regarding single counterparty credit limits, or SCCL, for
large banking organizations. The SCCL final rule is considered the last major piece of regulatory action needed
to implement Section 165(e) of the Dodd-Frank Act. Section 165(e) was a response to the concern that failure or
financial distress of one large, interconnected financial institution could cascade through the U.S. financial
system and impair the financial condition of that firm’s counterparties, including other large, interconnected
firms. Section 165(e) generally, and the SCCL final rule specifically, seek to mitigate this risk by limiting the
aggregate exposure among such financial institutions and their counterparties. The deadlines for compliance with
the requirements of the final rule are in 2020. We are currently implementing a risk and compliance program to
satisfy the requirements as they relate to MUFG Americas Holdings, and we are continuing to analyze the
requirements of the final rule and its impact on the combined U.S. operations of MUFG.
On April 8, 2019, the FRB issued two proposals that would (1) tailor the framework for application of
enhanced prudential standards to foreign banking organizations and (2) modify the application of capital and
liquidity requirements to the U.S. operations of foreign banking organizations. The proposals utilize the same
framework as the October 2018 proposal applicable to U.S. BHCs but with a differing calibration for foreign
banking organizations.
The first proposal, promulgated solely by the FRB, would determine the applicability of certain enhanced
prudential standards requirements, including liquidity stress testing and management, capital planning and stress
testing, risk management, single counterparty credit limits requirements, and related regulatory reporting by
categorizing all foreign banking organizations with $100 billion or more in combined U.S. assets into three
categories. The second proposal, to be issued jointly by the FRB, the OCC, and the FDIC, would similarly
categorize foreign banking organizations and tailor the application of the agencies’ regulatory capital and
standardized liquidity requirements on that basis. The comment period for both proposals ended on June 21,
2019. The final rule is expected to take effect at the same time as the domestic proposal currently on
November 20, 2019.
The FRB also approved a third proposal, to be jointly issued with the FDIC, that would revise the joint
regulation implementing the resolution planning requirements of Section 165(d) of the Dodd-Frank Act. The
comment period ended on June 21, 2019, and the final rule is proposed to take effect on November 20, 2019.
Foreign Account Tax Compliance Act. The Hiring Incentives to Restore Employment Act was enacted in
March 2010 and contains provisions commonly referred to as the Foreign Account Tax Compliance Act, or
FATCA. The U.S. Treasury, acting through the Internal Revenue Service, or the IRS, issued final FATCA
regulations in January 2013. FATCA created a new reporting and withholding regime for U.S. and foreign
financial institutions, or FFIs, and certain non-financial foreign entities, or NFFEs.
In addition, the FATCA framework has been expanded with the introduction of Intergovernmental
Agreements between the U.S. Treasury and foreign governments, which pursue a framework for
67
intergovernmental cooperation to facilitate the implementation of FATCA. The United States has entered into
various Intergovernmental Agreements with non-U.S. jurisdictions including Japan. FATCA and the
Intergovernmental Agreements became effective from July 1, 2014.
In connection with FATCA, we have assessed and determined if our group entities are U.S. withholding
agents, FFIs, or NFFEs. Each identified U.S. withholding agent and FFI has also evaluated pre-existing and new
entity accounts to the extent required to determine their respective FATCA classifications. We have continuously
developed internal procedures and processes that we believe address the regulatory requirements under FATCA.
However, FATCA compliance has required us to develop extensive systems capabilities and internal
processes to identify and report U.S. account holders who are subject to FATCA requirements, which has been a
complex and costly process requiring significant internal resources. If our procedures and processes are
determined not to be adequate to meet the requirements of FATCA, we could potentially be subject to serious
legal and reputational consequences, including the imposition of withholding taxes on certain amounts payable to
us from U.S. sources, and could be required to expend additional resources to enhance our systems, procedures
and processes and take other measures in response to such consequences.
Capital Adequacy. MUFG Americas Holdings and MUFG Union Bank are required to maintain minimum
capital ratios in accordance with rules issued by the U.S. Federal banking agencies. In July 2013, the U.S.
Federal banking agencies issued final rules to implement the Basel Committee on Banking Supervision’s capital
guidance for U.S. banking organizations, or U.S. Basel III. These rules establish more restrictive capital
definitions, create additional categories and higher risk weightings for certain asset classes and off-balance sheet
exposures, higher minimum capital and leverage ratios and capital conservation buffers that will be added to the
minimum capital requirements. These rules supersede the U.S. federal banking agencies’ general risk-based
capital rules generally referred to as Basel I, the advanced approaches rules generally referred to as Basel II,
which are applicable to certain large banking organizations, and leverage rules, and are subject to certain
transition provisions. MUFG Americas Holdings became subject to the U.S. Basel III capital rules in January
2015, with certain provisions subject to a phase-in period, while MUFG Union Bank continues to be subject to
the U.S. Basel III capital rules which became effective for advanced approaches institutions on January 1, 2014.
The U.S. Basel III capital rules were substantially phased in by January 1, 2019.
Both MUFG Americas Holdings and MUFG Union Bank are subject to the following regulatory minimum
risk-based capital ratios: (1) 4.5% Common Equity Tier 1 capital ratio, (2) 6.0% Tier 1 capital ratio and (3) 8.0%
total capital ratio. Failure to meet minimum capital requirements can result in certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have a material effect on MUFG
Americas Holdings’ consolidated financial statements.
In addition to these regulatory minimum ratio requirements, MUFG Americas Holdings and MUFG Union
Bank are subject to a fully phased-in capital conservation buffer requirement of 2.5%. MUFG Americas Holdings
and MUFG Union Bank are also subject to a Tier 1 leverage ratio regulatory minimum requirement of 4% and a
well-capitalized prompt corrective action standard of 5%.
In October 2015, the FRB proposed long-term debt and TLAC requirements for U.S. globally systemically
important bank holding companies and U.S. IHCs of non-U.S. globally systemically important banks, including
MUFG Americas Holdings. In December 2016, the FRB finalized rules imposing such requirements. Under the
final rules, a covered IHC such as MUFG Americas Holdings is required to maintain a minimum amount of
eligible long-term debt issued to a non-U.S. parent entity that could be cancelled or converted to equity in order
to absorb losses and recapitalize the IHC’s operating subsidiaries at or near the point of resolution. A covered
IHC is also required to maintain a minimum level of eligible TLAC issued to a non-U.S. parent entity consisting
of regulatory capital and eligible long-term debt and maintain related buffers consisting of Common Equity
Tier 1 capital. In addition, an IHC is restricted from issuing short-term debt and certain other types of liabilities
that are structurally senior to eligible long-term debt. MUFG Americas Holdings became subject to these rules on
68
January 1, 2019. Pursuant to 12 CFR § 252.164(a), we have certified to the FRB that we plan to follow an SPE
resolution strategy, and that MUFG Americas Holdings would therefore be considered a “non-resolution covered
IHC.”
For more information, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Capital Adequacy” and Note 22 to our audited consolidated financial statements included elsewhere
in this Annual Report.
Disclosure pursuant to Section 13(r) of the US Securities Exchange Act of 1934
Section 13(r) of the U.S. Securities Exchange Act of 1934 (Exchange Act) requires an issuer to disclose
whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran
or with natural persons or entities designated by the U.S. government under specified Executive Orders. The
scope of activities that must be reported includes activities not prohibited by U.S. law and conducted outside the
United States in compliance with applicable local law.
During the fiscal year ended March 31, 2019, one of our non-U.S. subsidiaries engaged in business activities
with entities in, or affiliated with, Iran, including counterparties owned or controlled by the Iranian government.
Specifically, our non-U.S. banking subsidiary, MUFG Bank, issued letters of credit and guarantees and provided
remittance and other settlement services mainly in connection with customer transactions related to the purchase
and exportation of Iranian crude oil to Japan, and in some cases, in connection with other petroleum-related
transactions with Iran by its customers. These transactions did not involve U.S. dollars nor clearing services of
U.S. banks for the settlement of payments. For the fiscal year ended March 31, 2019, the aggregate interest and
fee income relating to these transactions was less than ¥100 million, representing less than 0.005 percent of our
total interest and fee income. Some of these transactions were conducted through the use of non-U.S. dollar
correspondent accounts and other similar settlement accounts maintained with MUFG Bank outside the
United States by Iranian financial institutions and other entities in, or affiliated with, Iran. In addition to such
accounts, MUFG Bank receives deposits in Japan from, and provides settlement services in Japan to, fewer than
10 Iranian government-related entities and fewer than 100 Iranian government-related individuals such as Iranian
diplomats in Japan, and maintains settlement accounts outside the United States for certain other financial
institutions specified in Executive Order 13382, which settlement accounts were frozen in accordance with
applicable laws and regulations. For the fiscal year ended March 31, 2019, the average aggregate balance of
deposits held in these accounts represented less than 0.1 percent of the average balance of our total deposits. The
fee income from the transactions attributable to these account holders was less than ¥20 million, representing less
than 0.005 percent of our total fee income. Although there was no outstanding balance as of March 31, 2019,
MUFG Bank had, during the fiscal year ended March 31, 2019, loans that were arranged prior to changes in
applicable laws and regulations to borrowers in, or affiliated with, Iran, including entities owned by the Iranian
government. For the fiscal year ended March 31, 2019, the agent fee income relating to these loan transactions
was less than ¥20 million, representing less than 0.005 percent of our total interest and fee income.
MUFG Bank recognizes that following the withdrawal in May 2018 by the United States from the Joint
Comprehensive Plan of Action, the United States has imposed secondary sanctions against non-U.S. persons who
engage in or facilitate a broad range of transactions and activities involving Iran. MUFG Bank has taken the
recent sanctions related developments into account and monitor any future transactions relating to Iran in order to
comply with applicable U.S. and Japanese regulations as well as U.S., Japanese and other international sanctions.
69
C. Organizational Structure
The following chart presents our corporate structure summary as of March 31, 2019:
Mitsubishi UFJ Financial Group, Inc.
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Domestic
MUFG Bank, Ltd.
Overseas
MUFG Americas Holdings Corporation
Bank of Ayudhya Public Company Limited
Domestic
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Real Estate Services Co., Ltd.
The Master Trust Bank of Japan, Ltd.
MU Investments Co., Ltd.
Mitsubishi UFJ Kokusai Asset Management Co., Ltd.
Overseas
Mitsubishi UFJ Trust International Limited
Mitsubishi UFJ Baillie Gifford Asset Management Limited
Mitsubishi UFJ Investor Services & Banking (Luxembourg) S.A.
MUFG Lux Management Company S.A.
Mitsubishi UFJ Asset Management (UK) Ltd.
MUFG Investor Services Holdings Limited
Domestic
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
kabu.com Securities Co., Ltd.
Overseas
MUFG Securities EMEA plc
MUFG Securities Asia Limited
MUFG Securities Asia (Singapore) Limited
MUFG Securities (Canada), Ltd.
Domestic
Mitsubishi UFJ NICOS Co., Ltd.
Japan Digital Design, Inc.
MUMEC Visionary Design, Ltd.
Global Open Network, Inc.
MUFG Innovation Partners Co., Ltd.
Note:
(1) PT Bank Danamon Indonesia, Tbk. became a consolidated subsidiary through a share purchase transaction by MUFG Bank, on April 29,
2019.
70
Set forth below is a list of our principal consolidated subsidiaries as of March 31, 2019:
Name
Country of
Incorporation
Proportion of
Ownership
Interest
(%)
Proportion of
Voting
Interest
(%)
MUFG Bank, Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking Corporation . . . . . . . . . .
Mitsubishi UFJ Real Estate Services Co., Ltd. . . . . . . . . . . .
The Master Trust Bank of Japan, Ltd. . . . . . . . . . . . . . . . . . .
MU Investments Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Kokusai Asset Management Co., Ltd. . . . . .
Mitsubishi UFJ Securities Holdings Co., Ltd. . . . . . . . . . . . .
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
. . . . . .
. . .
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
kabu.com Securities Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS Co., Ltd.
. . . . . . . . . . . . . . . . . . . . .
Japan Digital Design, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
MUMEC Visionary Design, Ltd.
Global Open Network, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Innovation Partners Co., Ltd.
. . . . . . . . . . . . . . . . . .
MUFG Americas Holdings Corporation . . . . . . . . . . . . . . . .
Bank of Ayudhya Public Company Limited . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank (China), Ltd.
MUFG Bank (Malaysia) Berhad . . . . . . . . . . . . . . . . . . . . . . Malaysia
MUFG Bank (Europe) N.V.
Mitsubishi UFJ Trust International Limited . . . . . . . . . . . . .
Mitsubishi UFJ Baillie Gifford Asset Management
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
USA
Thailand
China
. . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
UK
100.00%
100.00%
100.00%
46.50%
100.00%
100.00%
100.00%
60.00%
100.00%
59.28%
100.00%
86.11%
60.00%
80.00%
100.00%
100.00%
76.88%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
46.50%
100.00%
100.00%
100.00%
60.00%
100.00%
59.29%
100.00%
86.11%
60.00%
80.00%
100.00%
100.00%
76.88%
100.00%
100.00%
100.00%
100.00%
Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Investor Services & Banking (Luxembourg)
UK
51.00%
51.00%
S.A.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Luxembourg
. . . . . . . . . . . . . . . Luxembourg
MUFG Lux Management Company S.A.
Mitsubishi UFJ Asset Management (UK) Ltd. . . . . . . . . . . .
MUFG Investor Services Holdings Limited . . . . . . . . . . . . .
MUFG Securities EMEA plc . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Securities Asia Limited . . . . . . . . . . . . . . . . . . . . . . .
MUFG Securities Asia (Singapore) Limited . . . . . . . . . . . . .
MUFG Securities (Canada), Ltd. . . . . . . . . . . . . . . . . . . . . . .
UK
Bermuda
UK
China
Singapore
Canada
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
D. Property, Plant and Equipment
Premises and equipment as of March 31, 2018 and 2019 consisted of the following:
As of March 31,
2018
2019
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 370,669
739,665
659,699
311,645
119,195
¥ 362,742
829,606
648,598
305,281
34,002
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200,873
1,187,285
2,180,229
1,206,629
Premises and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,013,588
¥ 973,600
71
Our registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan. As of March 31,
2019, we and our subsidiaries conducted our operations either in premises we owned or in properties we leased.
The following table presents the book values of our material offices and other properties as of March 31,
2019:
Owned land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owned buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book Value
(in millions)
¥362,742
258,711
The buildings and land we own are primarily used by us and our subsidiaries as offices and branches. Most
of the buildings and land we own are free from material encumbrances.
During the fiscal year ended March 31, 2019, we invested approximately ¥126,479 million in premises and
equipment, primarily for office renovations and relocation.
Item 4A. Unresolved Staff Comments.
None.
72
Item 5. Operating and Financial Review and Prospects.
The following discussion and analysis should be read in conjunction with “Item 3.A. Key Information—
Selected Financial Data,” “Selected Statistical Data” and our consolidated financial statements and related
notes included elsewhere in this Annual Report.
Business Environment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Sources of Income and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting Changes and Recently Issued Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Geographic Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Change in Exchange Rates on Foreign Currency Translation . . . . . . . . . . . . . . . . . . . . . . .
B. Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-exchange Traded Contracts Accounted for at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
74
76
81
84
86
87
87
96
103
105
105
105
131
136
C. Research and Development, Patents and Licenses, etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
D. Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
E. Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
F. Tabular Disclosure of Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
G. Safe Harbor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
73
Business Environment
Through our subsidiaries and affiliated companies, we engage in a broad range of financial businesses and
services, including commercial banking, investment banking, trust assets and asset management services,
securities businesses and credit card businesses, and provide related services to individuals primarily in Japan,
the United States and Thailand and to corporate customers around the world. Our results of operations and
financial condition are exposed to changes in various external economic factors, including:
‰
‰
‰
‰
general economic conditions,
interest rates,
foreign currency exchange rates, and
stock and real estate prices.
General Economic Conditions
During the fiscal year ended March 31, 2019, the global economy stayed on a moderately improving trend.
Uncertainties grew, however, concerning future global economic trends in light of recent changes in economic,
monetary and trade policies and geopolitical developments in various jurisdictions, which have contributed to
higher volatility in the financial market.
Japan’s economic growth continued at a moderate pace, while showing a mixture of positive and negative
trends, with the quarter-on-quarter real gross domestic product, or GDP, growth rate being 0.6% for the quarters
ended June 30, 2018, negative 0.6% for the quarters ended September 30, 2018, and 0.5% for the quarter ended
December 31, 2018, and 0.6% for the quarter ended March 31, 2019. The year-over-year real GDP growth rate
was 1.5% for the quarter ended June 30, 2018, 0.1% for the quarter ended September 30, 2018, 0.3% for the
quarter ended December 31, 2018 and 0.9% for the quarter ended March 31, 2019. Japan’s Consumer Price
Index, or CPI, fluctuated between negative 0.3% and positive 0.5% on a month-on-month basis and between
0.2% and 1.4% on a year-over-year basis during the fiscal year ended March 31, 2019. During the same period,
the unemployment rate in Japan remained low, fluctuating between 2.3% and 2.5%. According to Teikoku
Databank, a Japanese research institution, the number of companies that filed for legal bankruptcy in Japan
during the fiscal year ended March 31, 2019 was 8,057, a 2.8% decrease from the previous fiscal year. The total
liabilities of companies that filed for legal bankruptcy during the fiscal year ended March 31, 2019 were
¥1,554 billion, a 40% decrease from the previous fiscal year. The Japanese economy remains subject to
continuing deflationary pressure, increasing public debt, intensifying trade conflicts and global competition,
declining domestic population, stagnant private consumption which may further decline once the consumption
tax rate is raised from 8.0% to 10.0% in October 2019 as currently expected, and various other factors that could
adversely affect its economic conditions.
The U.S. economy expanded with the quarter-on-quarter annualized real GDP growth rate being 4.2% for
the quarter ended June 30, 2018, 3.4% for the quarter ended September 30, 2018, 2.2% for the quarter ended
December 31, 2018 and 3.1% for the quarter ended March 31, 2019. The year-over-year real GDP growth rate
was 2.9% for the quarter ended June 30, 2018, 3.0% for the quarter ended September 30, 2018, 3.0% for the
quarter ended December 31, 2018 and 3.2% for the quarter ended March 31, 2019. The U.S. economic growth
was supported by the improvement in the labor market, higher wages and increased corporate production
activities. During the fiscal year ended March 31, 2019, the unemployment rate in the U.S. fluctuated between
3.7% and 4.0%. However, the long-term prospects of the U.S. economy remain uncertain in light of the changes
in the government’s economic, monetary, trade and foreign relations policies under the Trump administration,
and various other factors.
The Eurozone’s economic growth continued at a slow rate with the quarter-on-quarter real GDP growth rate
being 0.4% for the quarter ended June 30, 2018, 0.1% for the quarter ended September 30, 2018, 0.2% for the
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quarter ended December 31, 2018 and 0.4% for the quarter ended March 31, 2019. The year-over-year real GDP
growth rate was 2.2% for the quarter ended June 30, 2018, 1.7% for the quarter ended September 30, 2018, 1.2%
for the quarter ended December 31, 2018 and 1.2% for the quarter ended March 31, 2019. During the fiscal year
ended March 31, 2019, the unemployment rate in the Eurozone declined to 7.7% for March 2019. There are still
uncertainties in the Eurozone economy, including the process and ramifications of the United Kingdom’s
withdrawal from the European Union and the large accumulation of non-performing loans in some European
peripheral countries.
In Asia excluding Japan, economic conditions in ASEAN (Association of Southeast Asian Nations) and
NIEs (Newly Industrialized Economies) generally improved but the economic growth remained relatively modest
during the fiscal year ended March 31, 2019. In China, economic conditions continued to improve at a moderate
pace during the fiscal year, with some downward pressure on economic growth resulting from remaining
structural adjustments. China’s quarter-on-quarter real GDP growth rate was 1.7% for the quarter ended June 30,
2018, 1.6% for the quarter ended September 30, 2018, 1.5% for the quarter ended December 31, 2018 and 1.4%
for the quarter ended March 31, 2019. China’s year-over-year real GDP growth rate was 6.7% for the quarter
ended June 30, 2018, 6.5% for the quarter ended September 30, 2018, 6.4% for the quarter ended December 31,
2018 and 6.4% for the quarter ended March 31, 2019. The Thai economy was on a gradually stabilizing trend
during the fiscal year ended March 31, 2019, with varying degrees of impact on the financial conditions of
consumers and small and medium-sized enterprises. Thailand’s quarter-on-quarter real GDP growth rate was
1.1% for the quarter ended June 30, 2018, negative 0.4% for the quarter ended September 30, 2018, 0.9% for the
quarter ended December 31, 2018 and 1.0% for the quarter ended March 31, 2019. Thailand’s year-over-year real
GDP growth rate was 4.7% for the quarter ended June 30, 2018, 3.2% for the quarter ended September 30, 2018,
3.6% for the quarter ended December 31, 2018 and 2.8% for the quarter ended March 31, 2019. Although there
are some signs of further economic growth in ASEAN and NIEs, such as growth in exports to developed
countries and larger investments in infrastructure projects in the region, uncertainties still remain in light of,
among other things, intensifying trade conflicts and potential geopolitical issues.
Interest Rates
Interest rates remained at historically low levels in Japan under the Bank of Japan’s monetary policy. The
yield on 10-year Japanese government bonds fluctuated between negative 0.090% and positive 0.161% during
the fiscal year ended March 31, 2019. The Bank of Japan adopted its “quantitative and qualitative monetary
easing” policy in April 2014 and commenced its “quantitative and qualitative monetary easing with negative
interest rates” policy in January 2016. Under this policy, aiming to achieve the price stability target of 2.0%, the
Bank of Japan applied a negative interest rate of minus 0.1% to the “Policy-Rate Balances,” which are a part of
current account amounts held by financial institutions at the Bank of Japan, while increasing the Bank of Japan’s
aggregate holding of Japanese government bonds by approximately ¥80 trillion each year. In September 2016,
the Bank of Japan announced a new “quantitative and qualitative monetary easing with yield curve control”
policy, adding to its monetary policy a Japanese government bond purchase program with an aim to keep the
yield of 10-year Japanese government bonds around zero percent. In July 2018, the Bank of Japan slightly its
modified monetary policy by adopting forward guidance on interest rates and adding language in its policy
statement that long-term interest rates may fluctuate depending on economic and price developments. The yield
on 10-year Japanese government bonds was 0.049% on March 30, 2018 and negative 0.081% on March 29, 2019.
The yield currently fluctuates around negative 0.158%.
In the United States, the FRB raised the target range for the federal funds rate to between1.75% and 2.00%
in June 2018, to between2.00% and 2.25% in September 2018, and further to between 2.25% and 2.50% in
December 2018. However, following the Federal Open Market Committee in June 2019, several FRB members
implied their willingness to reduce the rate at least by 25 basis points by the end of the calendar year 2019 in
light of increasing uncertainty in the economic outlook. The 10-year U.S. Treasury bond yield decreased from
2.74% at the end of March 2018 to 2.406% at the end of March 2019, while fluctuating between 2.368% and
3.238% during the period. The yield currently fluctuates around 2.006%.
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The yield on 10-year German Bunds decreased from positive 0.497% at the end of March 2018 to negative
0.07% as of March 29, 2019, while fluctuating between negative 0.081% and positive 0.645% during the period.
The yield currently fluctuates around negative 0.327%. The yield on 10-year French Obligations Assimilables du
Trésor decreased from 0.721% at the end of March 2018 to 0.318% as of March 29, 2019, while fluctuating
between 0.301% and 0.907% during the period. The yield currently fluctuates around negative 0.005%.
Foreign Currency Exchange Rates
The Japanese yen depreciated against the U.S. dollar from ¥106.28 to the U.S. dollar as of March 30, 2018
to ¥110.86 to the U.S. dollar as of March 29, 2019, while fluctuating between ¥105.89 to the U.S. dollar and
¥114.53 to the U.S. dollar during the period. The Japanese yen has since been fluctuating around ¥107.85 to the
U.S. dollar.
The Japanese yen was on a generally appreciating trend against the euro during the fiscal year ended
March 31, 2019, with the exchange rate being ¥124.35 to the euro as of March 29, 2019 compared to ¥130.97 to
the euro as of March 30, 2018. The Japanese yen has been fluctuating around ¥122.66 to the euro since April 1,
2019.
The Japanese yen was on a generally depreciating trend against the Thai baht during the fiscal year ended
March 31, 2019, with the exchange rate being ¥3.4929 to the Thai baht as of March 29, 2019 compared to
¥3.4076 to the Thai baht as of March 30, 2018. The Japanese yen has been fluctuating around ¥3.5162 to the Thai
baht since April 1, 2019.
Stock and Real Estate Prices
The closing price of the Nikkei Stock Average, which is the average of 225 blue chip stocks listed on the
Tokyo Stock Exchange, decreased from ¥21,454.30 on March 30, 2018 to ¥21,205.81 on March 29, 2019. The
closing price of the Nikkei Stock Average reached ¥24,270.62, the highest closing price since November 1991,
on October 2, 2018, and declined to ¥19,115.74 on December 25, 2018. The closing price of the Nikkei Stock
Average has since risen and has been fluctuating around ¥21,275.92.
According to the latest land price survey conducted by the Japanese government, between January 1, 2018
and January 1, 2019, the average residential land price in Japan increased 0.6%, and the average commercial land
price in Japan increased 2.8%. In the three major metropolitan areas of Tokyo, Osaka and Nagoya, between
January 1, 2018 and January 1, 2019, the average residential land price increased 1.0% and the average
commercial land price increased 5.1%. In the local regions of Japan, which consist of regions other than the three
major metropolitan areas, between January 1, 2018 and January 1, 2019, the average residential land price
increased 0.2% and the average commercial land price increased 1.0%.
Principal Sources of Income and Expenses
Net Interest Income
Net interest income is a function of:
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the amount of interest-earning assets,
the amount of interest-bearing liabilities,
the general level of interest rates,
the so-called “spread,” or the difference between the rate of interest earned on interest-earning assets
and the rate of interest paid on interest-bearing liabilities, and
the proportion of interest-earning assets financed by non-interest-bearing liabilities and equity.
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Provision for (Reversal of) Credit Losses
Provision for (reversal of) credit losses is charged to operations to maintain the allowance for credit losses at
a level deemed appropriate by management. For more information on our provision for (reversal of) credit losses
and a description of the approach and methodology used to establish the allowance for credit losses,
see “—B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio—Allowance policy.”
Non-interest Income
Non-interest income consists of the following:
Fees and commissions income
Fees and commissions income consist of the following:
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Fees and commissions on deposits consist of fees and commissions charged for ATM transactions and
other deposit and withdrawal services.
Fees and commissions on remittances and transfers consist of fees and commissions charged for
settlement services such as domestic fund remittances, including those made through electronic banking.
Fees and commissions on foreign trading business consist of fees and commissions charged for fund
collection and financing services related to foreign trading business activities.
Fees and commissions on credit card business consist of fees and commissions related to the credit card
business such as interchange income, annual fees, royalty and other service charges from franchisees.
Fees and commissions on security-related services primarily consist of fees and commissions for sales
and transfers of securities, including investment funds, underwriting, brokerage and advisory services,
securitization arrangement services, and agency services for the calculation and payment of dividends.
Fees and commissions on administration and management services for investment funds primarily
consist of fees and commissions earned on managing investment funds on behalf of clients.
Trust fees consist primarily of fees earned on fiduciary asset management and administration services
for corporate pension plans and investment funds.
‰ Guarantee fees consist of fees related to the guarantee business, including those charged for providing
guarantees on residential mortgage loans and other loans.
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Insurance commissions consist of commissions earned by acting as an agent for insurance companies
for the sale of insurance products.
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Fees and commissions on real estate business primarily consist of fees from real estate agent services.
‰ Other fees and commissions include various fees and commissions, such as arrangement fees and agent
fees, other than the fees mentioned above.
Net foreign exchange gains (losses)
Net foreign exchange gains (losses) consist of the following:
‰ Net foreign exchange gains (losses) on derivative contracts are net gains (losses) primarily on currency
derivative instruments entered into for trading purposes. For more information on our derivative
contracts, see Note 24 to our consolidated financial statements included elsewhere in this Annual
Report.
‰ Net foreign exchange gains (losses) on other than derivative contracts include foreign exchange trading
gains (losses) as well as transaction gains (losses) on the translation into Japanese yen of monetary
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assets and liabilities denominated in foreign currencies. The transaction gains (losses) on the translation
into Japanese yen fluctuate from period to period depending upon the spot rates at the end of each fiscal
year. In principle, all transaction gains (losses) on translation of monetary assets and liabilities
denominated in foreign currencies are included in current earnings.
‰ Net foreign exchange gains (losses) related to the fair value option include transaction gains (losses) on
the translation into Japanese yen of securities under the fair value option. For more information on the
fair value option, see Note 32 to our consolidated financial statements included elsewhere in this Annual
Report.
Net trading account profits (losses)
Trading account assets and liabilities are carried at fair value and changes in the value of trading account
assets and liabilities are recorded in net trading account profits (losses). Activities reported in our net trading
account profits (losses) can generally be classified into two categories:
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trading purpose activities, which are conducted mainly for the purpose of generating profits either
through transaction fees or arbitrage gains and involve frequent and short-term selling and buying of
securities, commodities or others; and
trading account assets relating to the application of certain accounting rules, which are generally not
related to trading purpose activities, but simply classified as trading accounts due to the application of
certain accounting rules.
Of the two categories, trading account assets relating to the application of certain accounting rules represent
a larger portion of our trading account profits for the fiscal year ended March 31, 2019.
We generally do not separate, for financial reporting purposes, customer originated trading activities from
non-customer related, proprietary trading activities. When an order for a financial product is placed by a
customer, a dealer offers a price which includes certain transaction fees, often referred to as the “margin” to the
market price. The margin is determined by considering factors such as administrative costs, transaction amount
and liquidity of the applicable financial product. Once the customer agrees to the offered price, the deal is
completed and the position is recorded in our ledger as a single entry without any separation of components. To
manage the risk relating to the customer side position, we often enter into an offsetting transaction with the
market. Unrealized gains and losses as of the period-end for both the customer side position and the market side
position are recorded within the same trading account profits and losses.
Net trading account profits (losses) consist of net profits (losses) on interest rate and other derivative
contracts and net profits (losses) on trading account securities, excluding derivatives.
Net profits (losses) on interest rate and other derivative contracts are reported for net profits (losses) on
derivative instruments which primarily relate to trading purpose activities and include:
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Interest rate contracts: Interest rate contracts are mainly utilized to manage interest rate risks which
could arise from mismatches between assets and liabilities resulting from customer originated trading
activities;
Equity contracts: Equity contracts are mainly utilized to manage the risk that would arise from price
fluctuations of stocks held in connection with customer transactions;
‰ Commodity contracts: Commodity contracts are mainly utilized to meet customers’ demand for hedging
the risks relating to their transactions, and to diversify our portfolio; and
‰ Credit derivatives: Credit derivatives are mainly utilized as a part of our credit portfolio risk
management.
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Derivative instruments for trading purposes also include those used as hedges of net exposures rather than
for specifically identified assets or liabilities, which do not meet the specific criteria for hedge accounting.
Net profits (losses) on trading account securities, excluding derivatives, consist of:
‰ Net profits (losses) on trading account securities, which primarily consist of gains and losses on trading
and valuation of trading securities which relate to trading purpose activities. Net profits (losses) on
investment securities held by certain consolidated variable interest entities, or VIEs, are included in
accordance with the applicable accounting rules.
‰ Net profits (losses) on trading account securities under the fair value option, which are classified into
trading accounts profits (losses) in accordance with certain accounting rules. For more information on
the fair value option, see Note 32 to our consolidated financial statements included elsewhere in this
Annual Report.
Net investment securities gains (losses)
Net investment securities gains (losses) include net gains (losses) on sales of marketable securities,
particularly debt securities and marketable equity securities. Impairment losses are recognized and offset net
investment securities gains when management concludes that declines in the fair value of investment securities
are other than temporary. In addition, as a result of our adoption of new guidance on recognition and
measurement of financial assets and financial liabilities on April 1, 2018, unrealized gains (losses), or holding
gains (losses), on equity investments are reflected in net gains (losses) from marketable equity securities. This
new guidance is not applied retrospectively to the fiscal years ended March 31, 2017 and 2018. Prior to adoption,
such unrealized gains and losses were reflected in other comprehensive income. For more information, see
Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
Net equity in earnings (losses) of equity method investees
Net equity in earnings (losses) of equity method investees includes our equity interest in the earnings of our
equity method investees and impairment losses on our investments in equity method investees.
Non-Interest Expense
Non-interest expense consists of:
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salaries and employee benefits, which include the amount of money paid as salaries and bonuses as well
as the cost of fringe-benefits,
occupancy expenses—net, which include the amount of money paid as rents for offices and other
facilities,
fees and commissions expenses, which include the amount of money paid as fees and commissions on
services received,
outsourcing expenses, including data processing, which include the amount of money paid for the
outsourcing services, including IT-related services,
depreciation of premises and equipment, which includes the depreciation of the value of buildings,
equipment and furniture through the passage of time,
amortization of intangible assets, which includes the amount of deductions of the cost of investments in
software and other intangible assets over their estimated useful lives,
impairment of intangible assets, which includes the amount of reductions in the carrying amounts of
intangible assets with indefinite useful lives in excess of their fair values,
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‰
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insurance premiums, including deposits insurance, which include the amount of money paid as the
insurance premiums including the deposit insurance premiums paid to the Deposit Insurance
Corporation of Japan
communications, which include the amount of money paid for communications such as postal services
and telecommunications,
taxes and public charges, which include the amount of tax payments and other public charges,
impairment of goodwill, which includes the amount of reductions in the carrying amount of goodwill
recorded in connection with the acquisition of companies in excess of their fair values,
provision for (reversal of) off-balance sheet credit instruments, which includes the amount of money
reserved for the estimated amount of losses on off-balance sheet credit instruments or reversal of any
portion of such amount, and
other non-interest expenses.
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Recent Developments
During the fiscal year ended March 31, 2019, we continued to pursue a strategy to improve our operational
efficiency and financial performance and achieve sustainable growth. We sought to strengthen our management
structure, while selectively reviewing and considering growth opportunities that would enhance our global
competitiveness. We also continued to monitor regulatory developments and pursue prudent transactions that
would create a strong capital structure to enable us to contribute to the real economy, both domestically and
globally, as a provider of a stable source of funds and high-quality financial services. In addition, in order to
respond to the increasingly complex market and legal risks, we continued to endeavor to enhance our compliance
and internal control frameworks. Starting in the current fiscal year ending March 31, 2019, we launched our new
three-year medium-term business plan, under which we aim to integrate the expertise and capabilities of our
subsidiaries to build a foundation for future growth.
Implementation of Share Repurchase Programs and Cancellation of Purchased Shares
During November 2018 and December 2018, we repurchased 159,836,800 shares of our common stock for
¥99,999,974,078 under a share repurchase program that was adopted in November 2018 and completed in
December 2018. Under the program, we were authorized by the Board of Directors to repurchase up to the lesser
of an aggregate of 200,000,000 shares of our common stock and an aggregate of ¥100.0 billion between
November 14, 2018 and December 31, 2018 and to cancel the repurchased shares. We cancelled all of the
repurchased shares on January 22, 2019.
During May 2018 and June 2018, we repurchased 72,420,700 shares of our common stock for
¥49,999,969,714 under a share repurchase program that was adopted in May 2018 and completed in June 2018.
Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate
of 100,000,000 shares of our common stock and an aggregate of ¥50.0 billion between May 16, 2018 and
June 30, 2018 and to cancel the repurchased shares. We cancelled all of the repurchased shares on July 20, 2018.
The purposes of the above two share repurchase programs were to enhance shareholder value, to improve
our capital efficiency and to allow the implementation of flexible capital policies in response to changes in the
business environment.
Issuances of Senior Debt Securities for TLAC Purposes
During and after the fiscal year ended March 31, 2019, we issued $13.2 billion, or ¥1,467.3 billion,
€1.0 billion, or ¥124.6 billion, and HK$0.3 billion, or ¥4.3 billion, aggregate principal amount of senior notes
that were intended to qualify as TLAC debt. As of March 31, 2019, our TLAC ratios were 18.16% on a risk-
weighted assets basis and 7.90% on a leverage exposure basis. We are required to maintain External TLAC ratios
of 16% on a risk-weighted assets basis and 6% on a leverage exposure basis from March 31, 2019 and 18% on a
risk-weighted assets basis and 6.75% on a leverage exposure basis from March 31, 2022. See “—B. Liquidity
and Capital Resources—Capital Adequacy” and “Item 4.B. Information on the Company—Business Overview—
Supervision and Regulation—Japan—Total loss-absorbing capacity.”
Redemption of Preferred Securities Issued by Special Purpose Company
In May 2019, we decided to redeem in full ¥90.0 billion of Japanese yen-denominated non-cumulative
preferred securities issued by an overseas special purpose company in the Cayman Islands called MUFG Capital
Finance 8 Limited. The effective date of the planned redemption is July 25, 2019. Based on the Japanese GAAP
information used to calculate our capital ratios as of March 31, 2019, we estimate that the planned redemption
would result in a decline in each of our Tier 1 capital ratio and our total capital ratio by approximately
0.1 percentage point.
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In January 2019, we redeemed in full ¥222.0 billion of Japanese yen-denominated non-cumulative preferred
securities issued by an overseas special purpose company in the Cayman Islands called MUFG Capital Finance 7
Limited.
Issuances of Basel III-Compliant Domestic Subordinated Bonds
In December 2018, we issued, in a public offering in Japan, ¥155.0 billion aggregate principal amount of
unsecured perpetual subordinated Additional Tier 1 notes. These notes are subject to our discretion to cease
interest payments and a write-down of the principal upon the occurrence of certain events, including when our
Common Equity Tier 1 capital ratio declines below 5.125%, when we are deemed to be at risk of becoming
non-viable or when we become subject to bankruptcy proceedings, but, following any write-down, the principal
may be reinstated to the extent permitted by the Japanese banking regulator. See “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—Japan.”
Strategic Investment in Bank Danamon in Indonesia
In December 2017, MUFG Bank acquired an initial 19.9% equity interest in Bank Danamon for an
aggregate purchase price of IDR 15.875 trillion, or ¥133.4 billion, based on a price of IDR 8,323, or ¥70, per
share. In August 2018, MUFG Bank acquired an additional 20.1% equity interest for an aggregate purchase price
of IDR 17.187 trillion, or ¥132.3 billion, based on a price of IDR 8,921, or ¥69, per share. As a result, MUFG
Bank’s equity interest in Bank Danamon increased to 40%, and MUFG Bank started to apply the equity method
of accounting to its investment in Bank Danamon during the six months ended September 30, 2018.
In April 2019, MUFG Bank further increased its shareholding in Bank Danamon from 40.0% to 94.0% by
acquiring additional shares for an aggregate purchase price of IDR 49,620 billion, or ¥397.0 billion, based on a
price of IDR 9,590, or ¥77, per share. In addition, in April 2019, MUFG Bank increased its shareholding in
PT Bank Nusantara Parahyangan Tbk., or Bank BNP, in Indonesia from 7.9% to 99.9% by acquiring shares from
ACOM Co., Ltd., our equity method affiliate, and other shareholders for an aggregate purchase price of IDR
3,011 billion, or ¥24.1 billion, based on a price of IDR 4,088, or ¥33, per share. As a result, Bank Danamon and
Bank BNP became our consolidated subsidiaries. In May 2019, Bank BNP was merged into Bank Danamon
through a share exchange transaction, resulting in our shareholding in Bank Danamon being 94.1%.
This investment is part of our strategic plan to expand our presence in Asia and Oceania and contribute to
the economic growth in the region. The investment is expected to enable us to leverage our financial strength,
relationships with Japan’s leading companies, and global network as well as our product and sectorial expertise
to further enhance our growth strategy. In our capacity as a long-term shareholder, we aim to build on Bank
Danamon’s established and respected brand franchise to foster synergies and enhance Bank Danamon’s position
as a leading and prominent Indonesian bank that remains committed to delivering high quality services to its
customers.
Bank Danamon, which was established in 1956, is the fifth most profitable Indonesian commercial bank in
terms of net income. Bank Danamon provides banking and financial products and services to consumer, micro-
finance, small and medium enterprise, and corporate customers, with a network of approximately 1,800 offices in
Indonesia.
Acquisition of Aviation Finance Business from DVB Bank
In March 2019, MUFG Bank agreed to purchase from DVB Bank SE in Germany its aviation finance client
lending portfolio, which was valued at approximately €5.6 billion, or approximately ¥716.3 billion, as of June 30,
2018, and the related operating infrastructure. In connection with this agreement, BOT Lease Co., Ltd., a
consolidated subsidiary of MUFG Bank, agreed to purchase from DVB Bank its aviation investment
management and asset management business. The closing of these transactions are expected to occur during the
second half of the fiscal year ending March 31, 2020, subject to regulatory approvals and other conditions. We
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consider aviation finance to be a key growth pillar for us and, through the acquisition, we aim to enhance our
Global Corporate & Investment Banking Business platform in terms of higher returns, portfolio diversification
and solution offering to our clients.
Sale of Shares in Standard Life Aberdeen
In February 2019, Mitsubishi UFJ Trust and Banking sold all of the ordinary shares it held in Standard Life
Aberdeen plc, a U.K.-based asset manager, for approximately £349.3 million, or approximately ¥49.4 billion.
The sale was part of our strategy to optimize our capital management in light of tightened international financial
regulations and changes in the business environment. Standard Life Aberdeen plc remains one of our most
important partners.
Agreement to Acquire Shares in Colonial First State Group Limited Subsidiaries
In October 2018, Mitsubishi UFJ Trust and Banking entered into a Share Sale Deed with Commonwealth
Bank of Australia, or CBA, and its wholly-owned subsidiary Colonial First State Group Limited, or CFSGL, to
acquire 100% of the shares in each of nine subsidiaries of CFSGL, which collectively represent CBA’s global
asset management business known as Colonial First State Global Asset Management, or CFSGAM, from CFSGL
for an aggregate purchase price of approximately AU$4.0 billion, or ¥328 billion, subject to certain conditions
precedent, including required regulatory approvals. The purpose of this transaction is to enhance Mitsubishi UFJ
Trust and Banking’s asset management capabilities and product competitiveness in the global asset management
market. The transaction is currently expected to be completed in mid-2019.
Sale of Shares in Banco Bradesco
In April 2018, MUFG Bank sold a portion of its equity interest in Banco Bradesco SA, a Brazil-based
universal banking group in Latin America, for approximately 1,411 million Brazilian Real, or approximately
¥45.3 billion. Although MUFG Bank’s shareholding ratio decreased to 1.25% as a result of the transaction,
Bradesco remains our important alliance partner in the Latin American region and continues to collaborate with
MUFG Bank in a broad range of business areas.
Agreement concerning Capital Transfer and Merger between Mitsubishi UFJ Morgan Stanley Securities and
Mitsubishi UFJ Morgan Stanley PB Securities
In April 2019, Mitsubishi UFJ Morgan Stanley Securities and Mitsubishi UFJ Morgan Stanley PB Securities
Co., Ltd., a subsidiary of Mitsubishi UFJ Morgan Stanley Securities holding 75% of its shares with the remaining
25% held by MUFG Bank, agreed on a merger whereby Mitsubishi UFJ Morgan Stanley Securities will be the
surviving company. In connection with the planned merger, MUFG Bank is expected to transfer its 25% equity
interest in Mitsubishi UFJ Morgan Stanley PB Securities to Mitsubishi UFJ Morgan Stanley Securities. Through
this transaction, Mitsubishi UFJ Morgan Stanley Securities aims to enhance its wealth management business.
Functional Realignment of Subsidiaries
In April 2018, Mitsubishi UFJ Trust and Banking’s corporate loan-related businesses were transferred to
MUFG Bank. As a result, the corporate loan-related businesses within the Group are currently concentrated at
MUFG Bank.
Also in April 2018, Mitsubishi UFJ Trust and Banking acquired MUFG Bank’s 15% equity interest and
Mitsubishi UFJ Securities Holding’s 34% equity interest in Mitsubishi UFJ Kokusai Asset Management Co., Ltd.
to make the asset management company a wholly owned subsidiary of Mitsubishi UFJ Trust and Banking. The
acquisition followed the transfer to Mitsubishi UFJ Trust and Banking of the shares of Mitsubishi UFJ Investor
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Services & Banking (Luxembourg) S.A. held by MUFG Bank in May 2017 to make the Luxembourg company a
wholly owned subsidiary of Mitsubishi UFJ Trust and Banking. As a result, Mitsubishi UFJ Trust and Banking
currently operates as the Group’s primary asset management and administration subsidiary, and seeks to further
strengthen its real estate, pension and estate administration services.
The realignment of these functions of our subsidiaries was executed as part of our strategy to increase the
effectiveness in accumulating and applying the expertise of our subsidiaries and to enhance efficiency in offering
and providing a diverse array of sophisticated financial products and services to customers through collaboration
among our subsidiaries. See “Item 4.B—Information on the Company—Business Overview.”
Critical Accounting Estimates
Our consolidated financial statements included elsewhere in this Annual Report are prepared in accordance
with U.S. GAAP. Certain accounting policies require management to make difficult, complex or subjective
judgments regarding the valuation of assets and liabilities. The accounting policies are fundamental to
understanding our operating and financial review and prospects. The notes to our consolidated financial
statements included elsewhere in this Annual Report provide a summary of our significant accounting policies.
The following is a summary of the critical accounting estimates:
Allowance for Credit Losses
The allowance for credit losses represents management’s best estimate of probable losses in our loan
portfolio. The evaluation process, including credit-ratings and self-assessments, involves a number of estimates
and judgments. The allowance is based on two principles of accounting guidance: (1) the guidance on
contingencies requires that losses be accrued when they are probable of occurring and can be estimated, and
(2) the guidance on accounting by creditors for impairment of a loan requires that losses be accrued based on the
difference between the loan balance, on the one hand, and the present value of expected future cash flows
discounted at the loan’s original effective interest rate, the fair value of collateral or the loan’s observable market
value, on the other hand.
We divide our loan portfolio into the following segments—Commercial, Residential, Card, MUFG Americas
Holdings and Krungsri—based on the segments used to determine the allowance for credit losses. We further divide
the Commercial segment into classes based on initial measurement attributes, risk characteristics, and our approach
to monitoring and assessing credit risk. We determine the appropriate level of the allowance for credit losses for
each of our loan portfolios by evaluating various factors and assumptions, such as the borrower’s credit rating,
collateral value and historical loss experience as well as existing economic conditions. We update these factors and
assumptions on a regular basis and upon the occurrence of unexpected changes in the economic environment.
For all portfolio segments, key elements relating to the policies and discipline used in determining the
allowance for credit losses are our credit classification and the related borrower categorization process. Each of
these components is determined based on estimates subject to change when actual events occur. The
categorization is based on conditions that may affect the ability of borrowers to service their debt, taking into
consideration current financial information, historical payment experience, credit documentation, public
information, analyses of relevant industry segments and current trends. In determining the appropriate level of
allowance, we evaluate the probable loss by category of the loan based on its type and characteristics.
In addition to the allowance for credit losses on our loan portfolio, we maintain an allowance for credit
losses on off-balance sheet credit instruments, including commitments to extend credit, a variety of guarantees
and standby letters of credit and other financial instruments. This allowance is included in other liabilities.
Determining the adequacy of the allowance for credit losses requires the exercise of considerable judgment
and the use of estimates, such as those discussed above. Our actual losses could be more or less than the
84
estimates. To the extent that actual losses differ from management’s estimates, additional provisions for credit
losses may be required that would adversely impact our operating results and financial condition in future
periods. For further information regarding our methodologies used in establishing the allowance for credit losses
by portfolio segments and allowance for credit losses policies, see Note 1 to our consolidated financial
statements included elsewhere in this Annual Report and “—B. Liquidity and Capital Resources—Financial
Condition—Loan Portfolio.”
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
Allowance for Repayment of Excess Interest
We maintain an allowance for repayment of excess interest based on our estimate of the potential liability
exposure. Our estimate of the potential liability exposure represents the estimated amount of claims for repayment
of excess interest to be received in the future. We expect that any such claim will be made on the basis of a 2006
ruling of the Japanese Supreme Court, or the Ruling. Under the Ruling, lenders are generally required to reimburse
borrowers for interest payments made in excess of the limits stipulated by the Interest Rate Restriction Act upon
receiving claims for reimbursement, despite the then-effective provisions of the Law Concerning Lending Business
that exempted a lender from this requirement if the lender provided required notices to the borrower and met other
specified requirements, and the borrower voluntarily made the interest payment.
While we have not entered into any consumer loan agreement after April 2007 that imposes an interest rate
exceeding the limits stipulated by the Interest Rate Restriction Act, we need to estimate the number of possible
claims for reimbursement of excess interest payments. To determine the allowance for repayment of excess
interest, we analyze the historical number of repayment claims we have received, the amount of such claims,
borrowers’ profiles, the actual amount of reimbursements we have made, management’s future forecasts, and
other events that are expected to possibly affect the repayment claim trends in order to arrive at our best estimate
of the potential liability. We believe that the provision for repayment of excess interest is adequate and the
allowance is at the appropriate amount to absorb probable losses, so that the impact of future claims for
reimbursement of excess interest will not have a material adverse effect on our financial position and results of
operations. The allowance is recorded as a liability in Other liabilities.
For further information, see Note 27 to our consolidated financial statements included elsewhere in this Annual
Report and “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our loans to
consumers and our shareholdings in companies engaged in consumer lending, changes in the business or regulatory
environment for consumer finance companies in Japan may further adversely affect our financial results.”
Accounting for Goodwill and Intangible Assets
Accounting for Goodwill. U.S. GAAP requires us to test goodwill for impairment at least annually, or
more frequently if events or changes in circumstances indicate that goodwill may be impaired, using a two-step
process that begins with an estimation of the fair value of a reporting unit of our business, which is to be
compared with the carrying amount of the unit, to identify potential impairment of goodwill. A reporting unit is
an operating segment or component of an operating segment that constitutes a business for which discrete
financial information is available and is regularly reviewed by management. The fair value of a reporting unit is
defined as the amount at which the unit as a whole could be bought or sold in a current transaction between
willing parties. For a reporting unit for which an observable quoted price is not available, the fair value is
determined using an income approach. In the income approach, the present value of expected future cash flows is
calculated by taking the net present value based on each reporting unit’s internal forecasts. A control premium
factor is also considered in relation to market capitalization.
If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment loss recorded in our consolidated statements of
85
income. This test requires a comparison of the implied fair value of the unit’s goodwill with the carrying amount of
that goodwill. The estimate of the implied fair value of the reporting unit’s goodwill requires us to allocate the fair
value of a reporting unit to all of the assets and liabilities of that reporting unit, including unrecognized intangible
assets, if any, since the implied fair value is determined as the excess of the fair value of a reporting unit over the net
amounts assigned to its assets and liabilities in the allocation. Accordingly, the second step of the impairment test
also requires an estimate of the fair value of individual assets and liabilities, including any unrecognized intangible
assets that belong to that unit. A change in the estimation could have an impact on impairment recognition since it is
driven by hypothetical assumptions, such as customer behavior and interest rate forecasts. The estimation is based
on information available to management at the time the estimation is made.
Accounting for Intangible Assets.
Intangible assets having indefinite useful lives are subject to annual
impairment tests. An impairment exists if the carrying value of an indefinite lived asset exceeds its fair value. For
other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not
recoverable and the carrying amount exceeds the fair value of the intangible asset. Management judgment is
required to evaluate whether indications of potential impairment have occurred, and to test intangible assets for
impairment if required.
Valuation of Financial Instruments
We measure certain financial assets and liabilities at fair value. The majority of such assets and liabilities
are measured at fair value on a recurring basis, including trading securities, trading derivatives and investment
securities. In addition, certain other assets and liabilities are measured at fair value on a non-recurring basis,
including held for sale loans which are carried at the lower of cost or fair value, collateral dependent loans and
nonmarketable equity securities subject to impairment.
We have elected the fair value option for certain foreign securities classified as available-for-sale debt
securities, whose unrealized gains and losses are reported in income, and marketable equity securities.
The guidance on the measurement of fair value defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. We have an established and documented process for determining fair value in accordance with the
guidance. To determine the fair value, we use quoted prices which include those provided from pricing vendors,
where available. We generally obtain one price or quote per instrument and do not adjust it to determine the fair
value of the instrument. We perform internal price verification procedures to ensure that the prices and quotes
provided from the independent pricing vendors are reasonable. Such verification procedures include a
comparison of pricing sources and analysis of variances among pricing sources. These verification procedures
are periodically performed by independent risk management departments. For collateralized loan obligations, or
CLOs, backed by general corporate loans, the fair value is determined by weighting the internal model valuation
and the non-binding broker-dealer quotes. If quoted prices are not available to determine the fair value of
derivatives, the fair value is based upon valuation techniques that use, where possible, current market-based or
independently sourced parameters, such as interest rates, yield curves, foreign exchange rates, volatilities and
credit curves. The fair values of trading liabilities are determined by discounting future cash flows at a rate which
incorporates our own creditworthiness. In addition, valuation adjustments may be made to ensure that the
financial instruments are recorded at fair value. These adjustments include, but are not limited to, amounts that
reflect counterparty credit quality, funding cost, liquidity risk, and model risk. Our financial models are validated
and periodically reviewed by risk management departments independent of divisions that created the models.
For a further discussion of the valuation techniques applied to the material assets or liabilities, see Note 32
to our consolidated financial statements included elsewhere in this Annual Report.
Accounting Changes and Recently Issued Accounting Pronouncements
See “Accounting Changes” and “Recently Issued Accounting Pronouncements” in Note 1 to our
consolidated financial statements included elsewhere in this Annual Report.
86
A. Operating Results
The following discussion relates to our operating results for the fiscal years ended March 31, 2018 and
2019. For the discussion on our operating results for the fiscal year ended March 31, 2017, including certain
comparative discussion on our operating results for the fiscal years ended March 31, 2017 and 2018, please
refer to “Item 5. Operating and Financial Review and Prospectus—5.A. Operating Results” in our annual report
on Form 20-F for the fiscal year ended March 31, 2018, filed with the SEC on July 12, 2018.
Results of Operations
The following table sets forth a summary of our results of operations for the fiscal years ended March 31,
2018 and 2019:
Fiscal years ended March 31,
2018
2019
(in billions)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,259.0
1,028.7
¥3,813.4
1,518.0
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,230.3
Provision for (reversal of) credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(240.8)
1,935.1
2,744.4
1,661.8
407.8
2,295.4
34.3
1,595.2
2,985.5
870.8
133.2
Net income before attribution of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
¥1,254.0
25.8
¥ 737.6
19.0
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . . . .
¥1,228.2
¥ 718.6
Major components of our net income attributable to Mitsubishi UFJ Financial Group for the fiscal years
ended March 31, 2018 and 2019 are discussed in further detail below.
87
Net Interest Income
The following table is a summary of the interest rate spread for the fiscal years ended March 31, 2018 and
2019:
Fiscal years ended March 31,
2018
Interest
income
(expense)
Average
balance
Average
rate
Average
balance
2019
Interest
income
(expense)
Average
rate
(in billions, except percentages)
Interest-earning assets:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥144,602.0 ¥ 1,002.0
2,257.0
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94,447.0
0.69% ¥145,279.1 ¥ 1,048.6
2,764.8
96,128.3
2.39
0.72%
2.88
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥239,049.0 ¥ 3,259.0
1.36% ¥241,407.4 ¥ 3,813.4
1.58%
Financed by:
Interest-bearing liabilities:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥173,166.0 ¥ (367.6) 0.21% ¥173,199.6 ¥ (504.2) 0.29%
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,013.8) 1.65
(661.1) 1.09
60,691.1
61,443.6
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . .
233,857.1
5,191.9
(1,028.7) 0.44
—
234,643.2
6,764.2
(1,518.0) 0.65
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥239,049.0
0.43% ¥241,407.4
0.63%
Net interest income and interest rate spread . . . . . . . . . . . . . .
Net interest income as a percentage of total interest-earning
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,230.3
0.92%
¥ 2,295.4
0.93%
0.93%
0.95%
The following table shows changes in our net interest income by changes in volume and by changes in rates
for the fiscal year ended March 31, 2019 compared to the fiscal year ended March 31, 2018:
Fiscal Year Ended March 31, 2018
versus
Fiscal Year Ended March 31, 2019
Increase (decrease)
due to changes in
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,801
16,791
Volume(1)
Net change
Rate(1)
(in millions)
¥ (98,744) ¥ (89,943)
155,080
138,289
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥25,592
¥ 39,545
¥ 65,137
Note:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net
change.”
Our net interest income for each of the fiscal years ended March 31, 2018 and 2019 was not materially
affected by gains or losses resulting from interest rate and other derivative contracts. We use such derivative
instruments to manage the risks affecting the values of our financial assets and liabilities. Although these
contracts are generally entered into for risk management purposes, a majority of them do not meet the specific
conditions to qualify for hedge accounting under U.S. GAAP and thus are accounted for as trading assets or
liabilities. Any gains or losses resulting from such derivative instruments are recorded as part of Trading account
profits—net. For a detailed discussion of our risk management activities, see “—A. Operating Results—Results
of Operations—Non-Interest Income” and “Item 11. Quantitative and Qualitative Disclosures about Credit,
Market and Other Risk.”
88
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
Net interest income increased ¥65.1 billion to ¥2,295.4 billion for the fiscal year ended March 31, 2019
from ¥2,230.3 billion for the fiscal year ended March 31, 2018. This increase was due to higher foreign interest
income, mainly reflecting higher average interest rates on, and higher average balance of, interest-earning assets,
particularly in the United States. This increase was partially offset by an increase in interest expense, primarily
reflecting higher interest rates on deposits in the United States and higher U.S. dollar funding rates in Japan.
Interest income increased ¥554.4 billion to ¥3,813.4 billion for the fiscal year ended March 31, 2019 from
¥3,259.0 billion for the previous fiscal year. Domestic interest income increased ¥46.6 billion mainly due to
higher interest rates on domestic loans, reflecting higher long-term interest rates in Japan during the first half of
the fiscal year ended March 31, 2019. Foreign interest income increased ¥507.8 billion primarily due to higher
interest rates on, and higher volumes of, foreign loans.
Interest expense increased ¥489.3 billion to ¥1,518.0 billion for the fiscal year ended March 31, 2019 from
¥1,028.7 billion for the previous fiscal year. Domestic interest expense increased ¥136.5 billion, and foreign
interest expense increased ¥352.7 billion. The higher domestic interest expense was primarily attributable to
higher short-term U.S. dollar funding rates in Japan. The higher foreign interest expense was mainly due to
higher interest rates on deposits and higher money market interest rates in the United States.
Our average interest rate spread (which is the average interest rate on interest-earning assets less the average
interest rate on interest-bearing liabilities) increased one basis point to 0.93% for the fiscal year ended March 31,
2019 from 0.92% for the previous fiscal year. The portion of our foreign interest-earning assets funded by
domestic interest-bearing liabilities, which have lower interest rates than foreign interest-bearing liabilities,
increased during the fiscal year ended March 31, 2019, compared to the previous fiscal year, resulting in the
slight improvement in our overall interest spread. Between the same periods, the average interest rate spread on
domestic activities decreased five basis points to 0.43% from 0.48%, and the average interest rate spread on
foreign activities decreased seven basis points to 1.23% from 1.30%. The decrease in the average interest rate
spread on domestic activities mainly reflected lower interest rates on our Japanese government bond portfolio
and higher U.S. dollar funding rates in Japan. The decrease in the average interest rate spread on foreign
activities mainly reflected higher money market interest rates in the United States and higher interest rates on
foreign deposits.
The yield on 10-year Japanese government bonds fluctuated between 0% and positive 0.15% during the six
months ended September 30, 2018, but subsequently declined to negative 0.1% towards March 31, 2019. During
the previous fiscal year, the yield on such bonds fluctuated between negative 0.02% to positive 0.1%. In July
2018, the Bank of Japan slightly modified its monetary policy, which included negative 0.1 percent interest on
the Policy-Rate Balances and a Japanese government bond purchase program with an aim to keep the yield of
10-year Japanese government bonds around zero percent, by adopting forward guidance on interest rates and
adding language in its policy statement that long-term interest rates may fluctuate depending on economic and
price developments. Long-term interest rates may fluctuate to a larger extent, causing additional uncertainty in
the interest rates in Japan. In the United States, the FRB raised the target range for the federal funds rate to
between 1.75% to 2.00% in June 2018, then to between 2.00% to 2.25% in September 2018, and further to
between 2.25% to 2.50% in December 2018. The FRB is currently expected to maintain the federal funds rate at
the current level or lower it during the calendar year 2019. See “—Business Environment.”
The average balance of interest-earning assets increased ¥2,358.4 billion to ¥241,407.4 billion for the fiscal
year ended March 31, 2019 from ¥239,049.0 billion for the fiscal year ended March 31, 2018. The average
balance of domestic interest-earning assets increased ¥677.1 billion to ¥145,279.1 billion mainly due to an
increase in the average balance of our interest-earning deposits in other banks particularly because we deposited
with the Bank of Japan a larger amount of cash received on sales and redemption of Japanese government bonds
as we reduced our holdings of such bonds. The higher average balance of domestic interest-earning assets was
also due to an increase in trading account assets. The average balance of foreign interest-earning assets increased
89
¥1,681.3 billion primarily due to increases in foreign currency-denominated loans, deposits in other banks and
investment securities, partially offset by a decrease in the average balance of trading account assets, particularly
U.S. Treasury bonds as interest rates rose for the first nine months ended December 31, 2018, in the United
States.
The average balance of interest-bearing liabilities increased ¥786.1 billion to ¥234,643.2 billion for the
fiscal year ended March 31, 2019 from ¥233,857.1 billion for the fiscal year ended March 31, 2018. The average
balance of domestic interest-bearing liabilities increased ¥33.6 billion mainly due to an increase in domestic
deposits. The average balance of foreign interest-bearing liabilities increased ¥752.5 billion mainly due to an
increase in other short-term borrowings, including such borrowings through commercial paper.
Provision for (reversal of) credit losses
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
We recorded ¥34.3 billion of provision for credit losses for the fiscal year ended March 31, 2019, compared
to ¥240.8 billion of reversal of credit losses for the previous fiscal year. By segment, for the fiscal year ended
March 31, 2019, ¥43.9 billion and ¥4.5 billion of reversal of credit losses were recorded in the Commercial and
Residential segments respectively, while ¥23.9 billion, ¥9.3 billion and ¥49.5 billion of provision for credit losses
were recorded in the Card, MUFG Americas Holdings and Krungsri segments respectively. For the previous
fiscal year, ¥297.4 billion, ¥22.3 billion and ¥9.3 billion of reversal of credit losses were recorded in the
Commercial, Residential and MUFG Americas Holdings segments respectively, while ¥23.4 billion and
¥64.8 billion of provision for credit losses were recorded in the Card and Krungsri segments, respectively.
The reversal of credit losses recorded in the Commercial segment for the fiscal year ended March 31, 2019
mainly reflected the improvements in the financial performance of a large borrower in the domestic electronics
manufacturing industry. The reversal of credit losses in the Residential segment for the fiscal year ended
March 31, 2019 primarily reflected, though to a lesser extent compared to the previous fiscal year, the improved
credit quality of borrowers who were positively affected by the stable domestic corporate environment in recent
periods.
The larger provision for credit losses in the Card segment for the fiscal year ended March 31, 2019 was
primarily attributable to an increase in default borrowers who filed for bankruptcy as part of their debt workout
efforts. Although the stable corporate environment in recent periods positively affected some individual
borrowers, the positive trends did not meaningfully affect our consumer loan borrowers and, in some cases, the
corporate efficiencies negatively affected some of our consumer loan borrowers. The provision for credit losses
in the MUFG Americas Holdings segment for the fiscal year ended March 31, 2019 mainly reflected the
bankruptcy filing of a large borrower in the electric power industry. The smaller provision for credit losses in the
Krungsri segment mainly reflected the improved credit quality of the small and medium-sized enterprise loan
portfolio where gradually stabilizing economic conditions in Thailand resulted in fewer borrowers experiencing
deterioration in their financial performance.
We recorded ¥40.2 billion of reversal of credit losses for our domestic loan portfolio for the fiscal year
ended March 31, 2019, compared to reversal of credit losses of ¥266.1 billion for the previous fiscal year. This
reflected the improvement in the credit quality of a large borrower in the domestic manufacturing industry in the
Commercial segment and the credit quality of borrowers in the Residential segment, partially offset by the
weaker credit quality among consumer loan borrowers. We recorded ¥74.5 billion of provision for credit losses
for our foreign portfolio for the fiscal year ended March 31, 2019, compared to ¥25.3 billion of provision for
credit losses for the previous fiscal year. The larger provision primarily reflected the deteriorated financial
condition of some large foreign borrowers who belong to the electric power industry and the construction
industry in the Commercial and MUFG Americas Holdings segments.
For more information, see “—B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio.”
90
Non-Interest Income
The following table is a summary of our non-interest income for the fiscal years ended March 31, 2018 and
2019:
Fiscal years ended March 31,
2018
2019
(in billions)
Fees and commissions income:
Fees and commissions on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on remittances and transfers . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on foreign trading business . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on credit card business . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on security-related services . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on administration and management services for
investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on real estate business . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
53.5
169.3
78.2
212.5
258.7
159.5
112.4
44.2
49.2
40.6
284.7
¥
52.6
168.7
73.2
225.9
233.4
147.6
115.0
45.0
46.9
45.2
285.1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange losses—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
1,462.8
(49.6)
1,438.6
(96.0)
Trading account profits (losses)—net:
Net losses on interest rate and other derivative contracts . . . . . . . . . . . . . . . . . . . .
Net profits (losses) on trading account securities, excluding derivatives . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities gains (losses)—net:
Net gains on sales of available-for-sale securities:
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on available-for-sale securities:
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net losses from marketable equity securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(226.8)
153.7
(73.1)
73.9
207.3
(0.1)
(6.7)
—
12.5
286.9
228.0
16.1
64.0
(24.0)
192.9
168.9
28.7
—
(0.6)
—
(355.8)
75.4
(252.3)
209.7
22.7
103.6
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,935.1
¥1,595.2
Note:
(1) As a result of our adoption of new guidance on recognition and measurement of financial assets and financial liabilities on April 1, 2018,
equity securities are measured at fair value with unrealized gains (losses), or holding gains (losses), reflected in net gains (losses) from
marketable equity securities. This new guidance is not applied retrospectively to the fiscal years ended March 31, 2018. Prior to
adoption, such unrealized gains and losses were reflected in other comprehensive income. For more information, see Note 1 to our
consolidated financial statements included elsewhere in this Annual Report. For the fiscal year ended March 31, 2019, net losses from
marketable equity securities include net gains on sales of marketable equity securities.
91
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
Non-interest income decreased ¥339.9 billion to ¥1,595.2 billion for the fiscal year ended March 31, 2019
from ¥1,935.1 billion for the fiscal year ended March 31, 2018. This decrease was mainly attributable to
¥252.3 billion of investment securities losses, primarily due to net losses from marketable equity securities
recorded as a result of our adoption of new guidance on recognition and measurement of financial assets and
financial liabilities on April 1, 2018.
Fees and commissions income
Fees and commissions income decreased ¥24.2 billion to ¥1,438.6 billion for the fiscal year ended
March 31, 2019 from ¥1,462.8 billion for the fiscal year ended March 31, 2018. This decrease was primarily due
to a decrease in fees and commissions on securities-related services mainly due to lower volumes of selling and
buying transactions by retail customers. This decrease was partially offset by an increase in fees and
commissions on credit card business, reflecting an increase in payment processing fees and an increase in credit
card issuance fees as credit card use grew in Japan.
Net foreign exchange gains (losses)
The following table sets forth the details of our foreign exchange gains and losses for the fiscal years ended
March 31, 2018 and 2019:
Fiscal years ended March 31,
2018
2019
(in billions)
Foreign exchange losses—net:
Net foreign exchange losses on derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Net foreign exchange gains on other than derivative contracts . . . . . . . . . . . . . . .
Net foreign exchange gains (losses) related to the fair value option . . . . . . . . . . .
¥(160.0)
377.9
(267.5)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (49.6)
¥(354.4)
71.8
186.6
¥ (96.0)
Net foreign exchange losses for the fiscal year ended March 31, 2019 were ¥96.0 billion, compared to net
losses of ¥49.6 billion for the fiscal year ended March 31, 2018. This was mainly due to smaller net foreign
exchange gains on other than derivative contracts, reflecting the negative impact of fluctuations in the foreign
currency exchange rates on the Japanese yen translated amounts of monetary liabilities of our commercial
banking subsidiaries as the Japanese yen depreciated against other major currencies on a spot rate basis between
March 31, 2018 and March 31, 2019. The larger total net foreign exchange losses also resulted from larger net
foreign exchange losses on derivative contracts mainly due to the lower mark to market valuation on currency
swaps entered in connection with our U.S. dollar funding, reflecting the wider gap between Japanese yen interest
rates and U.S. dollar interest rates. These were substantially offset by an increase in net foreign exchange gains
on foreign-denominated trading account securities, such as U.S. Treasury bonds, under the fair value option as
the Japanese yen depreciated against the U.S. dollar from ¥106.24 to the U.S. dollar as of March 31, 2018 to
¥110.99 to the U.S. dollar as of March 31, 2019, while the Japanese yen appreciated against the U.S. dollar
during the previous fiscal year resulting in net foreign exchange losses on U.S. dollar-denominated trading
account securities under the fair value option.
92
Net trading account profits (losses)
The following table sets forth details of our trading account profits and losses for the fiscal years ended
March 31, 2018 and 2019:
Fiscal years ended March 31,
2018
2019
(in billions)
Trading account profits (losses)—net:
Net profits (losses) on interest rate and other derivative contracts
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 51.0
(260.4)
6.3
(1.8)
(21.9)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(226.8)
Net profits (losses) on trading account securities, excluding derivatives
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities under the fair value option . . . . . . . . . . . . . . . . . .
¥ 301.9
(148.2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 153.7
¥ 5.6
80.1
0.3
(39.8)
(70.2)
¥ (24.0)
¥ (16.0)
208.9
¥192.9
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (73.1)
¥168.9
Net trading account profits were ¥168.9 billion for the fiscal year ended March 31, 2019, compared to net
trading account losses of ¥73.1 billion for the fiscal year ended March 31, 2018. This improvement was mainly
due to smaller net losses on interest rate and other derivative contracts, which primarily reflected ¥80.1 billion of
net profits on equity contracts for the fiscal year ended March 31, 2019, compared to ¥260.4 billion of net losses
on such contracts for the fiscal year ended March 31, 2018, due to an increase in the market value of equity
contracts designed to hedge against downside price fluctuations, as equity prices were on a declining trend in
Japan particularly towards the end of the fiscal year ended March 31, 2019.
The ¥39.2 billion increase in net profits on trading account securities, excluding derivatives, resulted mainly
from an improvement in net profits on trading account securities under the fair value option, particularly U.S.
Treasury bonds, as long-term interest rates declined in the United States during the fiscal year ended March 31,
2019. The yield on 10-year U.S. Treasury bonds declined to around 2.4% as of March 31, 2019 from around
2.7% as of March 31, 2018, whereas the yield on such bonds rose to around 2.7% as of March 31, 2018 from
around 2.4% as of March 31, 2017. This improvement was substantially offset by net losses on trading account
securities as equity prices declined in Japan towards the end of the fiscal year ended March 31, 2019.
Net investment securities gains (losses)
Net investment securities losses were ¥252.3 billion for the fiscal year ended March 31, 2019, compared to
net investment securities gains of ¥286.9 billion for the fiscal year ended March 31, 2018. This was mainly due
to ¥355.8 billion of net losses from marketable equity securities recorded as a result of our adoption of new
guidance on recognition and measurement of financial assets and financial liabilities on April 1, 2018. Under this
guidance, equity securities are measured at fair value, and the unrealized gains (losses), or holding gains (losses),
on such securities are reported as net investment securities gains (losses) in our consolidated statements of
income. This new guidance is not applied retrospectively to the fiscal year ended March 31, 2018. Prior to
adoption, such unrealized gains (losses) were reflected in other comprehensive income. For more information,
see Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
93
The net losses from marketable equity securities for the fiscal year ended March 31, 2019 reflected lower
equity prices in Japan. The net losses from marketable equity securities also included smaller net gains on sales
of marketable equity securities.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for the fiscal year ended March 31, 2019 was
¥209.7 billion, compared to ¥228.0 billion for the previous fiscal year, reflecting lower earnings of our equity
method investees, including Morgan Stanley.
Non-Interest Expense
The following table shows a summary of our non-interest expense for the fiscal years ended March 31, 2018
and 2019:
Fiscal years ended March 31,
2018
2019
(in billions)
Salaries and employee benefits(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy expenses—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outsourcing expenses, including data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of premises and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance premiums, including deposit insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes and public charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) off-balance sheet credit instruments . . . . . . . . . . . . . . . . .
Other non-interest expenses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,165.4
179.1
297.8
276.2
96.2
234.4
21.9
91.8
58.1
90.2
—
(96.1)
329.4
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,744.4
¥1,175.4
179.8
313.7
275.1
98.9
235.1
118.1
93.8
59.2
95.4
—
38.5
302.5
¥2,985.5
Note:
(1) As a result of our adoption of new guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost
on April 1, 2018 on a retrospective basis, the service cost component continues to be presented in Salaries and employee benefits while
other components of net pension benefit or cost (e.g., interest cost on projected benefit obligation, actual return on plan assets,
amortization of prior service cost) are now presented in Other non-interest expenses. For more information, see Notes 1 and 13 to our
consolidated financial statements included elsewhere in this Annual Report.
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
Non-interest expense increased ¥241.1 billion to ¥2,985.5 billion for the fiscal year ended March 31, 2019
from ¥2,744.4 billion for the previous fiscal year. Major factors affecting this increase are discussed below.
Impairment of intangible assets
Impairment of intangible assets increased ¥96.2 billion to ¥118.1 billion. This was primarily attributable to
¥116.1 billion of impairment losses on system integration-related assets of Mitsubishi UFJ NICOS as we
fundamentally revised our system integration plan, comprehensively taking into account the scale of, the
complexity of, and the degree of difficulty in, developing the system and responding to rapid changes in
payments market in an appropriate manner. For further discussion of impairment on intangible assets, see Note 6
to our audited consolidated financial statements included elsewhere in this Annual Report. See also “Item 3.D.
Key Information-Risk Factors-Risks Related to Our Business-Our operations are highly dependent on our
information, communications and transaction management systems and are subject to an increasing risk of cyber-
attacks and other information security threats and to changes in the business and regulatory environment.”
94
Provision for (reversal of) off-balance sheet credit instruments
We recorded ¥38.5 billion of provision for off-balance sheet credit instruments for the fiscal year ended
March 31, 2019, compared to ¥96.1 billion of reversal for the previous fiscal year. This was primarily because a
large domestic borrower in the services industry, in whose favor we have provided guarantees in substantial
amounts, began to experience financial difficulty due to a delay of a plant construction project in the United
States.
Income Tax Expense
The following table shows a summary of our income tax expense for the fiscal years ended March 31, 2018
and 2019:
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended March 31,
2018
2019
(in billions, except percentages)
¥1,661.8
407.8
24.5%
30.6%
¥870.8
133.2
15.3%
30.6%
Reconciling items between the combined normal effective statutory tax rates and the effective income tax
rates for the fiscal years ended March 31, 2018 and 2019 are summarized as follows:
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in taxes resulting from:
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit and payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lower tax rates applicable to income of subsidiaries . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and interest expense for uncertainty in income taxes . . . . . . . . . . . . . . .
Noncontrolling interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in tax laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended March 31,
2018
30.6%
2019
30.6%
0.2
—
(1.7)
(0.4)
(3.0)
(2.0)
0.7
0.0
0.1
(0.6)
0.6
0.5
—
(3.3)
(2.5)
(1.4)
(9.1)
0.6
0.6
0.2
0.0
(0.9)
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24.5%
15.3%
Income taxes applicable to us in Japan are imposed by the national, prefectural and municipal governments,
and the aggregate of these taxes resulted in a combined normal effective statutory tax rate of 30.6% and 30.6%
for the fiscal years ended March 31, 2018 and 2019. Foreign subsidiaries are subject to income taxes of the
jurisdictions in which they operate. These taxes are reflected in the effective income tax rate.
Fiscal Year Ended March 31, 2019
The effective income tax rate for the fiscal year ended March 31, 2019 was 15.3%, which was 15.3
percentage points lower than the combined normal effective statutory rate of 30.6%. This primarily reflected our
receipt of nontaxable dividends, which resulted in a decrease of ¥79.6 billion in income tax expense and a
decrease of 9.1 percentage points in the effective income tax rate for the fiscal year ended March 31, 2019. Under
95
Japanese tax law, a certain percentage of dividends received is considered nontaxable and excluded from gross
revenue in computing taxable income. This creates a permanent difference between our taxable income for
Japanese tax purposes and our income before income tax expense reported under U.S. GAAP. Another factor
contributing to the lower effective income tax rate was foreign tax credit, which resulted in a decrease of
¥28.5 billion in income tax expense and a decrease of 3.3 percentage points in the effective income tax rate for
the fiscal year ended March 31, 2019.
Fiscal Year Ended March 31, 2018
The effective income tax rate for the fiscal year ended March 31, 2018 was 24.5%, which was 6.1
percentage points lower than the combined normal effective statutory rate of 30.6%. This primarily reflected a
reduction in valuation allowance to the extent that it was more likely than not that the deferred tax assets would
be realized mainly because a subsidiary was added to our consolidated tax payment system during the fiscal year
ended March 31, 2018 after it was fully consolidated into our financial statements. The projected taxable income
of the subsidiary, for which we had valuation allowance recorded on its deferred tax assets, significantly
increased due to the application of our consolidated tax payment system to the subsidiary. As a result, the
realizability of the subsidiary’s deferred tax assets became more likely than not, and the relevant valuation
allowance was reduced to the extent of the improved realizability. The reduction in the relevant valuation
allowance resulted in a decrease of ¥33.3 billion in income tax expense and a decrease of 2.0 percentage points in
the effective income tax rate for the fiscal year ended March 31, 2018. Another factor contributing to the lower
effective income tax rate was our receipt of nontaxable dividends, which resulted in a decrease of ¥32.6 billion in
income tax expense and a decrease of 2.0 percentage points in the effective income tax rate for the fiscal year
ended March 31, 2018. Under Japanese tax law, a certain percentage of dividends received is considered
nontaxable and excluded from gross revenue in computing taxable income. This creates a permanent difference
between our taxable income for Japanese tax purposes and our income before income tax expense reported under
U.S. GAAP.
Net income (loss) attributable to noncontrolling interests
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
We recorded ¥19.0 billion of net income attributable to noncontrolling interests for the fiscal year ended
March 31, 2019, compared to ¥25.8 billion of net income attributable to noncontrolling interests for the previous
fiscal year. This mainly reflected decrease in net income of Mitsubishi UFJ Morgan Stanley Securities.
Business Segment Analysis
We measure the performance of each of our business segments primarily in terms of “operating profit.”
Operating profit and other segment information in this Annual Report are based on the financial information
prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting
rules and practices. Accordingly, the format and information are not consistent with our consolidated financial
statements prepared in accordance with U.S. GAAP. For example, operating profit does not reflect items such as
a component of the provision for (reversal of) credit losses (primarily equivalent to the formula allowance under
U.S. GAAP), foreign exchange gains (losses) and investment securities gains (losses). For a reconciliation of
operating profit under the internal management reporting system to income before income tax expense shown on
the consolidated statements of income, see Note 30 to our consolidated financial statements included elsewhere
in this Annual Report. We do not use information on the segments’ total assets to allocate our resources and
assess performance. Accordingly, business segment information on total assets is not presented.
Starting this fiscal year ended March 31, 2019, as part of our current medium-term business plan, we have
reorganized our business groups in an effort to further integrate the expertise and capabilities of our subsidiaries
to respond to the needs of our customers more effectively and efficiently. We make and execute unified group-
96
wide strategies based on customer characteristics and the nature of business and have accordingly integrated the
operations of our group companies into six business groups—Retail & Commercial Banking, Japanese
Corporate & Investment Banking, Global Corporate & Investment Banking, Global Commercial Banking, Asset
Management & Investor Services, and Global Markets. Our reporting segments consist of these six business
groups, which serve as the core sources of our revenue, as well as “Other,” which represents the operations that
are not covered under the six core business groups and the elimination of duplicated amounts of net revenues
among business segments, as further described below.
The following is a brief explanation of our business segments for the fiscal year ended March 31, 2019:
Retail & Commercial Banking Business Group—Covers the domestic retail and commercial banking
businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi
UFJ NICOS and other group companies of MUFG. This business group offers retail and small and medium-sized
enterprise customers in Japan an extensive array of commercial banking, trust banking and securities products
and services.
Japanese Corporate & Investment Banking Business Group—Covers the large Japanese corporate
businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings,
including the transaction banking, investment banking, trust banking and securities businesses. This business
group offers large Japanese corporations advanced financial solutions designed to respond to their diversified and
globalized needs and to contribute to their business and financial strategies through the global network of our
group companies.
Global Corporate & Investment Banking Business Group—Covers the corporate, investment and
transaction banking businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings. Through a global
network of offices and branches, this business group provides non-Japanese large corporate and financial
institution customers outside Japan with a comprehensive set of solutions that meet their increasingly diverse and
sophisticated financing needs.
Global Commercial Banking Business Group—Covers the retail and commercial banking businesses of
MUFG Union Bank and Krungsri. This business group offers a comprehensive array of financial products and
services such as loans, deposits, fund transfers, investments and asset management services for local retail, small
and medium-sized enterprise, and corporate customers across the Asia-Pacific region.
Asset Management & Investor Services Business Group—Covers the asset management and asset
administration businesses of Mitsubishi UFJ Trust and Banking and MUFG Bank. By integrating the trust
banking expertise of Mitsubishi UFJ Trust and Banking and the global strengths of MUFG Bank, the business
group offers a full range of asset management and administration services for corporations and pension funds,
including pension fund management and administration, advice on pension structures, and payments to
beneficiaries, and also offer investment trusts for retail customers.
Global Markets Business Group—Covers the customer business and the treasury operations of MUFG
Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings. The customer business
includes sales and trading in fixed income instruments, currencies, equities and other investment products as well
as origination and distribution of financial products. The treasury operations include asset and liability
management as well as global investments for the MUFG Group.
Other—Consists mainly of the corporate centers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and
Banking and Mitsubishi UFJ Morgan Stanley Securities. The elimination of duplicated amounts of net revenues
among business segments was also reflected in Other.
Below we have restated our prior business segment information and relevant discussion to reflect the
reorganization of our business groups described above and the transfer of corporate loan-related businesses of
97
Mitsubishi UFJ Trust and Banking to MUFG Bank in April 2018 and to enable comparison between the relevant
amounts for the fiscal years ended March 31, 2017, 2018 and 2019.
For further information, see Note 30 to our consolidated financial statements included elsewhere in this
Annual Report.
The following tables set forth our business segment information for the fiscal years ended March 31, 2017,
2018 and 2019:
Customer Business
Retail &
Commercial
Banking
Business
Group
Japanese
Corporate &
Investment
Banking
Business
Group
Global
Corporate &
Investment
Banking
Business
Group
Global
Commercial
Banking
Business
Group
Asset
Management
& Investor
Services
Business
Group
Global
Markets
Business
Group
Total
Other
Total(1)
Fiscal year ended March 31, 2017
Net revenue . . . . . . . . . . . . . ¥1,568.0
817.0
BK and TB(2):
. . . . . . .
¥527.1
446.9
¥418.3
275.6
¥628.6
(1.8)
¥176.7
72.7
(in billions)
¥3,318.7 ¥686.8 ¥ 56.3 ¥4,061.8
2,190.5
1,610.4
491.5
88.6
Net interest
income . . . . . . .
Net fees . . . . . . . .
Other . . . . . . . . . .
482.0
300.6
34.4
Other than BK and
TB . . . . . . . . . . . . . .
Operating expenses . . . . . . .
751.0
1,234.1
143.8
245.0
58.1
80.2
290.0
107.3
177.3
(9.0)
142.7
236.0
(1.7)
—
(0.1)
—
72.7
—
731.4
795.6
83.4
291.0
(8.2)
208.7
199.4
(98.8)
(12.0)
1,221.8
688.6
280.1
630.4
435.8
104.0
114.7
1,708.3
2,310.6
195.3
217.4
(32.3) 1,871.3
2,690.3
162.3
Operating profit (loss) . . . . . ¥ 333.9
¥237.1
¥182.3
¥192.8
¥ 62.0
¥1,008.1 ¥469.4 ¥(106.0) ¥1,371.5
Notes:
(1)
In accordance with internal management accounting rules and practices, the transfer of corporate loan-related businesses of Mitsubishi
UFJ Trust and Banking to MUFG Bank in April 2018 resulted in a decrease of the total operating profit by ¥24.3 billion for the fiscal
year ended March 31, 2017.
(2) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
Customer Business
Retail &
Commercial
Banking
Business
Group
Japanese
Corporate &
Investment
Banking
Business
Group
Global
Corporate &
Investment
Banking
Business
Group
Global
Commercial
Banking
Business
Group
Asset
Management
& Investor
Services
Business
Group
Global
Markets
Business
Group
Total
Other
Total(1)
Fiscal year ended March 31, 2018
Net revenue . . . . . . . . . . . . . ¥1,584.3
785.9
BK and TB(2):
. . . . . . .
¥522.6
439.8
¥378.6
246.3
¥666.3
(3.5)
¥190.4
83.8
(in billions)
¥3,342.2 ¥565.2 ¥ 10.7 ¥3,918.1
2,029.9
1,552.3
109.0
368.6
Net interest
income . . . . . . .
Net fees . . . . . . . .
Other . . . . . . . . . .
465.8
288.4
31.7
Other than BK and
TB . . . . . . . . . . . . . .
Operating expenses . . . . . . .
798.4
1,227.6
150.7
233.2
55.9
82.8
295.6
95.2
153.1
(2.0)
132.3
242.8
(3.4)
—
(0.1)
—
83.8
—
708.3
758.5
85.5
182.0
(12.2)
198.8
229.4
(79.1)
(41.3)
1,119.7
667.2
243.0
669.8
463.6
106.6
119.4
1,789.9
2,349.0
196.6
225.7
(98.3) 1,888.2
2,717.5
142.8
Operating profit (loss) . . . . . ¥ 356.7
¥227.0
¥135.8
¥202.7
¥ 71.0
¥ 993.2 ¥339.5 ¥(132.1) ¥1,200.6
Notes:
(1)
In accordance with internal management accounting rules and practices, the transfer of corporate loan-related businesses of Mitsubishi
UFJ Trust and Banking to MUFG Bank in April 2018 resulted in a decrease of the total operating profit by ¥23.5 billion for the fiscal
year ended March 31, 2018.
(2) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
98
Customer Business
Retail &
Commercial
Banking
Business
Group
Japanese
Corporate &
Investment
Banking
Business
Group
Global
Corporate &
Investment
Banking
Business
Group
Global
Commercial
Banking
Business
Group
Asset
Management
& Investor
Services
Business
Group
Global
Markets
Business
Group
Total
Other
Total
Fiscal year ended March 31, 2019
Net revenue . . . . . . . . . . . . . ¥1,521.6
738.6
BK and TB(1):
. . . . . . .
¥541.5
421.6
¥399.7
266.6
¥706.9
(1.4)
¥203.0
93.2
(in billions)
¥3,372.7 ¥472.5 ¥ (32.8) ¥3,812.4
1,861.0
1,518.6
303.9
38.5
Net interest
income . . . . . . .
Net fees . . . . . . . .
Other . . . . . . . . . .
460.4
243.9
34.3
Other than BK and
TB . . . . . . . . . . . . . .
Operating expenses . . . . . . .
783.0
1,222.8
152.1
213.1
56.4
119.9
291.8
113.6
152.4
0.6
133.1
247.0
(1.4)
—
—
—
93.2
—
724.7
702.6
91.3
183.1
(14.2)
135.0
237.4
(67.5)
(131.4)
1,145.2
620.9
94.9
708.3
486.5
109.8
124.6
1,854.1
2,372.7
168.6
221.3
(71.3) 1,951.4
2,740.1
146.1
Operating profit (loss) . . . . . ¥ 298.8
¥249.7
¥152.7
¥220.4
¥ 78.4
¥1,000.0 ¥251.2 ¥(178.9) ¥1,072.3
Note:
(1) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
Retail & Commercial Banking Business Group
Net revenue of the Retail & Commercial Banking Business Group decreased ¥62.7 billion to
¥1,521.6 billion for the fiscal year ended March 31, 2019 from ¥1,584.3 billion for the fiscal year ended
March 31, 2018. The Retail & Commercial Banking Business Group’s net revenue mainly consists of interest
income from lending and deposit-taking operations and fees relating to credit card settlement, consumer
financing, real estate and stock transfer services for Japanese domestic individual and small to medium-sized
corporate customers. The decrease in net revenue was mainly due to a decrease in investment products sales
reflecting weaker retail customer demand for investment products under unfavorable market conditions. The
decrease was partially offset by higher payment processing fees from the credit card business and higher fees
from the consumer finance business as credit card use and consumer lending grew in Japan.
Operating expenses of the Retail & Commercial Banking Business Group decreased ¥4.8 billion to
¥1,222.8 billion for the fiscal year ended March 31, 2019 from ¥1,227.6 billion for the fiscal year ended
March 31, 2018. The decrease primarily resulted from our cost reduction measures, partially offset by higher
expenses relating to the “Channel Strategy and Business Process Re-engineering” project pursuant to our current
medium-term business plan and the system integration for our consumer finance business.
As a result, operating profit of the Retail & Commercial Banking Business Group decreased ¥57.9 billion to
¥298.8 billion for the fiscal year ended March 31, 2019 from ¥356.7 billion for the fiscal year ended March 31,
2018.
Japanese Corporate & Investment Banking Business Group
Net revenue of the Japanese Corporate & Investment Banking Business Group increased ¥18.9 billion to
¥541.5 billion for the fiscal year ended March 31, 2019 from ¥522.6 billion for the fiscal year ended March 31,
2018. The Japanese Corporate & Investment Banking Business Group’s net revenue mainly consists of interest
income from lending and deposit-taking operations and fees relating to financing, investment banking, real estate
and stock transfer services for large Japanese corporate customers. The increase in net revenue was mainly due to
higher net interest income from foreign currency-denominated loans and deposits reflecting higher interest rate
spreads on such loans and deposits and larger balances of such deposits as well as higher fees and commissions
from the investment banking business relating to M&A and IPO transactions.
99
Operating expenses of the Japanese Corporate & Investment Banking Business Group decreased ¥3.8 billion
to ¥291.8 billion for the fiscal year ended March 31, 2019 from ¥295.6 billion for the fiscal year ended March 31,
2018. The decrease mainly reflected the results of our cost reduction measures.
As a result, operating profit of the Japanese Corporate & Investment Banking Business Group increased
¥22.7 billion to ¥249.7 billion for the fiscal year ended March 31, 2019 from ¥227.0 billion for the fiscal year
ended March 31, 2018.
Global Corporate & Investment Banking Business Group
Net revenue of the Global Corporate & Investment Banking Business Group increased ¥21.1 billion to
¥399.7 billion for the fiscal year ended March 31, 2019 from ¥378.6 billion for the fiscal year ended March 31,
2018. The Global Corporate & Investment Banking Business Group’s net revenue mainly consists of interest
income from lending and deposit-taking operations and fees and commissions from investment banking services
and foreign exchange and derivatives transactions for large non-Japanese corporate and institutional customers
outside Japan. The increase in net revenue was mainly attributable to larger balances of loans and a decline in
foreign currency-denominated mid- to long term funding costs as well as the closings of several large event-
driven financing deals in the Americas and the Asia and Oceania region.
Operating expenses of the Global Corporate & Investment Banking Business Group increased ¥4.2 billion to
¥247.0 billion for the fiscal year ended March 31, 2019 from ¥242.8 billion for the fiscal year ended March 31,
2018. The increase was mainly attributable to higher expenses for system development and global financial
regulatory compliance purposes.
As a result, operating profit of the Global Corporate & Investment Banking Business Group increased
¥16.9 billion to ¥152.7 billion for the fiscal year ended March 31, 2019 from ¥135.8 billion for the fiscal year
ended March 31, 2018.
Global Commercial Banking Business Group
Net revenue of the Global Commercial Banking Business Group increased ¥40.6 billion to ¥706.9 billion for
the fiscal year ended March 31, 2019 from ¥666.3 billion for the fiscal year ended March 31, 2018. The Global
Commercial Banking Business Group’s net revenue mainly consists of interest income from lending and deposit-
taking operations and fees from remittances and transfers, consumer finance and wealth-related services for
individual and small to medium-sized corporate customers of MUFG Union Bank and Krungsri. The increase in
net revenue was mainly due to higher net interest income reflecting an increase in Krungsri’s automobile loan
portfolio. The increase in net revenue was also attributable to higher net interest income in MUFG Union Bank
mainly reflecting an increase in its retail loan portfolio.
Operating expenses of the Global Commercial Banking Business Group increased ¥22.9 billion to
¥486.5 billion for the fiscal year ended March 31, 2019 from ¥463.6 billion for the fiscal year ended March 31,
2018. The increase was mainly attributable to an increase in expenses in Krungsri primarily reflecting larger
volumes of business. The increase in operating expenses was also attributable to an increase in expenses for IT
system development projects in the United States.
As a result, operating profit of the Global Commercial Banking Business Group increased ¥17.7 billion to
¥220.4 billion for the fiscal year ended March 31, 2019 from ¥202.7 billion for the fiscal year ended March 31,
2018.
Asset Management & Investor Services Business Group
Net revenue of the Asset Management & Investor Services Business Group increased ¥12.6 billion to
¥203.0 billion for the fiscal year ended March 31, 2019 from ¥190.4 billion for the fiscal year ended March 31,
100
2018. The Asset Management & Investor Services Business Group’s net revenue mainly consists of fees from
asset management and administration services for products, such as pension trusts and mutual funds. The
increase in net revenue was primarily attributable to higher fees from investor services both in and outside Japan,
reflecting a larger balance of assets under management as we expanded our services to global fund customers and
started to offer services for new domestic investment products. The increase in net revenue was also attributable
to an increase in investment products sales to domestic corporate investors.
Operating expenses of the Asset Management & Investor Services Business Group increased ¥5.2 billion to
¥124.6 billion for the fiscal year ended March 31, 2019 from ¥119.4 billion for the fiscal year ended March 31,
2018. The increase was mainly attributable to larger volumes of business.
As a result, operating profit of the Asset Management & Investor Services Business Group increased
¥7.4 billion to ¥78.4 billion for the fiscal year ended March 31, 2019 from ¥71.0 billion for the fiscal year ended
March 31, 2018.
Global Markets Business Group
Net revenue of the Global Markets Business Group decreased ¥92.7 billion to ¥472.5 billion for the fiscal
year ended March 31, 2019 from ¥565.2 billion for the fiscal year ended March 31, 2018. This was mainly due to
lower net revenue from the asset and liability management operations, primarily reflecting tighter spreads
between long-term and short-term interest rates in the United States as well as lower realized gains on sales of
Japanese government bonds. In the fiscal year ended March 31, 2018, we recorded relatively higher realized
gains on sales of Japanese government bonds executed in larger volumes in anticipation of greater fluctuations in
interest rates in Japan. The decrease in net revenue was also attributable to a decline in customer business
reflecting lower volatility in the bond and equity markets.
Operating expenses of the Global Markets Business Group decreased ¥4.4 billion to ¥221.3 billion for the
fiscal year ended March 31, 2019 from ¥225.7 billion for the fiscal year ended March 31, 2018. This decrease
primarily reflected the results of our cost reduction measures, partially offset by an increase in expenses for
financial regulatory compliance purposes.
As a result, operating profit of the Global Markets Business Group decreased ¥88.3 billion to ¥251.2 billion
for the fiscal year ended March 31, 2019 from ¥339.5 billion for the fiscal year ended March 31, 2018.
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
Retail & Commercial Banking Business Group
Net revenue of the Retail & Commercial Banking Business Group increased ¥16.3 billion to
¥1,584.3 billion for the fiscal year ended March 31, 2018 from ¥1,568.0 billion for the fiscal year ended
March 31, 2017. The Retail & Commercial Banking Business Group’s net revenue mainly consists of interest
income from lending and deposit-taking operations and fees relating to credit card settlement, consumer
financing, real estate and stock transfer services for Japanese domestic individual and small to medium-sized
corporate customers. The increase in net revenue was mainly due to an increase in payment processing fees and
an increase in fees from the consumer finance business, reflecting growth in the volume of cashless payments.
The increase in net revenue was also attributable to an increase in fees and commissions on sales of securities
primarily due to stronger customer demand in response to the rising trend in equity prices. These increases in net
revenues were partially offset by the lower net revenue related to operations funded by deposits due to tighter
interest rate spreads in the near-zero interest rate environment in Japan.
Operating expenses of the Retail & Commercial Banking Business Group decreased ¥6.5 billion to
¥1,227.6 billion for the fiscal year ended March 31, 2018 from ¥1,234.1 billion for the fiscal year ended
March 31, 2017, mainly resulting from our cost reduction measures.
101
As a result, operating profit of the Retail & Commercial Banking Business Group increased ¥22.8 billion to
¥356.7 billion for the fiscal year ended March 31, 2018 from ¥333.9 billion for the fiscal year ended March 31,
2017.
Japanese Corporate & Investment Banking Business Group
Net revenue of the Japanese Corporate & Investment Banking Business Group decreased ¥4.5 billion to
¥522.6 billion for the fiscal year ended March 31, 2018 from ¥527.1 billion for the fiscal year ended March 31,
2017. The Japanese Corporate & Investment Banking Business Group’s net revenue mainly consists of interest
income from lending and deposit-taking operations and fees relating to financing, investment banking, real estate
and stock transfer services for large Japanese corporate customers. The lower net revenue mainly reflected a
decrease in fee income from the sales of derivative instruments and lower net revenues from the M&A and
underwriting businesses, mainly reflecting reduced corporate investment and financing activities due to
uncertainties surrounding the financial market. The lower net revenue was also attributable to decreases in net
interest income related to domestic operations funded by deposits and net revenue from loans to domestic
corporate clients due to tighter interest rate spreads in the near-zero interest rate environment in Japan, which
more than offset the increases in net interest income related to overseas operations funded by deposits and net
revenue from loans to overseas corporate clients.
Operating expenses of the Japanese Corporate & Investment Banking Business Group increased ¥5.6 billion
to ¥295.6 billion for the fiscal year ended March 31, 2018 from ¥290.0 billion for the fiscal year ended March 31,
2017. This increase was primarily due to the increased volume of overseas Japanese corporate business and
higher expenses for global financial regulatory compliance purposes.
As a result, operating profit of the Japanese Corporate & Investment Banking Business Group decreased
¥10.1 billion to ¥227.0 billion for the fiscal year ended March 31, 2018 from ¥237.1 billion for the fiscal year
ended March 31, 2017.
Global Corporate & Investment Banking Business Group
Net revenue of the Global Corporate & Investment Banking Business Group decreased ¥39.7 billion to
¥378.6 billion for the fiscal year ended March 31, 2018 from ¥418.3 billion for the fiscal year ended March 31,
2017. The Global Corporate & Investment Banking Business Group’s net revenue mainly consists of interest
income from lending and deposit-taking operations and fees and commissions from investment banking services
and foreign exchange and derivatives transactions for large non- Japanese corporate and institutional customers
outside Japan. The lower net revenue was mainly due to a decrease in the volume of M&A finance business in
the United States as well as the application of stricter business acceptance criteria as part of our effort to improve
profitability.
Operating expenses of the Global Corporate & Investment Banking Business Group increased ¥6.8 billion to
¥242.8 billion for the fiscal year ended March 31, 2018 from ¥236.0 billion for the fiscal year ended March 31,
2017, reflecting higher expenses for global financial regulatory compliance purposes.
As a result, operating profit of the Global Corporate & Investment Banking Business Group decreased
¥46.5 billion to ¥135.8 billion for the fiscal year ended March 31, 2018 from ¥182.3 billion for the fiscal year
ended March 31, 2017.
Global Commercial Banking Business Group
Net revenue of the Global Commercial Banking Business Group increased ¥37.7 billion to ¥666.3 billion for
the fiscal year ended March 31, 2018 from ¥628.6 billion for the fiscal year ended March 31, 2017. The Global
Commercial Banking Business Group’s net revenue mainly consists of interest income from lending and
102
deposit-taking operations and fees from remittances and transfers, consumer finance and wealth-related services
for individual and small to medium-sized corporate customers of MUFG Union Bank and Krungsri. The higher
net revenue was mainly due to an increase in net interest income reflecting an increase in Krungsri’s automobile
and consumer finance loan portfolio.
Operating expenses of the Global Commercial Banking Business Group increased ¥27.8 billion to
¥463.6 billion for the fiscal year ended March 31, 2018 from ¥435.8 billion for the fiscal year ended March 31,
2017, reflecting higher expenses in Krungsri primarily due to increased business volume.
As a result, operating profit of the Global Commercial Banking Business Group increased ¥9.9 billion to
¥202.7 billion for the fiscal year ended March 31, 2018 from ¥192.8 billion for the fiscal year ended March 31,
2017.
Asset Management & Investor Services Business Group
Net revenue of the Asset Management & Investor Services Business Group increased ¥13.7 billion to
¥190.4 billion for the fiscal year ended March 31, 2018 from ¥176.7 billion for the fiscal year ended March 31,
2017. The Asset Management & Investor Services Business Group’s net revenue mainly consists of fees from
asset management and administration services for products, such as pension trusts and mutual funds. Net revenue
of the Trust Assets Business Group increased mainly due to an increase in income from the fund administration
and custody services globally, reflecting the contributions of our recently acquired overseas subsidiaries.
Operating expenses of the Asset Management & Investor Services Business Group increased ¥4.7 billion to
¥119.4 billion for the fiscal year ended March 31, 2018 from ¥114.7 billion for the fiscal year ended March 31,
2017. This was mainly due to the expansion of our fund administration and custody businesses globally through
acquisitions.
As a result, operating profit of the Asset Management & Investor Services Business Group increased
¥9.0 billion to ¥71.0 billion for the fiscal year ended March 31, 2018 from ¥62.0 billion for the fiscal year ended
March 31, 2017.
Global Markets Business Group
Net revenue of the Global Markets Business Group decreased ¥121.6 billion to ¥565.2 billion for the fiscal
year ended March 31, 2018 from ¥686.8 billion for the fiscal year ended March 31, 2017. This was mainly due to
a decrease in net revenue from the asset liability management operations, primarily reflecting a decrease in
realized gains on sales of foreign government bonds as well as a decrease in interest income due to the reduction
of our foreign government bond portfolio and the flattening of the yield curve of U.S. Treasury bonds. The
decrease in net revenue was also attributable to lower net revenue from the sales and trading business in Japan,
reflecting the low volatility in interest rates.
Operating expenses of the Global Markets Business Group increased ¥8.3 billion to ¥225.7 billion for the
fiscal year ended March 31, 2018 from ¥217.4 billion for the fiscal year ended March 31, 2017, reflecting higher
expenses in our overseas securities subsidiaries primarily with larger volumes of sales and trading business as
well as higher expenses for financial regulatory compliance purposes.
As a result, operating profit of the Global Markets Business Group decreased ¥129.9 billion to
¥339.5 billion for the fiscal year ended March 31, 2018 from ¥469.4 billion for the fiscal year ended March 31,
2017.
Geographic Segment Analysis
The table below sets forth our total revenue, income (loss) before income tax expense (benefit) and net
income (loss) attributable to Mitsubishi UFJ Financial Group on a geographic basis for the fiscal years ended
103
March 31, 2018 and 2019. Assets, income and expenses attributable to foreign operations are allocated to
geographical areas based on the domicile of the debtors and customers. In general, we have allocated all direct
expenses and a proportionate share of general and administrative expenses to income derived from foreign loans
and other transactions by our foreign operations to the relevant foreign geographical areas. Certain charges, such
as most impairment charges on goodwill, are recognized as domestic expenses. For further information, see
Note 31 to our consolidated financial statements included elsewhere in this Annual Report.
Fiscal years ended March 31,
2018
2019
(in billions)
Total revenue (interest income and non-interest income):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,127.3
¥1,886.4
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,337.5
506.2
780.0
443.1
3,066.8
1,637.6
222.3
1,157.9
504.4
3,522.2
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,194.1
¥5,408.6
Income (loss) before income tax expense (benefit):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 439.9
¥ (317.7)
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
493.7
332.5
128.9
266.8
624.6
48.3
265.2
250.4
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,221.9
1,188.5
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,661.8
¥ 870.8
Net income (loss) attributable to Mitsubishi UFJ Financial Group
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 140.1
¥ (345.1)
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
447.9
322.6
92.0
225.6
573.7
50.9
214.5
224.6
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,088.1
1,063.7
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,228.2
¥ 718.6
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
Domestic net loss attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31, 2019
was ¥345.1 billion, compared to domestic net income attributable to Mitsubishi UFJ Financial Group of
¥140.1 billion for the fiscal year ended March 31, 2018. This was mainly attributable to investment securities
losses recorded as a result of our adoption of new guidance on recognition and measurement of financial assets
and financial liabilities on April 1, 2018, mainly reflecting lower equity prices in Japan.
104
Foreign net income attributable to Mitsubishi UFJ Financial Group decreased ¥24.4 billion to
¥1,063.7 billion for the fiscal year ended March 31, 2019 from ¥1,088.1 billion for the fiscal year ended
March 31, 2018. The decrease in foreign net income was mainly due to lower net trading account profits and
lower foreign exchange gains in Europe, partially offset by higher net income in the United States and Asia/
Oceania excluding Japan.
Effect of Change in Exchange Rates on Foreign Currency Translation
Fiscal Year Ended March 31, 2019 Compared to Fiscal Year Ended March 31, 2018
The average exchange rate for the fiscal year ended March 31, 2019 was ¥110.91 per U.S.$1.00, compared
to the average exchange rate of ¥110.85 per U.S.$1.00 for the previous fiscal year. The average exchange rate for
the conversion of the U.S. dollar financial statements of some of our foreign subsidiaries for the fiscal year ended
December 31, 2018 was ¥110.43 per U.S.$1.00, compared to the average exchange rate for the fiscal year ended
December 31, 2017 of ¥112.19 per U.S.$1.00.
The change in the average exchange rate of the Japanese yen against the U.S. dollar and other foreign
currencies had the effect of decreasing total revenue by ¥21.6 billion, net interest income by ¥9.3 billion and
income before income tax expense by ¥5.4 billion, respectively, for the fiscal year ended March 31, 2019.
B. Liquidity and Capital Resources
Financial Condition
Total Assets
Our total assets as of March 31, 2019 were ¥305,228.9 billion, an increase of ¥4,658.6 billion from
¥300,570.3 billion as of March 31, 2018. The increase in total assets mainly reflected an increase in trading
account assets of ¥5,389.9 billion and an increase in receivables under resale agreements of ¥5,248.8 billion,
which were partially offset by a decrease in receivables under securities borrowing transactions of
¥6,510.2 billion.
The following table shows our total assets as of March 31, 2018 and 2019 by geographic region based
principally on the domicile of the obligors:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign:
As of March 31,
2018
2019
(in billions)
¥196,121.5
¥194,070.5
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
44,831.7
22,342.6
27,163.1
10,111.4
49,987.4
21,535.3
27,993.0
11,642.7
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,448.8
111,158.4
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥300,570.3
¥305,228.9
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
We have allocated a substantial portion of our assets to international activities. As a result, reported amounts
are affected by changes in the exchange rates of the Japanese yen against the U.S. dollar and other foreign
currencies. Foreign assets are denominated primarily in the U.S. dollar. The Japanese yen amount of foreign
105
currency-denominated assets increases as major foreign currencies appreciate against the Japanese yen. For
example, as of March 31, 2019, the exchange rate was ¥110.99 per U.S.$1.00, as compared with ¥106.24 as of
March 31, 2018. This depreciation of the Japanese yen against the U.S. dollar and other foreign currencies
between March 31, 2018 and March 31, 2019 resulted in a ¥768.6 billion increase in the Japanese yen amount of
our total assets as of March 31, 2019.
106
Loan Portfolio
The following table sets forth our loans outstanding, before deduction of allowance for credit losses, as of
March 31, 2018 and 2019, based on the industry segment loan classifications as defined by the Bank of Japan for
regulatory reporting purposes, which is not necessarily based on the use of proceeds:
As of March 31,
2018
2019
(in billions)
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
¥ 10,876.6
781.3
11,763.8
2,689.1
7,989.1
4,818.4
1,551.5
8,939.3
16,287.3
¥ 11,154.0
717.7
11,706.4
2,653.2
7,643.4
5,213.0
1,510.6
8,756.5
15,802.0
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,696.4
65,156.8
Foreign:
Governments and official institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
920.5
12,851.6
30,591.2
7,270.9
841.7
11,641.4
31,951.1
7,597.5
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,634.2
52,031.7
Unearned income, unamortized premium—net and deferred loan fees—net . . . . . . . . .
(294.7)
(304.6)
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥117,035.9
¥116,883.9
Notes:
(1) Loans to so-called “non-bank finance companies” are generally included in the “Banks and other financial institutions” category.
Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
(2) The above table includes loans held for sale of ¥226.9 billion and ¥291.8 billion as of March 31, 2018 and 2019, respectively, which are
carried at the lower of cost or fair value.
Loans are one of our main uses of funds. For the fiscal year ended March 31, 2019, the average balance of
loans was ¥118,102.2 billion, accounting for 48.9% of the average total interest-earning assets, compared to
¥117,765.1 billion, representing 49.3% of the average total interest-earning assets, for the previous fiscal year.
As of March 31, 2019, our total loans were ¥116,883.9 billion, accounting for 38.3% of total assets, compared to
¥117,035.9 billion, accounting for 38.9% of total assets as of March 31, 2018. As a percentage of total loans
before unearned income, net unamortized premiums and net deferred loan fees, between March 31, 2018 and
March 31, 2019, domestic loans decreased from 56.0% to 55.6%, while foreign loans increased from 44.0% to
44.4%.
Our domestic loan balance decreased ¥539.6 billion, or 0.8%, between March 31, 2018 and March 31, 2019.
This was mainly due to a decrease in residential loans, which are included in the consumer category in the above
table, as repayments exceeded newly extended loans.
Our foreign loan balance increased ¥397.5 billion, or 0.8%, between March 31, 2018 and March 31, 2019.
This was primarily due to increased lending activity in the United States and Asia excluding Japan where
economic conditions continued to improve at a moderate pace. In particular, larger volumes of retail, consumer
and residential loans in MUFG Union Bank and automobile loans in Krungsri contributed to the increase in the
foreign loan balance.
107
Particularly, retail, consumer and residential loans in MUFG Americas Holdings and automobile loans in
Krungsri were attributable to growth of foreign loan balance.
Credit quality indicator
The following table sets forth credit quality indicators of loans by class as of March 31, 2018 and 2019:
As of March 31, 2018:
Commercial
Normal
Close
Watch
Likely to become
Bankrupt or
Legally/
Virtually
Bankrupt
(in billions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . .
Banks and other financial
¥49,050.3
10,215.5
727.9
11,379.3
2,467.5
7,518.4
institutions . . . . . . . . . . . . . . . . . . .
4,800.3
Communication and information
services . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . .
1,491.1
8,780.5
1,669.8
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . . . . . .
36,049.1
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.0
¥1,691.0
596.7
43.7
279.9
175.8
374.7
10.9
48.2
120.5
40.6
569.1
11.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
¥85,111.4
¥2,271.8
Total(1)
¥51,012.7
10,869.9
780.7
11,691.9
2,667.4
7,971.0
4,812.3
1,551.2
8,938.0
1,730.3
¥271.4
57.7
9.1
32.7
24.1
77.9
1.1
11.9
37.0
19.9
108.3
36,726.5
3.6
¥383.3
27.3
¥87,766.5
Accrual
Nonaccrual
Total(1)
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,012.9
528.1
¥
(in billions)
¥67.3
¥61.7
¥14,080.2
589.8
¥
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention Classified
Total(1)(2)
(in billions)
MUFG Americas Holdings . . . . . . . . . .
¥4,360.5
¥14.2
¥4,509.1
¥59.9
¥116.8
¥9,060.5
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,284.1
¥198.5
¥123.1
¥5,605.7
Normal
Special
Mention
Substandard or Doubtful
or Doubtful of Loss
Total(1)
(in billions)
108
As of March 31, 2019:
Commercial
Normal
Close
Watch
Likely to become
Bankrupt or
Legally/
Virtually
Bankrupt
(in billions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . .
Banks and other financial
¥49,392.0
10,819.6
672.1
11,403.6
2,436.4
7,240.8
institutions . . . . . . . . . . . . . . . . . . .
5,199.9
Communication and information
services . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . .
1,465.7
8,610.5
1,543.4
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . . . . . .
35,418.2
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.7
¥1,242.1
279.9
37.2
222.8
174.8
329.3
7.6
34.5
119.6
36.4
562.9
10.8
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
¥84,821.9
¥1,815.8
Total(1)
¥50,851.8
11,147.4
717.2
11,648.9
2,631.2
7,638.8
5,208.4
1,510.4
8,755.0
1,594.5
¥217.7
47.9
7.9
22.5
20.0
68.7
0.9
10.2
24.9
14.7
112.1
36,093.2
3.8
¥333.6
26.3
¥86,971.3
Accrual
Nonaccrual
Total(1)
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,661.8
516.9
¥
(in billions)
¥66.3
¥61.6
¥13,728.1
578.5
¥
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention Classified
Total(1)(2)
(in billions)
MUFG Americas Holdings . . . . . . . . . .
¥4,752.1
¥15.5
¥4,699.7
¥51.9
¥88.4
¥9,607.6
Normal
Special
Mention
Substandard or Doubtful
or Doubtful of Loss
Total(1)
(in billions)
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,682.2
¥199.1
¥129.2
¥6,010.5
Notes:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
(2) Total loans of MUFG Americas Holdings do not include FDIC covered loans and small business loans which are not individually rated
totaling ¥0.9 billion and ¥0.7 billion as of March 31, 2018 and 2019, respectively. We will be reimbursed for a substantial portion of any
future losses on FDIC covered loans under the terms of the FDIC loss share agreements.
We classify loans into risk categories based on relevant information about the ability of borrowers to service
their debt, including, but not limited to, historical and current financial information, historical and current
payment experience, credit documentation, public and non-public information about borrowers and current
economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes of the Commercial segment is the internal
credit rating assigned to each borrower based on our internal borrower ratings of 1 through 15 with the rating of
109
1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a borrower, we
evaluate the borrower’s expected debt-service capability based on various information, including financial and
operating information of the borrower as well as information on the industry in which the borrower operates, and
the borrower’s business profile, management and compliance system. In evaluating a borrower’s debt-service
capability, we also conduct an assessment of the level of earnings and an analysis of the borrower’s net worth.
Based on the internal borrower rating, loans within the Commercial segment are categorized as Normal (internal
borrower ratings of 1 through 9), Close Watch (internal borrower ratings of 10 through 12), and Likely to
become Bankrupt or Legally/Virtually Bankrupt (internal borrower ratings of 13 through 15).
Loans to borrowers categorized as Normal represent those that are not deemed to have collectability issues.
Loans to borrowers categorized as Close Watch represent those that require close monitoring as the borrower has
begun to exhibit elements of potential concern with respect to its business performance and financial condition,
the borrower has begun to exhibit elements of serious concern with respect to its business performance and
financial condition, including business problems requiring long-term solutions, or the borrower’s loans are TDRs
or loans contractually past due 90 days or more for special reasons. Loans to borrowers categorized as Likely to
become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of default than
those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving
restructuring plans, the borrower being considered virtually bankrupt with no prospects for an improvement in
business operations, or the borrower being legally bankrupt with no prospects for continued business operations
because of non-payment, suspension of business, voluntary liquidation or filing for legal liquidation.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
The accrual status is a primary credit quality indicator for loans within the Residential segment and the Card
segment as well as consumer loans within the MUFG Americas Holdings segment. The accrual status of these
loans is determined based on the number of delinquent payments.
Commercial loans within the MUFG Americas Holdings segment are categorized as either pass or criticized
based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk
graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the
borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan
and result in a further downgrade. Classified credits are those that are internally risk graded as Substandard or
Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full
satisfaction of the debt. A credit classified as Doubtful has critical weaknesses that make full collection
improbable on the basis of currently existing facts and conditions.
Loans within the Krungsri segment are categorized as Normal, Special Mention, and Substandard, which is
further divided into Substandard, Doubtful and Doubtful of Loss, primarily based on their delinquency status.
Loans categorized as Special Mention generally represent those that have overdue principal repayments or
interest payments for a cumulative period exceeding one month commencing from the contractual due date.
Loans categorized as Substandard, Doubtful or Doubtful of Loss generally represent those that have overdue
principal repayments or interest payments for a cumulative period exceeding three months, commencing from the
contractual due date.
For the Commercial, Residential and Card segments, credit quality indicators are based on information as of
March 31. For the MUFG Americas Holdings and Krungsri segments, credit quality indicators are generally
based on information as of December 31.
110
Allowance for credit losses
The following table shows a summary of the changes in the allowance for credit losses by portfolio segment
for the fiscal years ended March 31, 2018 and 2019:
Fiscal year ended March 31, 2018:
Commercial Residential
Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Balance at beginning of fiscal year . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1)
¥ 900.7
(297.4)
134.8
25.0
109.8
(2.4)
¥ 67.3
(22.3)
3.8
1.3
2.5
—
¥30.2
23.4
22.7
1.2
21.5
—
¥73.7
(9.3)
14.7
6.1
8.6
(2.0)
¥110.3
64.8
56.1
17.5
38.6
8.1
¥1,182.2
(240.8)
232.1
51.1
181.0
3.7
Balance at end of fiscal year . . . . . . . . . . . . . . .
¥ 491.1
¥ 42.5
¥32.1
¥53.8
¥144.6
¥ 764.1
Fiscal year ended March 31, 2019:
Commercial Residential
Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Balance at beginning of fiscal year . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1)
¥ 491.1
(43.9)
76.6
17.5
59.1
1.5
¥ 42.5
(4.5)
0.3
0.9
(0.6)
—
¥32.1
23.9
24.3
0.9
23.4
—
¥53.8
9.3
13.2
3.7
9.5
(1.0)
¥144.6
49.5
59.6
21.1
¥ 764.1
34.3
174.0
44.1
38.5
(10.8)
129.9
(10.3)
Balance at end of fiscal year . . . . . . . . . . . . . . .
¥ 389.6
¥ 38.6
¥32.6
¥52.6
¥144.8
¥ 658.2
Note:
(1) Others are principally comprised of gains or losses from foreign exchange translation.
111
Allowance for credit losses and recorded investment in loans by portfolio segment as of March 31, 2018 and
2019 are shown below:
As of March 31, 2018:
Commercial Residential Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
414.8 ¥
64.3
16.6 ¥ 21.2 ¥
24.7
10.9
7.7 ¥
45.6
29.4 ¥
115.2
489.7
260.7
credit quality . . . . . . . . . . . . . . . . . . . . . . .
12.0
1.2
0.0
0.5
0.0
13.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
491.1 ¥
42.5 ¥ 32.1 ¥
53.8 ¥ 144.6 ¥
764.1
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
978.0 ¥
110.2 ¥ 66.9 ¥
82.5 ¥
84.1 ¥
86,761.2
13,961.3
512.5
8,963.7
5,515.4
1,321.7
115,714.1
credit quality . . . . . . . . . . . . . . . . . . . . . . .
27.3
8.7
10.4
15.2
6.2
67.8
Total(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥87,766.5 ¥14,080.2 ¥589.8 ¥9,061.4 ¥5,605.7 ¥117,103.6
As of March 31, 2019:
Commercial Residential Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
313.0 ¥
63.3
14.1 ¥ 21.8 ¥
23.4
10.8
8.3 ¥
44.3
28.3 ¥
116.5
385.5
258.3
credit quality . . . . . . . . . . . . . . . . . . . . . . .
13.3
1.1
0.0
0.0
0.0
14.4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
389.6 ¥
38.6 ¥ 32.6 ¥
52.6 ¥ 144.8 ¥
658.2
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
880.0 ¥
102.9 ¥ 64.8 ¥
69.8 ¥
83.2 ¥
86,065.0
13,617.8
510.4
9,527.3
5,921.4
1,200.7
115,641.9
credit quality . . . . . . . . . . . . . . . . . . . . . . .
26.3
7.4
3.3
11.2
5.9
54.1
Total(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥86,971.3 ¥13,728.1 ¥578.5 ¥9,608.3 ¥6,010.5 ¥116,896.7
Note:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
We recorded ¥34.3 billion of provision for credit losses for the fiscal year ended March 31, 2019, compared
to ¥240.8 billion of reversal of credit losses for the previous fiscal year. Our total allowance for credit losses as of
March 31, 2019 was ¥658.2 billion, a decrease of ¥105.9 billion from ¥764.1 billion as of March 31, 2018. The
total allowance for credit losses represented 0.56% of the total loan balance as of March 31, 2019, compared to
0.65% as of March 31, 2018. Significant trends in each portfolio segment are discussed below.
Commercial segment—We recorded ¥43.9 billion of reversal of credit losses for the fiscal year ended
March 31, 2019, compared to ¥297.4 billion of reversal of credit losses for the previous fiscal year. The overall
credit quality of domestic borrowers remained on an improving trend, though to a lesser extent, as their financial
performance was positively affected by the continued gradual recovery of economic conditions in Japan. The
112
reversal for the fiscal year ended March 31, 2019 reflected an improvement in the financial condition and the
projected cash flows of a large borrower in the domestic electronics manufacturing industry. In addition, the
financial performance of foreign borrowers particularly in the oil and gas sector that previously experienced
deteriorated repayment ability improved as oil and other commodities prices were stabilizing. The financial
performance of a broader number of small and medium-sized borrowers in the domestic manufacturing industry
also improved due to the continued gradual recovery of economic conditions in Japan. As a result, the ratio of
loans classified as Close Watch to total loans decreased to 2.09% as of March 31, 2019 from 2.59% as of
March 31, 2018, and the ratio of loans classified as Likely to become Bankrupt and Legally/Virtually Bankrupt to
total loans decreased to 0.38% as of March 31, 2019 from 0.44% as of March 31, 2018. The total allowance for
credit losses for this segment represented 0.45% of the segment’s total loan balance as of Mach 31, 2019,
compared to 0.56% as of March 31, 2018.
Residential segment—We recorded ¥4.5 billion of reversal of credit losses for the fiscal year ended
March 31, 2019, compared to ¥22.3 billion of reversal of credit losses for the previous fiscal year. The stable
domestic corporate environment in recent periods has generally contributed to higher income for residential
borrowers, resulting in an overall improvement, though to a lesser extent compared to the previous fiscal year, in
the credit quality of this segment. The ratio of loans classified as Nonaccrual to total loans in the segment was
0.48% as of March 31, 2019, unchanged from March 31, 2018. The ratio of total allowance for credit losses to
the total loan balance in this segment decreased to 0.28% as of March 31, 2019 from 0.30% as of March 31,
2018.
Card segment—We recorded ¥23.9 billion of provision for credit losses for the fiscal year ended March 31,
2019, compared to ¥23.4 billion of the provision for credit losses for the previous fiscal year. The increase in
provision for credit losses primarily reflected an increase in default borrowers who filed for bankruptcy as part of
their debt workout efforts. Although the stable corporate environment in recent periods positively affected some
individual borrowers, the positive trends did not meaningfully affect our consumer loan borrowers and, in some
cases, the corporate efficiencies negatively affected some of our consumer loan borrowers. As a result, the ratio
of loans classified as Nonaccrual to the total loans in the segment increased to 10.65% as of March 31, 2019,
from 10.46% as of March 31, 2018. The ratio of total allowance for credit losses to the total loan balance in this
segment increased to 5.63% as of March 31, 2019 from 5.45% as of March 31, 2018.
MUFG Americas Holdings segment—We recorded ¥9.3 billion of provision for credit losses for the fiscal
year ended March 31, 2019, compared to ¥9.3 billion of reversal of credit losses for the previous fiscal year. The
provision for credit losses mainly reflected the bankruptcy filing of a large borrower in the electric power
industry whose financial condition deteriorated as a result of becoming liable for damages caused by wild fires.
The reversal of credit losses for the previous fiscal year reflected the improved credit quality of the oil and gas
loan portfolio. As the total loan balance increased, the ratio of loans classified as Special Mention or below and
Nonaccrual to total loans in the segment decreased to 1.62% as of March 31, 2019 from 2.11% as of March 31,
2018. The ratio of total allowance for credit losses to the total loan balance in this segment decreased to 0.55% as
of March 31, 2019 from 0.59% as of March 31, 2018.
Krungsri segment—We recorded ¥49.5 billion of provision for credit losses for the fiscal year ended
March 31, 2019, compared to ¥64.8 billion of provision for credit losses for the previous fiscal year. The smaller
provision for credit losses mainly reflected the improved credit quality of the small and medium-sized enterprise
loan portfolio where gradually stabilizing economic conditions in Thailand resulted in fewer borrowers
experiencing deterioration in their financial performance. The ratio of loans classified as Special Mention or
below to total loans in the segment decreased to 5.46% as of March 31, 2019 from 5.74% as of March 31, 2018.
The ratio of total allowance for credit losses to the total loan balance in this segment decreased to 2.41% as of
March 31, 2019 from 2.58% as of March 31, 2018.
When there is an improvement in asset quality, reversal of credit losses is recorded in our consolidated
statements of income to maintain the allowance for credit losses at a level management deems appropriate.
113
Although we reversed allowance for credit losses in recent periods, we have historically provided for credit
losses, and in future periods we may need to recognize a provision for credit losses. See “Item 3.D. Key
Information—Risk Factors—Risks Related to Our Business—We may suffer additional credit-related losses in
the future if our borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or
in anticipation of, our borrowers’ deteriorating repayment abilities prove inappropriate or insufficient.”
Allowance policy
We maintain an allowance for credit losses to absorb probable losses inherent in the loan portfolio. We have
divided our allowance for credit losses into five portfolio segments—Commercial, Residential, Card, MUFG
Americas Holdings and Krungsri.
For all portfolio segments, key elements relating to the policies and discipline used in determining the
allowance for credit losses are our credit classification and related borrower categorization process, which are
closely linked to the risk grading standards set by the Japanese regulatory authorities for asset evaluation and
assessment, and are used as a basis for establishing the allowance for credit losses and charge-offs. The
categorization is based on conditions that may affect the ability of borrowers to service their debt, such as current
financial condition and results of operations, historical payment experience, credit documentation, other public
information and current trends.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
For the Commercial, MUFG Americas Holdings and Krungsri segments, our allowance for credit losses
primarily consists of allocated allowances. The allocated allowances consist of (1) an allowance for loans
individually evaluated for impairment, (2) an allowance for large groups of smaller-balance homogeneous loans,
and (3) a formula allowance. The allocated allowance within the Commercial segment also includes an allowance
for country risk exposure. The allowance for credit losses within the MUFG Americas Holdings segment also
includes an unallocated allowance which captures losses that are attributable to economic events in various
industry or geographic sectors whose impact on our loan portfolios in these segments have occurred but have yet
to be recognized in the allocated allowance. For the Residential and Card segments, the loans are smaller-balance
homogeneous loans that are pooled by the risk ratings based on the number of delinquencies.
For more information on our methodologies used to estimate the allowance for each portfolio segment, see
“Summary of Significant Accounting Policies” in Note 1 to our consolidated financial statements included
elsewhere in this Annual Report and “—Critical Accounting Estimates—Allowance for Credit Losses” above.
During the fiscal year ended March 31, 2019, we did not make any significant changes to the methodologies
and policies used to determine our allowance for credit losses.
Allowance for off-balance sheet credit instruments
We maintain an allowance for credit losses on off-balance sheet credit instruments, including commitments
to extend credit, guarantees, standby letters of credit and other financial instruments. The allowance is included
in other liabilities. We have adopted for such instruments the same methodology as that which is used in
determining the allowance for credit losses on loans.
The allowance for credit losses on off-balance sheet credit instruments was ¥119.3 billion as of March 31,
2019, an increase of ¥37.6 billion from ¥81.7 billion as of March 31, 2018. This increase was primarily because a
large domestic borrower in the services industry, in whose favor we have provided guarantees in substantial
amounts, began to experience financial difficulty due to a delay of a plant construction project in the United
States.
114
Nonaccrual loans and troubled debt restructurings
We consider a loan to be a nonaccrual loan when substantial doubt exists as to the full and timely payment
of interest on, or repayment of, the principal of the loan, which is a borrower condition that generally
corresponds to borrowers in categories 13 and below in our internal rating system (which corresponds to “Likely
to become Bankrupt,” “Virtually Bankrupt” and “Bankrupt or de facto Bankrupt” status under Japanese banking
regulations). Substantially all nonaccrual loans are also impaired loans. Loans are also placed in nonaccrual
status when principal or interest is contractually past due one month or more with respect to loans within all
classes of the Commercial segment, three months or more with respect to loans within the Card, MUFG
Americas Holdings and Krungsri segments, and six months or more with respect to loans within the Residential
segment.
We modify certain loans in conjunction with our loss-mitigation activities. Through these modifications,
concessions are granted to a borrower who is experiencing financial difficulty, generally in order to minimize
economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize payments received
from the borrower. The concessions granted vary by portfolio segment, by program, and by borrower-specific
characteristics, and may include interest rate reductions, term extensions, payment deferrals, and partial principal
forgiveness. Loan modifications that represent concessions made to borrowers who are experiencing financial
difficulties are identified as troubled debt restructurings, or TDRs. TDRs are also considered impaired loans, and
an allowance for credit losses is separately established for each loan.
Generally, accruing loans that are modified in a TDR remain as accruing loans subsequent to the
modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been modified as a
TDR and the borrower is not delinquent under the modified terms, and demonstrates that its financial condition
has improved, we may reclassify the loan to accrual status. This determination is generally performed at least
once a year through a detailed internal credit rating review process. Although we have not defined any minimum
period to qualify for an upgrade, it is not common for a borrower to be able to demonstrate that its business
problems have been resolved or can soon be resolved within a short period of time following a restructuring. If
the borrower is upgraded to category 12 or higher in our internal rating system (which corresponds to “Normal”
and “Close Watch” status under the Japanese banking regulations), a TDR would be reclassified to accrual status.
Once a nonaccrual loan is deemed to be a TDR, we will continue to designate the loan as a TDR even if the loan
is reclassified to accrual status.
A loan that has been modified into a TDR is considered to be impaired until it matures, is repaid, or is
otherwise liquidated, regardless of whether the borrower performs under the modified terms.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
For more information on our TDRs, see Note 4 to our consolidated financial statements included elsewhere
in this Annual Report.
115
Nonaccrual loans
The following table shows information about the nonaccrual status of loans by class as of March 31, 2018
and 2019:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign-excluding MUFG Americas Holdings and Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2018
2019
(in billions)
¥333.0
77.2
10.8
33.3
30.7
108.2
1.1
13.8
37.6
20.3
109.5
69.5
61.4
52.3
121.2
¥272.8
65.9
9.8
23.2
26.2
94.5
0.9
12.0
25.4
14.9
111.0
68.5
61.4
46.5
127.5
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥746.9
¥687.7
Note:
(1) The above table does not include loans held for sale of ¥0.1 billion and ¥12.7 billion as of March 31, 2018 and 2019, respectively, and
loans acquired with deteriorated credit quality of ¥6.7 billion and ¥6.3 billion as of March 31, 2018 and 2019, respectively.
Total nonaccrual loans decreased ¥59.2 billion between March 31, 2018 and March 31, 2019. Significant
trends in each portfolio segment are discussed below.
Commercial segment—Nonaccrual loans in the domestic commercial category decreased ¥60.2 billion
between March 31, 2018 and March 31, 2019. As economic conditions gradually improved in Japan, the amount
of loans transferred from accrual status to nonaccrual status decreased. In addition, nonaccrual loans outstanding
to medium-sized corporate borrowers decreased, primarily due to repayments and charge-offs. On the other hand,
nonaccrual loans in the foreign excluding MUFG Americas Holdings and Krungsri category increased
¥1.5 billion primarily reflecting the deteriorated financial condition of some large borrowers who belong to the
electric power industry and the construction industry, partially offset by the transfer to accrual status, or
repayments, of loans outstanding to some borrowers in the oil, gas and natural resources sector.
Residential segment—Nonaccrual loans in the segment decreased ¥1.0 billion between March 31, 2018 and
March 31, 2019 primarily due to the transfer from nonaccrual status to accrual status of loans to borrowers who
became current with their interest payments as the stable corporate environment in recent periods has contributed
to higher income for borrowers in the segment. In addition, our efforts to work with borrowers on their loan
obligations contributed to the reduction in nonaccrual loans.
Card segment—Nonaccrual loans in the segment remained at the same level between March 31, 2018 and
March 31, 2019. Some of our consumer loan borrowers were negatively affected by increased corporate
efficiencies, resulting in an increase in nonaccrual loans. However, this increase was offset by the write-offs of
loans to borrowers who filed for bankruptcy.
116
MUFG Americas Holdings segment—Nonaccrual loans in the segment decreased ¥5.8 billion between
March 31, 2018 and March 31, 2019. This was mainly due to repayments of loans outstanding to, and the
improved repayment ability of, some borrowers in the oil and gas sector that were positively affected by stable
oil and gas prices.
Krungsri segment—Nonaccrual loans in the segment increased ¥6.3 billion between March 31, 2018 and
March 31, 2019. The increase mainly reflected the expansion of the automobile loan portfolio despite the
improved credit quality of the small and medium-sized enterprise loan portfolio where gradually stabilizing
economic conditions in Thailand resulted in fewer borrowers experiencing deterioration in their financial
performance.
Troubled debt restructurings
The following table shows information about outstanding recorded investment balances of TDRs by class as
of March 31, 2018 and 2019:
As of March 31,
2018
2019
(in billions)
Commercial(1)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign-excluding MUFG Americas Holdings and Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥482.6
320.7
7.4
33.3
24.0
70.1
0.0
12.8
9.7
4.6
54.2
40.7
67.3
65.4
54.0
¥445.4
311.9
4.6
27.7
17.1
69.4
0.1
3.8
6.4
4.4
51.7
34.4
65.0
48.1
63.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥764.2
¥707.6
Notes:
(1) TDRs for the Commercial and Residential segments include accruing loans with concessions granted, and do not include nonaccrual
loans with concessions granted.
(2) TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding
recorded investment balances as of March 31, 2018 and 2019 are nonaccrual TDRs as follows: ¥38.8 billion and ¥38.8 billion—Card;
¥26.0 billion and ¥15.0 billion—MUFG Americas Holdings; and ¥24.9 billion and ¥31.1 billion—Krungsri, respectively.
Total TDRs decreased ¥56.6 billion between March 31, 2018 and March 31, 2019. Significant trends in each
portfolio segment are discussed below.
Commercial segment—TDRs in the domestic commercial category decreased ¥37.2 billion between
March 31, 2018 and March 31, 2019. This was mainly due to a ¥9.0 billion decrease in the domestic
communication and information services industry resulting from a charge-off of loans to a large borrower whose
financial condition deteriorated. In addition, the decrease in TDRs was attributable to a ¥8.8 billion decrease in
the domestic manufacturing industry, mainly reflecting repayments pursuant to restructured loan terms by some
medium-sized corporate borrowers.
117
Residential segment—TDRs in the segment decreased ¥6.3 billion between March 31, 2018 and March 31,
2019 primarily as a result of repayments of loans classified as TDRs pursuant to their respective restructured
terms.
Card segment—TDRs in the segment decreased ¥2.3 billion between March 31, 2018 and March 31, 2019
mainly due to charge-offs resulting from borrowers filing for bankruptcy and repayments of loans classified as
TDRs pursuant to their respective restructured terms.
MUFG Americas Holdings segment—TDRs in the segment decreased ¥17.3 billion between March 31,
2018 and March 31, 2019. The decrease was mainly due to repayments by borrowers in the oil and gas sector
pursuant to their respective restructured loans.
Krungsri segment—TDRs in the segment increased ¥9.0 billion between March 31, 2018 and March 31,
2019. The increase mainly reflected the expansion of the automobile loan portfolio despite the improved credit
quality of the small and medium-sized enterprise loan portfolio where gradually stabilizing economic conditions
in Thailand resulted in fewer borrowers experiencing deterioration in their financial performance.
In the above table, TDRs for the Commercial and Residential segments include accruing loans with
concessions granted, and do not include nonaccrual loans with concessions granted, whereas TDRs for the Card,
MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. In the Commercial and
Residential segments, once a loan is classified as a nonaccrual loan, a modification would have little likelihood
of resulting in the recovery of the loan in view of the severity of the financial difficulty of the borrower.
Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual loan. The
vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates, typically for
periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan at the
extended maturity. Accordingly, the impact of such TDRs on the outstanding recorded investment is immaterial,
and the vast majority of nonaccrual TDRs have subsequently defaulted.
For the fiscal year ended March 31, 2019, extensions of the stated maturity dates of loans were the primary
concession type in the Commercial, Residential and Krungsri segments, reductions in the stated rates were the
primary concession type in the Card segment, and loan forbearance was the primary concession type in the
MUFG Americas Holdings segment.
Impaired loans and impairment allowance
Impaired loans primarily include nonaccrual loans and TDRs. We consider a loan to be impaired when,
based on current information and events, it is probable that we will be unable to collect all of the scheduled
payments of interest on, and repayment of, the principal of the loan when due according to the contractual terms
of the loan agreement.
118
The following tables show information about impaired loans by class as of March 31, 2018 and 2019:
As of March 31, 2018
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
(in billions)
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 626.5
361.2
10.9
43.6
38.1
128.7
1.1
18.8
13.0
11.1
122.3
7.8
105.1
67.0
48.8
58.5
¥189.0
36.6
7.2
23.1
16.6
49.6
¥ 815.5
397.8
18.1
66.7
54.7
178.3
¥ 875.8
408.1
18.5
71.8
59.3
189.4
¥331.9
166.1
7.9
10.7
25.9
94.8
0.0
7.8
34.3
13.8
40.2
—
6.2
0.4
33.7
25.6
1.1
26.6
47.3
24.9
1.2
28.1
67.5
31.9
162.5
190.5
7.8
111.3
67.4
82.5
84.1
15.5
134.7
74.8
94.6
91.0
1.0
16.0
5.4
4.1
82.9
4.3
16.9
21.2
7.7
29.4
Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,036.0
¥295.1
¥1,331.1
¥1,476.9
¥494.3
119
As of March 31, 2019
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
(in billions)
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
¥ 560.5
349.6
8.3
20.8
30.3
118.3
1.0
8.8
13.8
9.6
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . .
127.5
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1
97.2
64.6
46.6
57.1
¥157.5
28.2
6.0
30.0
13.0
45.6
¥ 718.0
377.8
14.3
50.8
43.3
163.9
¥ 759.4
384.3
14.8
55.9
46.8
175.7
¥227.0
92.9
6.6
5.7
20.1
84.5
0.0
6.9
18.0
9.8
34.5
—
6.5
0.4
23.2
26.1
1.0
15.7
31.8
19.4
1.0
16.6
38.4
25.9
162.0
183.1
8.1
103.7
65.0
69.8
83.2
15.0
120.6
72.2
83.3
90.4
0.8
6.8
6.9
2.7
86.0
5.5
14.3
21.8
8.3
28.3
Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 961.6
¥248.2
¥1,209.8
¥1,324.0
¥391.2
Notes:
(1) These loans do not require an allowance for credit losses because the recorded loan balance equal, or do not exceed, the present value of
expected future cash flows discounted at the loans’ effective interest rate, loans’ observable market price, or the fair value of the
collateral if the loan is a collateral-dependent loan.
Included in impaired loans as of March 31, 2018 and 2019 are accrual TDRs as follows: ¥536.8 billion and ¥ 497.1 billion—
Commercial; ¥40.7 billion and ¥34.4 billion—Residential; ¥28.5 billion and ¥26.2 billion—Card; ¥39.4 billion and ¥33.1 billion—
MUFG Americas Holdings; and ¥24.9 billion and ¥26.9 billion—Krungsri, respectively.
In addition to impaired loans presented in the above table, there were loans held for sale that were impaired of ¥0.1 billion and
¥12.7 billion as of March 31, 2018 and 2019, respectively.
(2)
(3)
120
The following table shows information regarding the average recorded loan balance and recognized interest
income on impaired loans for the fiscal years ended March 31, 2018 and 2019:
Fiscal years ended March 31,
2018
2019
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
(in billions)
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . .
Communication and information services . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUFG Americas Holdings and
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 918.1
472.1
19.5
74.0
59.9
186.4
1.7
25.5
50.4
28.6
209.3
8.6
119.4
69.8
83.5
75.4
¥ 9.4
3.8
0.3
1.1
0.8
2.3
0.0
0.4
0.2
0.5
4.2
0.5
1.6
2.0
2.0
3.9
¥ 766.8
387.7
15.7
57.9
48.9
171.7
1.3
22.5
39.2
21.9
160.0
7.8
107.1
66.2
71.2
83.2
¥12.4
6.1
0.3
1.1
1.0
2.9
0.0
0.5
0.2
0.3
3.1
0.2
1.6
1.6
2.3
5.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,484.1
¥23.6
¥1,262.3
¥26.2
121
Past due analysis
Aging of past due loans by class as of March 31, 2018 and 2019 are shown below:
As of March 31, 2018:
Commercial
Domestic . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . .
Construction . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . .
Communication and
information services . . . . .
Other industries . . . . . . . . . .
Consumer . . . . . . . . . . . . . . .
Foreign-excluding MUFG
Americas Holdings and
Krungsri . . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in billions)
Recorded
Investment>
90 Days and
Accruing
Total
Loans(1)
¥ 13.3
1.4
0.4
2.1
1.0
3.9
—
0.7
0.3
3.5
12.5
78.1
18.9
23.1
116.7
¥ 43.9
1.4
0.4
3.2
0.6
4.2
¥ 57.2
2.8
0.8
5.3
1.6
8.1
¥ 50,955.5
10,867.1
779.9
11,686.6
2,665.8
7,962.9
¥ 51,012.7
10,869.9
780.7
11,691.9
2,667.4
7,971.0
0.0
0.3
28.3
5.5
19.7
19.4
32.2
13.6
99.3
0.0
4,812.3
4,812.3
1.0
28.6
9.0
32.2
97.5
51.1
36.7
216.0
1,550.2
8,909.4
1,721.3
1,551.2
8,938.0
1,730.3
36,694.3
13,974.1
528.2
9,009.5
5,383.5
36,726.5
14,071.6
579.3
9,046.2
5,599.5
¥ 6.4
—
—
1.6
0.0
1.3
—
—
—
3.5
1.1
10.8
—
0.8
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥262.6
¥228.1
¥490.7
¥116,545.1
¥117,035.8
¥19.1
122
As of March 31, 2019:
Commercial
Domestic . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . .
Construction . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . .
Communication and
information services . . . . .
Other industries . . . . . . . . . .
Consumer . . . . . . . . . . . . . . .
Foreign-excluding MUFG
Americas Holdings and
Krungsri . . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in billions)
Recorded
Investment>
90 Days and
Accruing
Total
Loans(1)
¥ 11.6
1.6
0.2
2.1
0.7
2.8
—
0.4
0.4
3.4
10.9
62.7
17.2
28.6
126.3
¥ 30.6
3.0
0.1
4.2
0.6
2.4
¥ 42.2
4.6
0.3
6.3
1.3
5.2
¥ 50,809.6
11,142.8
716.9
11,642.6
2,629.9
7,633.6
¥ 50,851.8
11,147.4
717.2
11,648.9
2,631.2
7,638.8
¥ 6.9
—
0.0
2.5
0.0
0.1
0.0
0.8
13.0
6.5
20.0
16.6
30.6
10.9
106.8
0.0
5,208.4
5,208.4
1.2
13.4
9.9
30.9
79.3
47.8
39.5
233.1
1,509.2
8,741.6
1,584.6
1,510.4
8,755.0
1,594.5
36,062.3
13,641.4
527.4
9,557.6
5,771.5
36,093.2
13,720.7
575.2
9,597.1
6,004.6
—
—
—
4.3
0.2
6.6
—
2.3
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥257.3
¥215.5
¥472.8
¥116,369.8
¥116,842.6
¥16.0
Note:
(1) Total loans in the above table do not include loans held for sale or loans acquired with deteriorated credit quality and represent balances
without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
Sales of nonperforming loans
The following table presents comparative data relating to the principal amount of nonperforming loans sold
and reversal of allowance for credit losses:
Principal
amount of
loans(1)
Allowance
for credit
losses(2)
Loans,
net of
allowance
(in billions)
Reversal of
allowance
for credit
losses
For the fiscal year ended March 31, 2018 . . . . . . . . . . . . . . . . . . . .
For the fiscal year ended March 31, 2019 . . . . . . . . . . . . . . . . . . . .
¥117.9
8.2
¥
¥18.5
¥ 0.5
¥99.4
¥ 7.7
¥ (6.3)
¥(15.6)
Notes:
(1) Represents principal amount after the deduction of charge-offs made before the sales of nonperforming loans.
(2) Represents allowance for credit losses at the latest balance-sheet date.
While we originate various types of loans to corporate and individual borrowers in Japan and overseas in the
normal course of business, we dispose of nonperforming loans in order to improve our loan quality. Most of
these nonperforming loans are disposed of by sales to third parties without any continuing involvement.
Through the sale of nonperforming loans to third parties, gains or losses may arise from factors such as a
change in the credit quality of the borrowers or the value of the underlying collateral subsequent to the prior
reporting date, and the risk appetite and investment policy of the purchasers.
123
The principal amount of non-performing loans sold in the fiscal year ended March 31, 2019 decreased
compared to the previous fiscal year mainly due to decreased sales of nonperforming loans outstanding to
borrowers in the Foreign-excluding MUFG Americas Holdings and Krungsri in the Commercial segment.
In connection with the sale of loans, including performing loans, we recorded net gains of ¥2.9 billion and ¥
20.7 billion for the fiscal years ended March 31, 2018 and 2019, respectively.
Investment Portfolio
Our investment securities primarily consist of Japanese government bonds and marketable equity securities.
Japanese government bonds are mostly classified as available-for-sale debt securities. Our investment in
Japanese government bonds is a part of our asset and liability management policy with respect to investing the
amount of Japanese yen-denominated funds exceeding our net loans. The percentage of our holding of
available-for-sale Japanese government bonds to the total investment securities decreased to 53.6% as of
March 31, 2019 from 56.3% as of March 31, 2018. We also hold Japanese government bonds that are classified
as held-to-maturity debt securities, which accounted for 2.4% of the total investment securities as of March 31,
2019.
Historically, we have held equity securities of some of our customers primarily for strategic purposes, in
particular to maintain long-term relationships with these customers. We continue to focus on reducing our
investment in equity securities for such purposes in order to reduce the price fluctuation risk in our equity
portfolio from a risk management perspective and to respond to applicable regulatory requirements as well as
increasing market expectations for us to reduce our equity portfolio. As of March 31, 2018 and 2019, the
aggregate book value of our marketable equity securities under Japanese GAAP satisfied the requirements of the
legislation prohibiting banks from holding equity securities in excess of their Tier 1 capital. In November 2015,
we announced that we would aim to reduce the balance of equity securities held for strategic purposes valued
under Japanese GAAP to approximately 10% of our Tier 1 capital over a five-year period. During the fiscal year
ended March 31, 2019, we sold down ¥127 billion of equity securities held in our strategic equity investment
portfolio valued under Japanese GAAP. As of March 31, 2019, the balance of such securities valued under
Japanese GAAP represented 13.4% of our Tier 1 capital. However, various factors, including market conditions
and changes in our Tier 1 capital ratio, may affect the amount of equity securities we should sell and our ability
to achieve the target as planned.
Investment securities increased ¥1,283.8 billion to ¥44,938.0 billion as of March 31, 2019 from
¥43,654.2 billion as of March 31, 2018, primarily due to an increase in amortized cost of held-to-maturity debt
securities, particularly asset-backed securities.
Investment securities other than available-for-sale debt securities, held-to-maturity debt securities and
marketable equity securities consist of nonmarketable equity securities, which are included in equity securities on
our consolidated balance sheets. Nonmarketable equity securities were primarily carried at cost of ¥619.1 billion
as of March 31, 2019 and ¥566.6 billion as of March 31, 2018, respectively, because their fair values were not
readily determinable.
Losses resulting from impairment of investment securities, which reflect the decline in value considered to
be other than temporary, were ¥0.6 billion for the fiscal year ended March 31, 2019. Such losses were recorded
substantially on available-for-sale debt securities, primarily corporate bonds. Losses resulting from impairment
of investment securities for the fiscal year ended March 31, 2018 were ¥8.2 billion, consisting ¥6.7 billion of
losses on marketable equity securities, ¥0.1 billion of losses on available-for-sale debt securities and ¥1.4 billion
of losses on nonmarketable equity securities. Losses resulting from impairment of investment securities for the
fiscal year ended March 31, 2019 no longer included impairment of marketable equity securities, which were
instead reported as part of net gains or losses from marketable equity securities, pursuant to new guidance on
recognition and measurement of financial assets and financial liabilities.
124
On April 1, 2018, we began to report all of our marketable and nonmarketable equity investment securities
as “equity securities” in a line-item separate from available-for-sale debt securities and held-to-maturity debt
securities in our consolidated balance sheets. Previously, marketable equity securities were included in
available-for-sale securities, and nonmarketable equity securities were included in other investment securities.
This reclassification has been retrospectively reflected in the presentation of the relevant amounts as of
March 31, 2018 in this Annual Report.
For more information on the relevant accounting changes, see Notes 1 and 3 to our consolidated financial
statements included elsewhere in this Annual Report.
The following table shows information regarding the amortized cost, net unrealized gains (losses), and fair
value of our available-for-sale debt securities and held-to-maturity debt securities as of March 31, 2018 and
2019.
As of March 31,
2018
2019
Amortized
cost
Fair value
Net
unrealized
gains (losses)
Amortized
cost
Fair value
Net
unrealized
gains (losses)
(in billions)
¥24,272.3
¥24,567.9
¥295.6
¥23,748.6
¥24,077.7
¥329.1
Available-for-sale debt securities:
Japanese government and
Japanese government
agency bonds . . . . . . . . . . .
Japanese prefectural and
municipal bonds . . . . . . . . .
1,532.1
1,537.4
5.3
2,204.0
2,226.6
22.6
Foreign government and
official institution bonds . . .
Corporate bonds . . . . . . . . . . .
Mortgage-backed securities . .
Asset-backed securities . . . . .
Other debt securities . . . . . . . .
Total available-for-sale debt
2,207.7
1,104.8
1,727.8
1,547.0
165.0
2,171.7
1,119.4
1,712.8
1,558.3
165.6
(36.0)
14.6
(15.0)
11.3
0.6
2,648.9
1,117.3
1,768.2
1,494.6
192.9
2,641.4
1,130.7
1,746.3
1,502.9
192.9
(7.5)
13.4
(21.9)
8.3
0.0
securities . . . . . . . . . . . . . . . . . . .
¥32,556.7
¥32,833.1
¥276.4
¥33,174.5
¥33,518.5
¥344.0
Held-to-maturity debt
securities(1)
. . . . . . . . . . . . . . . . .
¥ 3,582.9
¥ 3,620.7
¥ 37.8
¥ 4,441.9
¥ 4,452.9
¥ 11.0
Note:
(1) See Note 3 to our consolidated financial statements included elsewhere in this Annual Report for more details.
Net unrealized gains on available-for-sale debt securities increased ¥67.6 billion to ¥344.0 billion as of
March 31, 2019 from ¥276.4 billion as of March 31, 2018. The increase was primarily attributable to a
¥33.5 billion increase in net unrealized gains on Japanese government and Japanese government agency bonds,
reflecting a decline in the yield on such bonds. The increase was also attributable to an improvement in net
unrealized losses on foreign government and official institutions bonds, reflecting generally declining trends in
the yield on such bonds. The increase was offset in part by larger net unrealized losses on mortgage-backed
securities.
The amortized cost of available-for-sale debt securities increased ¥617.8 billion to ¥33,174.5 billion as of
March 31, 2019 from ¥32,556.7 billion as of March 31, 2018. This increase was mainly attributable to a
¥671.9 billion increase in Japanese prefectural and municipal bonds and a ¥441.2 billion increase in foreign
government and official institution bonds. These increases were partially offset by a ¥523.7 billion decrease in
Japanese government and Japanese government agency bonds.
125
The amortized cost of held-to-maturity debt securities increased ¥859.0 billion to ¥4,441.9 billion as of
March 31, 2019 from ¥3,582.9 billion as of March 31, 2018. The increase was mainly due to an increase in asset-
backed securities.
The following table shows information relating to our equity securities as of March 31, 2018 and 2019:
Equity securities:
Marketable equity securities(1)
Nonmarketable equity securities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unlisted preferred securities(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities held by investment companies and brokers and
As of March 31,
2018
2019
(in billions)
¥6,671.6
¥6,358.5
391.1
147.1
393.3
198.0
dealers(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28.4
27.8
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,238.2
¥6,977.6
Notes:
(1) As a result of our adoption of new guidance on recognition and measurement of financial assets and financial liabilities on April 1, 2018,
equity securities are measured at fair value with unrealized gains (losses), or holding gains (losses), reflected in net income. This new
guidance is not applied retrospectively to March 31, 2018. Prior to adoption, such unrealized gains (losses) were reflected in other
comprehensive income. For more information, see Note 1 to our consolidated financial statements included elsewhere in this Annual
Report.
(2) These securities are mainly issued by public companies, including preferred stocks issued by Morgan Stanley, preferred securities issued
by our non-consolidated funding vehicles, and other unlisted preferred securities issued by several Japanese public companies. Those
securities are primarily carried at cost.
(3) These securities are equity securities issued by unlisted companies other than unlisted preferred securities. Those securities are primarily
carried at cost.
(4) These investment securities are held by certain subsidiaries subject to specialized industry accounting principles for investment
companies and brokers and dealers, and are measured at fair value.
Equity securities decreased ¥260.6 billion to ¥6,977.6 billion as of March 31, 2019 from ¥7,238.2 billion as
of March 31, 2018. The decrease was primarily attributable to a decrease in the fair value of marketable equity
securities, as we sold down equity securities for asset and liability management purposes during the fiscal year
ended March 31, 2019.
Cash, Due from Banks and Interest-earning Deposits in Other Banks
Cash and due from banks increased ¥1,275.9 billion to ¥33,924.3 billion as of March 31, 2019 from
¥32,648.4 billion as of March 31, 2018. This increase was primarily because we deposited with the Bank of
Japan a larger amount of cash received from sales and redemption of Japanese government bonds as we reduced
our holdings of such bonds.
Interest-earning deposits in other banks decreased ¥2,562.8 billion to ¥40,646.9 billion as of March 31, 2019
from ¥43,209.7 billion as of March 31, 2018. This decrease was mainly because of a decrease in the balance of
our commercial banking subsidiaries’ interest-earning deposits with other banks.
Call Loans, Funds Sold, and Receivables under Resale Agreements
Call loans, funds sold, and receivables under resale agreements increased ¥5,462.4 billion to
¥12,084.7 billion as of March 31, 2019 from ¥6,622.3 billion as of March 31, 2018. This was mainly due to an
increase in receivables under resale agreements in reaction to reduced Japanese government bond settlement risk
resulting from the shortening of the settlement cycle for Japanese government bonds.
126
Receivables under Securities Borrowing Transactions
Receivables under securities borrowing transactions decreased ¥6,510.2 billion to ¥2,758.6 billion as of
March 31, 2019 from ¥9,268.8 billion as of March 31, 2018. This decrease was mainly in reaction to reduced
Japanese government bond settlement risk resulting from the shortening of the settlement cycle for Japanese
government bonds.
Trading Account Assets
Trading account assets increased ¥5,389.9 billion to ¥40,576.6 billion as of March 31, 2019 from
¥35,186.7 billion as of March 31, 2018. Trading account assets consist of trading account securities and trading
derivative assets. Trading account securities increased ¥4,770.6 billion to ¥27,372.1 billion as of March 31, 2019
from ¥22,601.5 billion as of March 31, 2018. This increase was mainly due to the higher fair values of our
trading residential mortgage-backed securities portfolio and foreign government and official institution bond
portfolio. Trading derivative assets increased ¥619.3 billion to ¥13,204.5 billion as of March 31, 2019 from
¥12,585.2 billion as of March 31, 2018. This increase was mainly attributable to the higher fair values of interest
rate derivatives.
Deferred Tax Assets and Deferred Tax Liabilities
Deferred tax assets and deferred tax liabilities as of March 31, 2019 were ¥89.7 billion and ¥624.1 billion,
respectively, compared to ¥68.7 billion and ¥654.1 billion, respectively, as of March 31, 2018. Net deferred tax
liabilities as of March 31, 2019 were ¥534.4 billion, compared to ¥585.3 billion as of March 31, 2018. The lower
net deferred tax liabilities were primarily due to decreases in net realized gains on trading securities and
investment securities.
For more information, see “—A. Operating Results—Results of Operations—Income Tax Expense” and
Note 7 to our consolidated financial statements included elsewhere in this Annual Report.
Total Liabilities
As of March 31, 2019, total liabilities were ¥289,244.2 billion, an increase of ¥4,319.7 billion from
¥284,924.5 billion as of March 31, 2018. This was primarily due to an increase of ¥7,090.0 billion in payables
under repurchase agreements and an increase of ¥3,606.2 billion in deposits, partially offset by a decrease of
¥7,257.1 billion in securities lending transactions.
Deposits
Deposits are our primary source of funds. The balance of deposits increased ¥3,606.2 billion to
¥199,280.8 billion as of March 31, 2019 from ¥195,674.6 billion as of March 31, 2018. The increase was mainly
attributable to an increase in foreign interest-bearing deposits, primarily in the United States and Thailand.
The total average balance of interest-bearing deposits increased ¥2,044.7 billion to ¥166,607.5 billion for
the fiscal year ended March 31, 2019 from ¥164,562.8 billion for the fiscal year ended March 31, 2018, mainly
due to an increase in domestic deposits.
Payables under Repurchase Agreements
Payables under repurchase agreements increased ¥7,090.0 billion to ¥25,224.6 billion as of March 31, 2019
from ¥18,134.6 billion as of March 31, 2018. This increase was mainly in reaction to reduced Japanese
government bond settlement risk resulting from the shortening of the settlement cycle for Japanese government
bonds.
127
Payables under Securities Lending Transactions
Payables under securities lending transactions decreased ¥7,257.1 billion to ¥913.1 billion as of March 31,
2019 from ¥8,170.2 billion as of March 31, 2018. This decrease was mainly in reaction to reduced Japanese
government bond settlement risk resulting from the shortening of the settlement cycle for Japanese government
bonds.
Long-term debt
Long-term debt increased ¥920.9 billion to ¥27,990.5 billion as of March 31, 2019 from ¥27,069.6 billion as
of March 31, 2018. This increase was due to additional issuances of bonds by us to meet applicable TLAC and
other capital requirements. The average balance of long-term debt for the fiscal year ended March 31, 2019 was
¥28,667.5 billion, an increase of ¥735.5 billion from ¥27,932.0 billion for the previous fiscal year.
Sources of Funding and Liquidity
Our primary source of liquidity is from a large balance of deposits, mainly ordinary deposits, certificates of
deposit and time deposits. Time deposits have historically shown a high rollover rate among our corporate
customers and individual depositors. The average deposit balance increased to ¥196,393.3 billion for the fiscal
year ended March 31, 2019 from ¥192,741.2 billion for the fiscal year ended March 31, 2018. These deposits
provide us with a sizable source of stable and low-cost funds. Our average deposits, combined with our average
total equity of ¥20,465.9 billion, funded 67.5% of our average total assets of ¥321,292.8 billion during the fiscal
year ended March 31, 2019. Our deposits exceeded our loans before allowance for credit losses by
¥82,396.9 billion as of March 31, 2019 compared to ¥78,638.7 billion as of March 31, 2018. As part of our asset
and liability management policy, a significant portion of the amount of Japanese yen-denominated funds
exceeding our loans has been deposited with the Bank of Japan or invested in Japanese government bonds in
recent periods.
The remaining funding was primarily provided by short-term borrowings and long-term senior and
subordinated debt. Short-term borrowings consist of call money and funds purchased, payables under repurchase
agreements, payables under securities lending transactions, due to trust account, and other short-term borrowings.
From time to time, we have issued long-term instruments, including various fixed and floating interest rate senior
and subordinated bonds with and without maturities. The balance of our short-term borrowings as of March 31,
2019 was ¥38,055.1 billion, and the average balance of short-term borrowings for the fiscal year ended
March 31, 2019 was ¥36,281.9 billion. The balance of our long-term debt as of March 31, 2019 was
¥27,990.5 billion, and the average balance of long-term debt for the fiscal year ended March 31, 2019 was
¥28,667.5 billion. Liquidity may also be provided by the sale of financial assets, including available-for-sale debt
securities, marketable equity securities, trading account securities and loans. Additional liquidity may be
provided by the maturity of loans.
We manage liquidity separately at certain of our domestic and foreign banking and non-bank subsidiaries
because they are subject to separate regulatory requirements, pursue different business models and have
distinctive liquidity risk profiles. We manage our group-wide liquidity on a consolidated basis based on the tests
and analyses conducted at the subsidiary level. Liquidity risk management measures at the subsidiary level
include the following:
‰ Domestic banking subsidiaries—Our major domestic banking subsidiaries, MUFG Bank and Mitsubishi
UFJ Trust and Banking, set liquidity and funding limits designed to maintain their respective
requirements for funding from market sources below pre-determined levels for certain periods
(e.g., one-day, two-week and one-month). The major domestic banking subsidiaries also monitor the
balance of buffer assets they respectively hold, including Japanese government bonds and U.S. Treasury
bonds, which can be used for cash funding even in periods of stress. In addition, the major domestic
banking subsidiaries regularly perform liquidity stress testing designed to evaluate the impact of
128
systemic market stress conditions and institution-specific stress events, including credit rating
downgrades, on their liquidity positions;
‰
‰
Foreign banking subsidiaries—Our major foreign banking subsidiaries, MUFG Americas Holdings and
Krungsri, monitors various liquidity metrics, including total available liquidity, the net non-core funding
dependence ratio, and minimum liquidity assets, as a tool to maintain a sufficient amount of liquidity
and diversity of funding sources to allow the major foreign banking subsidiaries to meet expected
obligations in both stable and adverse conditions. In addition, the major foreign banking subsidiaries
regularly conduct stress testing, which incorporates both bank-specific and systemic market scenarios
that would adversely affect its liquidity position, to facilitate the identification of appropriate remedial
measures to help ensure that it maintains adequate liquidity in adverse conditions;
Securities subsidiaries—Our securities subsidiaries implement liquidity and funding limits designed to
maintain their requirements for funding from market sources below pre-determined levels for specified
periods. In addition, the securities subsidiaries regularly conduct analyses designed to assess the period
for which they can continue to meet their respective liquidity requirements by selling or pledging assets
they respectively hold under scenarios where they are unable to access any additional sources of
financing in the market; and
‰ Non-bank subsidiaries—Our non-bank subsidiaries, including Mitsubishi UFJ NICOS, regularly
conduct cash flow analyses designed to assess their ability to generate sufficient liquidity for specified
periods, considering the cash and cash equivalents as well as deposits they respectively hold, and their
respective operating income and expenses under scenarios where they are no longer able to obtain
funding from markets through issuance of commercial paper, bonds or other instruments. The non-bank
subsidiaries also conduct analyses to ensure sufficient liquidity and funding are available from our bank
subsidiaries and other financial institutions outside of our group of companies.
We collect and evaluate the results of the stress tests individually performed by our major subsidiaries to
ensure our ability to meet our liquidity requirements on a consolidated basis in stress scenarios.
We manage our funding sources by setting limits on, or targets for, our holdings of buffer assets, primarily
Japanese government bonds. As of March 31, 2019, we held ¥24,077.7 billion of Japanese government bonds and
government agency bonds as available-for-sale debt securities. We also regard deposits with the Bank of Japan as
buffer assets. In addition, our commercial banking subsidiaries manage their funding sources through liquidity-
supplying products such as commitment lines and through a liquidity gap, or the excess of cash inflows over cash
outflows.
Any downgrade of the credit ratings assigned to us or our major subsidiaries could increase the cost, or
decrease the availability, of our funding, particularly in U.S. dollars and other foreign currencies, adversely affect
our liquidity position or net interest margin, trigger additional collateral or funding obligations, and result in
losses of depositors, investors and counterparties willing or permitted to transact with us, thereby reducing our
ability to generate income and weakening our financial position. See “Item 3.D. Key Information—Risk
Factors—Risks Related to Our Business—A downgrade of our credit ratings could adversely affect our ability to
access and maintain liquidity.”
Liquidity Requirements for Banking Institutions in Japan
We are required to calculate and disclose our LCR calculated in accordance with the methodology
prescribed in the FSA guidance that has been adopted to implement the relevant Basel III standard. Starting in
the calendar year 2019, we are required to maintain a minimum LCR of 100%. See “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—Japan—Liquidity Coverage Ratio” and
“—B. Liquidity and Capital Resources—Capital Adequacy—Liquidity Coverage Ratios of MUFG and Major
Banking Subsidiaries in Japan.”
129
Total Equity
The following table presents a summary of our total equity as of March 31, 2018 and 2019:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated net unrealized gains (losses) on investment securities, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes, other than net unrealized
gains on investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost
March 31, 2018 March 31, 2019
(in billions, except percentages)
¥ 2,090.3
¥ 2,090.3
5,577.2
5,740.2
8,333.6
5,185.3
239.6
239.6
8,094.0
4,945.7
2,270.3
(369.4)
207.0
(522.9)
85.1
(517.2)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,970.2
675.6
¥15,199.6
785.1
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,645.8
¥15,984.7
Ratio of total equity to total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.21%
5.24%
Mitsubishi UFJ Financial Group shareholders’ equity as of March 31, 2019 was ¥15,199.6 billion, an
increase of ¥229.4 billion from ¥14,970.2 billion as of March 31, 2018.
Capital surplus decreased ¥163.0 billion to ¥5,577.2 billion as of March 31, 2019 from ¥5,740.2 billion as of
March 31, 2018. This decrease was mainly due to repurchases of shares of our common stock and cancellation of
the repurchased shares.
Retained earnings increased ¥3,148.3 billion to ¥8,333.6 billion as of March 31, 2019 from ¥5,185.3 billion
as of March 31, 2018, whereas accumulated net unrealized losses on investment securities, net of taxes as of
March 31, 2019 was ¥369.4 billion compared to accumulated net unrealized gains on investment securities, net of
taxes as of March 31, 2018 of ¥2,270.3 billion. These changes primarily resulted from the adoption of the new
accounting guidance described below. We decided to pay our year-end dividend of ¥11 per share of our common
stock for the six months ended March 31, 2019, resulting in an annual dividend of ¥22 per share of our common
stock for the fiscal year ended March 31, 2019.
Effective April 1, 2018, we adopted new guidance on recognition and measurement of financial assets and
financial liabilities and began to measure equity securities at fair value with unrealized gains (losses), or holding
gains (losses), on such securities being reflected in net investment securities gains or losses in our consolidated
statements of income. Upon adoption, we also recorded an increase in the beginning balance of retained earnings
as of April 1, 2018 of ¥2,702 billion, with a corresponding decrease in accumulated net unrealized gains (losses)
on investment securities, net of taxes. For more information, see Note 1 to our consolidated financial statements
included elsewhere in this Annual Report.
Accumulated other comprehensive income, net of taxes, other than accumulated net unrealized gains on
investment securities decreased ¥121.9 billion to ¥85.1 billion as of March 31, 2019 from ¥207.0 billion as of
March 31, 2018. The decrease was mainly due to ¥88.7 billion of negative net change in the balance of pension
liability adjustments because the investment returns on our pension plans decreased.
As a result of the foregoing, total equity increased ¥338.9 billion to ¥15,984.7 billion as of March 31, 2019
from ¥15,645.8 billion as of March 31, 2018. The ratio of total equity to total assets increased 0.03 percentage
points to 5.24% as of March 31, 2019 from 5.21% as of March 31, 2018.
130
The following table presents information relating to the accumulated net unrealized gains, net of taxes, in
respect of available-for-sale investment securities as of March 31, 2018 and 2019:
Accumulated net unrealized gains on investment securities, net of taxes(1) . . . . . . .
Accumulated net unrealized gains on investment securities, net of taxes, to total
March 31, 2018 March 31, 2019
(in billions, except percentages)
¥(369.4)
¥2,270.3
equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.51%
(2.31)%
Note:
(1) As a result of our adoption of new guidance on recognition and measurement of financial assets and financial liabilities on April 1, 2018,
equity securities are measured at fair value with unrealized gains (losses), or holding gains (losses), reflected in net income. This new
guidance is not applied retrospectively to March 31, 2018. Prior to adoption, such unrealized gains (losses) were reflected in other
comprehensive income. For more information, see Note 1 to our consolidated financial statements included elsewhere in this Annual
Report.
Capital Adequacy
We are subject to various regulatory capital requirements promulgated by the regulatory authorities of the
countries in which we operate. Failure to meet minimum capital requirements can result in mandatory actions
being taken by regulators that could have a direct material effect on our consolidated financial statements.
Moreover, if our capital ratios are perceived to be low, our counterparties may avoid entering into transactions
with us, which in turn could negatively affect our business and operations. For further information, see
“Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may not be able to maintain
our capital ratios and other regulatory ratios above minimum required levels, which could result in various
regulatory actions, including the suspension of some or all of our operations.”
We continually monitor our risk-adjusted capital ratios, leverage ratio and TLAC ratios closely, and manage
our operations in consideration of the capital requirements. Factors that affect some or all of these ratios include
fluctuations in the value of our assets, including our credit risk assets such as loans and equity securities, the risk
weights of which depend on the borrowers’ or issuers’ internal ratings, and marketable securities, and
fluctuations in the value of the Japanese yen against the U.S. dollar and other foreign currencies, as well as
general price levels of Japanese equity securities.
Capital Requirements for Banking Institutions in Japan
Under Japanese regulatory capital requirements, our consolidated capital components, including Common
Equity Tier 1, Tier 1, and Tier 2 capital and risk-weighted assets, are calculated based on our consolidated
financial statements prepared under Japanese GAAP. Each of the consolidated and stand-alone capital
components and risk-weighted assets of our banking subsidiaries in Japan is also calculated based on
consolidated and non-consolidated financial statements prepared under Japanese GAAP.
As of March 31, 2019, we were required to maintain a capital conservation buffer of 2.5%, a G-SIB
surcharge of 1.5% and a countercyclical buffer of 0.04% in addition to the 4.5% minimum Common Equity Tier
1 capital ratio. See “Item 4.B. Information on the Company—Business Overview—Supervision and
Regulation—Japan—Capital adequacy.”
We have been granted approval by the FSA to exclude the majority of our investment in Morgan Stanley
from being subject to double gearing adjustments. The approval was granted for a 10-year period, but the
approval amount will be phased out by 20% each year starting from March 31, 2019. As of March 31, 2019, a
full application of double gearing adjustments with respect to our investment in Morgan Stanley would have
reduced our Common Equity Tier 1 capital ratio by approximately 0.9%.
131
Leverage Requirements for Banking Institutions in Japan
Our consolidated leverage ratio is calculated in accordance with the methodology prescribed in the FSA
guidance that has been adopted to implement the relevant Basel III standard. The leverage ratio is designed for
monitoring and preventing the build-up of excessive leverage in the banking sector and is expressed as the ratio
of Tier 1 capital to total balance sheet assets adjusted in accordance with the FSA guidance. As of March 31,
2019, we were required to maintain a minimum leverage ratio of 3.00%. A G-SIB leverage ratio buffer equal to
50% of the applicable G-SIB capital surcharge is expected to be applied to us in 2022. See “Item 4.B.
Information on the Company—Business Overview—Supervision and Regulation—Japan—Leverage Ratio.”
TLAC Requirements for Banking Institutions in Japan
Our External TLAC ratios are calculated in accordance with the methodology prescribed in the FSA
guidance that has been adopted to implement the TLAC Principle published by the FSB in November 2015.
External TLAC ratios are expressed as the ratio of External TLAC amount to risk-weighted assets or leverage
exposure in accordance with the FSA guidance. We are required to maintain External TLAC ratios of 16% on a
risk-weighted assets basis and 6% on a leverage exposure basis from March 31, 2019 and 18% on a
risk-weighted assets basis and 6.75% on a leverage exposure basis from March 31, 2022. See “Item 4.B.
Information on the Company—Business Overview—Supervision and Regulation—Japan—Total loss-absorbing
capacity.”
Capital Ratios, Leverage Ratio and TLAC Ratios of MUFG
The table below presents our consolidated total capital components, risk-weighted assets, risk-adjusted
capital ratios, leverage ratio and TLAC ratios in accordance with Basel III as of March 31, 2018 and 2019.
Underlying figures are calculated in accordance with Japanese banking regulations based on information derived
from our consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA.
The figures in the table below are rounded down. For further information, see Note 22 to our consolidated
financial statements included elsewhere in this Annual Report.
Capital components:
Common Equity Tier 1 . . . . . . . . . .
Additional Tier 1 . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital
Tier 2 capital
. . . . . . . . . . . . . . . . . . . . . .
Total capital . . . . . . . . . . . . . . . . . . . . . . .
Risk-weighted assets . . . . . . . . . . . . . . . . . . . .
Capital ratios:
Common Equity Tier 1 capital . . . . . . . . .
Tier 1 capital
. . . . . . . . . . . . . . . . . . . . . .
Total capital . . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
External TLAC ratios . . . . . . . . . . . . . . . . . . . .
Risk-weighted assets basis(2)
. . . . . . . . . .
Leverage exposure basis . . . . . . . . . . . . .
As of March 31,
2018
Minimum
ratios required(1)
As of March 31,
2019
Minimum
ratios required(1)
(in billions, except percentages)
¥ 14,284.9
1,966.8
16,251.7
2,543.7
¥ 18,795.4
¥113,463.6
¥ 14,322.4
1,953.8
16,276.3
2,493.4
¥ 18,769.7
¥117,091.1
12.58%
14.32
16.56
5.01
—
—
7.51%
9.01
11.01
—
—
—
12.23%
13.90
16.03
4.94
18.16
7.90
8.54%
10.04
12.04
3.00
16.00
6.00
Note:
(1) The minimum capital ratios required as of March 31, 2018 include a capital conservation buffer of 1.875% and a G-SIB surcharge of
1.125% and a countercyclical buffer of 0.01%. The minimum capital ratios required as of March 31, 2019 include a capital conservation
buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.04%.
(2) The TLAC ratio on a risk-weighted assets basis and the required minimum ratios as of March 31, 2019 do not include the regulatory
capital buffers consisting of a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.04%.
132
Management believes that, as of March 31, 2019, we were in compliance with all capital adequacy
requirements to which we were subject.
Our Common Equity Tier 1 capital ratio as of March 31, 2019 was lower compared to the ratio as of
March 31, 2018 due to an increase in our risk-weighted assets, more than offsetting the impact of larger Common
Equity Tier 1 capital. The increase in risk-weighted assets mainly reflected the increase in credit risks for
overseas subsidiaries. The increase in our Common Equity Tier 1 capital was mainly due to larger retained
earnings, reflecting the net income.
Capital Ratios and Leverage Ratios of Major Banking Subsidiaries in Japan
The table below presents the risk-adjusted capital ratios and leverage ratios of MUFG Bank and Mitsubishi
UFJ Trust and Banking in accordance with Basel III as of March 31, 2018 and 2019. Underlying figures are
calculated in accordance with Japanese banking regulations based on information derived from each bank’s
consolidated and non-consolidated financial statements prepared in accordance with Japanese GAAP, as required
by the FSA. The figures in the table below are rounded down. For further information, see Note 22 to our
consolidated financial statements included elsewhere in this Annual Report.
As of
March 31,
2018
Minimum capital
ratios required
As of
March 31,
2019
Minimum capital
ratios required
Consolidated:
MUFG Bank
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
11.85%
13.59
15.90
4.81
4.50%
6.00
8.00
—
10.83%
12.46
14.42
4.63
4.50%
6.00
8.00
3.00
Mitsubishi UFJ Trust and Banking
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
Stand-alone:
MUFG Bank
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
16.21
17.67
20.03
4.71
12.54
14.51
16.90
—
16.18
17.55
19.88
—
4.50
6.00
8.00
—
4.50
6.00
8.00
—
4.50
6.00
8.00
—
19.57
21.26
24.40
5.09
11.69
13.53
15.58
4.84
19.42
21.12
24.25
5.55
4.50
6.00
8.00
3.00
4.50
6.00
8.00
3.00
4.50
6.00
8.00
3.00
Management believes that, as of March 31, 2019, our banking subsidiaries were in compliance with all
capital adequacy requirements to which they were subject.
Liquidity Coverage Ratios of MUFG and Major Banking Subsidiaries in Japan
The following table presents the LCRs of MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking in
accordance with Basel III as adopted by the FSA for the periods indicated. The figures underlying the ratios were
calculated in accordance with Japanese banking regulations. The percentages in the table below are rounded
133
down. The required minimum LCR was 90% during the calendar year 2018 and is 100% during the calendar year
2019.
Three months ended
March 31,
2018(1),(6)
June 30,
2018(2),(6)
September 30,
2018(3),(6)
December 31,
2018(4),(6)
March 31,
2019(5),(6)
MUFG (consolidated) . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank (consolidated) . . . . . . . . . . . . . . . . . . .
MUFG Bank (stand-alone) . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking
144.8% 140.3%
160.0
170.4
148.4
156.2
138.4%
144.7
152.8
(consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Mitsubishi UFJ Trust and Banking (stand-alone)
113.8
127.7
124.4
151.3
125.1
157.0
136.0%
143.2
151.5
118.7
143.1
141.2%
150.7
159.0
115.2
141.5
Notes:
(1) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between January 4, 2018 and
March 30 2018 divided by the average amount of net cash outflows for the same fifty-nine business days.
(2) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between April 2, 2018 and
June 29, 2018 divided by the average amount of net cash outflows for the same sixty-two business days.
(3) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between July 2, 2018 and
September 28, 2018 divided by the average amount of net cash outflows for the same sixty-two business days.
(4) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between October 1, 2018 and
December 28, 2018 divided by the average amount of net cash outflows for the same sixty-two business days.
(5) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between January 4, 2019 and
March 29, 2019 divided by the average amount of net cash outflows for the same fifty-eight business days.
(6) The LCR is to be calculated as an average based on daily values in accordance with the Japanese banking regulations.
See “—B. Liquidity and Capital Resources—Sources of Funding and Liquidity.”
Capital Requirements for Banking Institutions in the United States
In the United States, MUFG Americas Holdings and MUFG Union Bank are subject to various regulatory
capital requirements administered by the U.S. Federal banking agencies. Failure to meet the applicable minimum
capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a material effect on MUFG Americas Holdings’ consolidated financial statements.
For a more detailed discussion of the applicable capital requirements, see “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—United States.” See also Note 22 to our
consolidated financial statements included elsewhere in this Annual Report.
In addition, as foreign banking organizations that have U.S. branches and agencies and also as entities that
are controlled by MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking are subject to the FRB’s
requirements.
134
Capital Ratios of Banking Subsidiaries in the United States
The table below presents the risk-adjusted capital ratios of MUFG Americas Holdings and MUFG Union
Bank, both subsidiaries of MUFG Bank, calculated in accordance with applicable U.S. banking regulations as of
December 31, 2017 and 2018:
As of
December 31,
2017
Minimum capital
ratios required
as of
December 31,
2017(1)
As of
December 31,
2018
Minimum capital
ratios required
as of
December 31,
2018(2)
Ratio OCC
requires to be
“well capitalized”
as of
December 2018
—
—
—
—
5.0
10.0
6.5
MUFG Americas Holdings:
Tier I capital (to risk-
weighted assets) . . . . . .
Tier I capital (to quarterly
. . . . .
average assets)(3)
Total capital (to risk-
Common Equity Tier I
Capital (to risk-
weighted assets) . . . . . .
MUFG Union Bank:
Tier I capital (to risk-
weighted assets) . . . . . .
Tier I capital (to quarterly
. . . . .
average assets)(3)
Total capital (to risk-
16.31%
7.250%
13.96%
7.875%
weighted assets) . . . . . .
17.76
10.06
4.000
9.250
8.77
14.60
4.000
9.875
16.31
5.750
13.96
6.375
16.17%
7.250%
14.45%
7.875%
8.0%
weighted assets) . . . . . .
17.68
11.78
4.000
9.250
10.61
15.09
4.000
9.875
Common Equity Tier I
Capital (to risk-
weighted assets) . . . . . .
16.17
5.750
14.45
6.375
Notes:
(1) Beginning January 1, 2017, the minimum capital requirement includes a capital conservation buffer of 1.250%.
(2) Beginning January 1, 2018, the minimum capital requirement includes a capital conservation buffer of 1.875%.
(3) Excludes certain deductions.
Management believes that, as of December 31, 2018, MUFG Americas Holdings and MUFG Union Bank
were in compliance with all capital adequacy requirements to which they were subject.
As of December 31, 2017 and 2018, the OCC categorized MUFG Union Bank as “well-capitalized.” To be
categorized as “well-capitalized,” MUFG Union Bank must maintain minimum ratios of Total and Tier I capital
to risk-weighted assets and of Tier I capital to quarterly average assets (leverage ratio) as set forth in the table.
For further information, see Note 22 to our consolidated financial statements included elsewhere in this
Annual Report.
Capital Requirements for Securities Firms in Japan and Overseas
We have securities subsidiaries in Japan and overseas, which are also subject to regulatory capital
requirements. In Japan, the Financial Instruments and Exchange Act of Japan and related ordinances require
financial instruments firms to maintain a minimum capital ratio of 120% calculated as a percentage of capital
accounts less certain fixed assets, as determined in accordance with Japanese GAAP, against amounts equivalent
to market, counterparty credit and operational risks. Specific guidelines are issued as a ministerial ordinance
which details the definition of essential components of the capital ratios, including capital, deductible fixed asset
135
items and risks, and related measures. Failure to maintain a minimum capital ratio will trigger mandatory
regulatory actions. A capital ratio of less than 140% will call for additional regulatory reporting, a capital ratio of
less than 120% may result in an order to change the method of business, and a capital ratio of less than 100%
may lead to a suspension of all or part of the business for a period of time and cancellation of a registration.
Overseas securities subsidiaries are subject to the relevant regulatory capital requirements of the countries or
jurisdictions in which they operate.
Capital Ratio of Mitsubishi UFJ Morgan Stanley Securities
As of March 31, 2019, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets
of ¥446.6 billion on a stand-alone basis represented 331.6% of the total amounts equivalent to market,
counterparty credit and operational risks. As of the same date, Mitsubishi UFJ Morgan Stanley Securities’ capital
accounts less certain fixed assets of ¥469.3 billion on a consolidated basis represented 332.2% of the total
amounts equivalent to market, counterparty credit and operational risks. As of March 31, 2018, Mitsubishi UFJ
Morgan Stanley Securities’ capital accounts less certain fixed assets of ¥446.5 billion on a stand-alone basis
represented 291.2% of the total amounts equivalent to market, counterparty credit and operational risks. As of the
same date, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets of ¥473.3 billion
on a consolidated basis represented 293.2% of the total amounts equivalent to market, counterparty credit and
operational risks. These figures are calculated in accordance with Japanese GAAP, pursuant to the Financial
Instruments and Exchange Act of Japan.
For further information, see Note 22 to our consolidated financial statements included elsewhere in this
Annual Report.
Non-exchange Traded Contracts Accounted for at Fair Value
The use of non-exchange traded or over-the-counter contracts provides us with the ability to adapt to the
varied requirements of a wide customer base while mitigating market risks. Non-exchange traded contracts are
accounted for at fair value, which is generally based on pricing models or quoted prices for instruments with
similar characteristics. Gains or losses on non-exchange traded contracts are included in “Trading account profits
(losses)—net” in our consolidated statements of income. The following table summarizes the changes in the fair
value of non-exchange traded contracts for the fiscal years ended March 31, 2018 and 2019:
Net fair value of contracts outstanding at beginning of fiscal year
Changes attributable to contracts realized or otherwise settled during the fiscal
. . . . . . . . . . . . . . . .
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Fair value of new contracts entered into during the fiscal year
Other changes in fair value, principally revaluation at end of fiscal year
Fiscal years ended March 31,
2018
2019
(in millions)
¥ 4,373
¥ 1,812
(2,126)
—
(435)
(1,212)
356
34
Net fair value of contracts outstanding at end of fiscal year . . . . . . . . . . . . . . . . . . . . . .
¥ 1,812
¥
990
136
The following table summarizes the maturities of non-exchange traded contracts as of March 31, 2019:
Net fair value of contracts—unrealized gains
Prices provided by
other external sources
Prices based on models and
other valuation methods
(in millions)
Maturity less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity less than 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity less than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity 5 years or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥695
10
—
—
¥705
¥ (67)
352
—
—
¥285
C. Research and Development, Patents and Licenses, etc.
Not applicable.
D. Trend Information
See the discussions in “—Business Environment,” “—Recent Developments,” “—A. Operating Results”
and “—B. Liquidity and Capital Resources.”
E. Off-Balance Sheet Arrangements
In the normal course of business, we engage in several types of off-balance sheet arrangements to meet the
financing needs of customers, including various types of guarantees, credit commitments and commercial letters
of credit. The following table summarizes these commitments as of March 31, 2019:
Amount of commitment by expiration period
1 year
or less
1-5
years
Over
5 years
Total
(in billions)
Guarantees:
Standby letters of credit and financial guarantees . . . . . . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,792
2,332
29,734
5,884
12
¥
838
784
20,921
420
13
¥
271
140
7,370
5,216
28
¥ 3,901
3,256
58,025
11,520
53
Total guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,754
22,976
13,025
76,755
Other off-balance sheet instruments:
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit
Commercial letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to make investments . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,465
926
8
—
25,807
131
81
5
2,001
—
151
—
77,273
1,057
240
5
Total other off-balance sheet instruments . . . . . . . . . . . . . . . .
¥50,399
¥26,024
¥ 2,152
¥78,575
See Note 25 to our consolidated financial statements included elsewhere in this Annual Report for a
description of the nature of our guarantees and other off-balance sheet instruments.
The contractual amounts of these guarantees and other off-balance sheet instruments represent the amounts
at risk if the contracts were to be fully drawn upon as a result of a subsequent default by our customer and a
decline in the value of the underlying collateral. Since many of these commitments expire without being drawn
137
upon, the total contractual or notional amounts of these commitments do not necessarily represent our future cash
requirements. As of March 31, 2019, approximately 58% of these commitments have an expiration date within
one year, 32% have an expiration date from one year to five years, and 10% have an expiration date after five
years. Risks relating to off-balance sheet instruments are monitored and managed as a part of our risk
management system as set forth in “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and
Other Risk.” We evaluate off-balance sheet arrangements in the manner described in Note 1 to our consolidated
financial statements included elsewhere in this Annual Report.
The fees generated specifically from off-balance sheet arrangements are not a dominant source of our
overall fees and commissions.
Some of our off-balance sheet arrangements are related to activities of special purpose entities, most of
which are VIEs. For further information, see Note 26 to our consolidated financial statements included elsewhere
in this Annual Report.
F. Tabular Disclosure of Contractual Obligations
The following table shows a summary of our contractual obligations outstanding as of March 31, 2019:
Contractual obligations:
Payments due by period
Less than
1 year
1-3
years
3-5
years
Over
5 years
Total
(in billions)
Time deposit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥56,911 ¥ 9,174 ¥1,283 ¥ 866 ¥68,234
261
Estimated interest expense on time deposit obligations(1)
. . . . . .
27,983
Long-term debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
622
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
296
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
14,183
10
150
93
1
7,771
3
271
58
226
3,048
6
94
66
4
2,981
4
107
79
Total(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥60,351 ¥23,640 ¥4,458 ¥8,970 ¥97,419
Notes:
(1) Contractual obligations related to estimated interest expense on time deposit obligations are calculated by applying the March 31, 2019
weighted-average interest rate on outstanding time deposits.
(2) The total amount of expected future pension payments is not included in the above table or the total amount of commitments outstanding
as of March 31, 2019. We expect to contribute approximately ¥33.9 billion for pension and other benefits for our employees for the fiscal
year ending March 31, 2020. For further information, see Note 13 to our consolidated financial statements included elsewhere in this
Annual Report.
(3) The above table does not include unrecognized tax benefits and interest and penalties related to income tax associated with the guidance
on accounting for uncertainty in income taxes as we cannot estimate reasonably the timing of cash settlement of the liabilities for
unrecognized tax benefits. The total amount of the liabilities for unrecognized tax benefits is ¥19.2 billion as of March 31, 2019. Among
the liabilities for unrecognized tax benefits, it is reasonably possible that the unrecognized tax benefits will decrease by approximately
¥2.6 billion during the next twelve months. For further information, see Note 7 to our consolidated financial statements included
elsewhere in this Annual Report.
Purchase obligations include any legally binding contractual obligations that require us to spend more than
¥100 million annually under the contract. Purchase obligations in the table primarily include commitments to
make investments into corporate recovery or private equity investment funds.
G. Safe Harbor
See the discussion under “Forward-Looking Statements.”
138
Item 6.
Directors, Senior Management and Employees.
A. Directors and Senior Management
Members of the Board of Directors
The following table sets forth the members of our board of directors as of July 1, 2019, together with their
respective dates of birth, positions and experience:
Name
(Date of Birth)
Mariko Fujii
(March 9, 1955)
Position in MUFG
Member of the Board
of Directors
(Outside Director)
April 1977
July 1997
April 1999
Business Experience
Joined Ministry of Finance
Director, International Affairs and Research
Division, Customs and Tariff Bureau
Associate Professor, Research Center for
Advanced Science and Technology, The
University of Tokyo
March 2001
Professor, Research Center for Advanced
Economic Engineering, The University of
Tokyo
April 2004
Professor, Research Center for Advanced
Science and Technology, National University
Corporation, The University of Tokyo
June 2014
Outside director of Electric Power Development
October 2015
Resigned from Professor of The University of
Co., Ltd.
Tokyo
Resigned from an Outside director of Electric
Power Development Co., Ltd.
Ambassador Extraordinary and Plenipotentiary
of Japan to Latvia
January 2019
Retired from Ambassador Extraordinary and
June 2019
Plenipotentiary of Japan to Latvia
Outside director of NTT DATA
CORPORATION (incumbent)
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
Kaoru Kato
(May 20, 1951)
Member of the Board
April 1977
Joined Nippon Telegraph and Telephone Public
of Directors
(Outside Director)
July 1999
Corporation (NTT)
General Manager of Plant Department of NTT
Kansai Mobile Communications Network,
Inc.
April 2000
General Manager of Plant Department of NTT
June 2002
General Manager of Corporate Strategy and
DoCoMo Kansai, Inc.
July 2005
Planning Department, Member of the Board
of Directors of NTT DoCoMo Kansai, Inc
Representative Director and Senior Corporate
Executive Officer of Sumitomo Mitsui Card
Co., Ltd.
July 2007
Executive Vice President, General Manager of
Corporate Strategy and Planning Department,
Member of the Board of Directors of NTT
DoCoMo Kansai, Inc.
139
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2008
Executive Vice President, General Manager of
June 2012
Corporate Strategy and Planning Department,
Member of the Board of Directors of NTT
DOCOMO, Inc.
President and Chief Executive Officer, Member
of the Board of Directors of NTT DOCOMO,
Inc.
June 2016
Corporate Advisor, Member of the Board of
June 2018
Corporate Advisor of NTT DOCOMO, Inc.
Directors of NTT DOCOMO, Inc.
(incumbent)
June 2019
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
Haruka Matsuyama
(August 22, 1967)
Member of the Board
of Directors
(Outside Director)
April 1995
July 2000
January 2002
June 2012
June 2013
Assistant Judge, Tokyo District Court
Registered as an attorney at law, member of the
Daini Tokyo Bar Association
Joined Hibiya Park Law Offices
Partner of Hibiya Park Law Offices (incumbent)
Outside Corporate Auditor of Vitec Co., Ltd.
Outside director of T&D Holdings, Inc.
(incumbent)
June 2014
External Audit & Supervisory Board member of
MITSUI & CO., LTD. (incumbent)
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
June 2015
Outside director of Vitec Co., Ltd. (current
Restar Holdings Corporation) (incumbent)
Toby S. Myerson
(July 20, 1949)
Member of the Board
of Directors
(Outside Director)
September 1977 Registered as an attorney at law, admitted in
States of California and New York in the
United States
October 1981
Joined Paul, Weiss, Rifkind, Wharton &
June 1983
Partner of Paul, Weiss, Rifkind, Wharton &
Garrison LLP
Garrison LLP
April 1989
Managing Director of Wesserstein Perella &
Co. Inc.
November 1990 Partner of Paul, Weiss, Rifkind, Wharton &
Garrison LLP
June 2014
December 2016 Retired from Paul, Weiss, Rifkind, Wharton &
Outside director of BK(US) (incumbent)
Garrison LLP
January 2017
Chairman & CEO of Longsight Strategic
Advisors LLC (incumbent)
February 2017 Outside director of MUAH (incumbent)
June 2017
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
140
Name
(Date of Birth)
Position in MUFG
Business Experience
Hirofumi Nomoto
Member of the Board
(September 27, 1947)
of Directors
(Outside Director)
April 1971
April 2003
Joined Tokyu Corporation
Executive General Manager of Media Business
April 2004
June 2007
Headquarters of Tokyu Corporation
President & Representative Director of its
communications Inc.
Director of Tokyu Corporation
Executive Officer of Real Estate Development
Business Unit of Tokyu Corporation
January 2008 Managing Director of Tokyu Corporation
June 2008
Senior Managing Director of Tokyu
April 2010
Corporation
Executive Officer & Senior Executive General
Manager of Urban Life Produce Business
Unit of Tokyu Corporation
June 2010
Senior Managing Director & Representative
Director of Tokyu Corporation
April 2011
President & Representative Director of Tokyu
Corporation
April 2018
Chairman & Representative Director of Tokyu
Corporation (incumbent)
June 2019
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
Tsutomu Okuda
Member of the Board
(October 14, 1939)
of Directors
(Outside Director)
April 1964
Joined The Daimaru, Inc.
September 1991 Managing Director of Daimaru Australia
Pty. Ltd.
May 1995
May 1996
March 1997
May 2003
September 2007 Chairman of The Daimaru, Inc.
Director of The Daimaru, Inc.
Managing Director of The Daimaru, Inc.
President of The Daimaru, Inc.
Chairman & CEO of The Daimaru, Inc.
President and Chief Executive Officer of J.
Front Retailing Co., Ltd.
March 2010
Chairman and Chief Executive Officer of J.
April 2013
Director and Senior Advisor of J. Front
Front Retailing Co., Ltd.
Retailing Co., Ltd.
May 2014
June 2014
Senior Advisor of J. Front Retailing Co., Ltd.
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
May 2018
Special Advisor of J. Front Retailing Co., Ltd.
(incumbent)
Yasushi Shingai
Member of the Board
April 1980
Joined Japan Tobacco and Salt Public
(January 11, 1956)
of Directors
(Outside Director)
July 2001
Corporation (current Japan Tobacco Inc.)
Vice President of Financial Planning Division
of Japan Tobacco Inc.
June 2004
Senior Vice President, Head of Finance Group
of Japan Tobacco Inc.
July 2004
Senior Vice President, Chief Financial Officer
of Japan Tobacco Inc.
141
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2005
Member of the Board, Senior Vice President,
June 2006
and Chief Financial Officer of Japan Tobacco
Inc.
Member of the Board of Japan Tobacco Inc.,
Executive Vice President and Deputy CEO of
JT International S.A.
June 2011
Representative Director and Executive Vice
President of Japan Tobacco Inc.
June 2014
External Board Director of Recruit Holdings
Co., Ltd.
January 2018 Member of the Board of Japan Tobacco Inc.
March 2018
Outside Director of Asahi Group Holdings, Ltd.
(incumbent)
June 2018
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
June 2019
Outside director of Dai-ichi Life Holdings, Inc.
(incumbent)
Tarisa Watanagase
Member of the Board
(November 30, 1949)
of Directors
(Outside Director)
June 1975
January 1988
Joined the Bank of Thailand
Economist, International Monetary Fund (On
the Secondment)
Deputy Governor of the Bank of Thailand
October 2002
November 2006 Governor of the Bank of Thailand
September 2010 Retired from the Bank of Thailand
March 2013
Outside director of the Siam Cement Public
Akira Yamate
Member of the Board
(November 23, 1952)
of Directors
(Outside Director)
Company Limited (incumbent)
June 2017
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
November 1977 Joined Price, Waterhouse & Co. Japan
March 1983
Registered as Certified Public Accountant in
Japan
July 1991
Representative Partner of Aoyama Audit
Corporation
April 2000
Partner of Price Waterhouse
Representative Partner of Chuo Aoyama Audit
Corporation
Partner of PricewaterhouseCoopers
September 2006 Representative Partner of
PricewaterhouseCoopers Aarata
Resigned from PricewaterhouseCoopers Aarata
External Audit & Supervisory Board member of
Nomura Real Estate Holdings, Inc.
External Audit & Supervisory Board member of
Nomura Real Estate Development, Co., Ltd.
Retired from External Audit & Supervisory
Board member of Nomura Real Estate
Development, Co., Ltd.
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
June 2013
June 2015
142
Name
(Date of Birth)
Position in MUFG
Business Experience
External director of Nomura Real Estate
Holdings, Inc.
External member of Board of Statutory
Auditors, Prudential Holdings of Japan, Inc.
(incumbent)
June 2019
Retired from External director of Nomura Real
Estate Holdings, Inc.
External director of Nomura Real Estate
Development, Co., Ltd. (incumbent)
Tadashi Kuroda
(June 7, 1958)
Member of the Board
of Directors
April 1981
April 2008
June 2011
Joined The Sanwa Bank, Limited
Executive Officer of BK
Senior Managing Executive Officer of
Mitsubishi UFJ Research and Consulting Co.,
Ltd. (MURC)
Director and Senior Managing Executive
Officer of MURC
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Director of TB
Member of the Board of Directors, Managing
Executive Officer of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Corporate Executive of MUFG
Member of the Board of Directors of MUFG
(incumbent)
May 2013
May 2014
June 2014
May 2015
June 2015
May 2018
Junichi Okamoto
Member of the Board
April 1980
Joined The Toyo Trust and Banking Company,
(November 9, 1957)
of Directors
Limited
June 2008
June 2010
June 2012
June 2013
June 2015
June 2017
Executive Officer of TB
Managing Executive Officer of TB
Executive Officer of MUFG
Senior Managing Executive Officer of TB
Director, Deputy President and Executive
Officer of TB
Member of the Board of Directors of MUFG
Senior Managing Corporate Executive of
MUFG
Director of TB
Member of the Board of Directors of MUFG
(incumbent)
Nobuyuki Hirano
Member of the Board
(October 23, 1951)
of Directors
April 1974
June 2001
Joined The Mitsubishi Bank, Limited
Executive Officer of Bank of Tokyo-Mitsubishi,
Chairman
(Corporate
Executive)
July 2004
Executive Officer of Mitsubishi Tokyo
Ltd. (BTM)
Financial Group, Inc. (MTFG)
Managing Executive Officer of BTM
May 2005
143
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2005
Member of the Board of Directors, Managing
Executive Officer of BTM
Member of the Board of Directors of MTFG
January 2006 Member of the Board of Directors, Managing
Executive Officer of BK
October 2008 Member of the Board of Directors, Senior
June 2009
Managing Executive Officer of BK
Member of the Board of Directors, Deputy
President of BK
Managing Executive Officer of MUFG
Member of the Board of Directors of MUFG
June 2010
October 2010 Member of the Board of Directors, Deputy
President of MUFG
President & CEO of BK
Member of the Board of Directors of MUFG
President & CEO of MUFG
Member of the Board of Directors, President &
April 2013
June 2015
April 2012
Group CEO of MUFG
November 2015 Director of Morgan Stanley
April 2016
April 2019
Chairman of BK
Member of the Board of Directors of BK
(incumbent)
Member of the Board of Directors, Chairman of
MUFG (incumbent)
Member of the Board
April 1981
Joined The Mitsubishi Trust and Banking
Mikio Ikegaya
(July 6, 1958)
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
Corporation (MTB)
Executive Officer of TB
Executive Officer of MUFG
Director and Managing Executive Office of TB
Managing Executive Officer of MUFG
Managing Executive Officer of TB
Executive Officer of MUFG
Senior Managing Executive Officer of TB
Director and Senior Managing Executive
Officer of TB
Managing Executive Officer of MUFG
President & CEO of TB (incumbent)
Deputy Chairman of MUFG
Member of the Board of Directors, Deputy
Chairman of MUFG (incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors, Managing
Executive Officer of BK
Member of the Board of Directors of MUFG
June 2008
June 2011
June 2012
June 2013
June 2015
April 2016
June 2016
April 1981
June 2007
May 2009
May 2011
June 2012
144
Saburo Araki
Member of the Board
(August 6, 1957)
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2014
May 2015
June 2015
Managing Executive Officer of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG
May 2016
Member of the Board of Directors, Deputy
April 2018
June 2018
April 1979
June 2005
May 2009
May 2011
June 2011
May 2013
October 2015
May 2016
President of BK
President & CEO of SCHD (incumbent)
President & CEO of MUMSS (incumbent)
Deputy Chairman of MUFG
Member of the Board of Directors, Deputy
Chairman of MUFG (incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BTM
Executive Officer of MTFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors, Managing
Executive Officer of BK
Senior Managing Executive Officer of BK
Executive Chairman of MUAH
Executive Chairman of BK(US)
Deputy President and Executive Officer of BK
Senior Managing Corporate Executive of
MUFG
June 2016
Member of the Board of Directors, Deputy
President of BK
June 2017
President & CEO of BK (incumbent)
Member of the Board of Directors, Deputy
Chairman of MUFG
April 2019
Member of the Board of Directors, President &
Group CEO of MUFG (incumbent)
April 1986
June 2010
May 2014
July 2014
May 2017
June 2017
May 2018
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Deputy CEO of Americas at BK(US)
Managing Corporate Executive of MUFG
Member of the Board of Directors, Managing
Executive Officer of BK
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG
December 2018 Representative of the Board of Directors &
CEO of Global Open Network,
Inc.(incumbent)
April 2019
Deputy President of MUFG
145
Kanetsugu Mike
Member of the Board
(November 4, 1956)
of Directors
President & Group
CEO
(Representative
Corporate
Executive)
Hironori Kamezawa
Member of the Board
(November 18, 1961)
of Directors
Deputy President
(Group Chief
Operational
Officer, or COO &
Group Chief
Digital
Transformation
Officer, or CDTO)
(Representative
Corporate
Executive)
Name
(Date of Birth)
Position in MUFG
Business Experience
Member of the Board of Directors, Deputy
President of BK (incumbent)
Representative of the Board of Directors &
CEO of Global Open Network Japan, Inc.
(incumbent)
June 2019
Member of the Board of Directors, Deputy
President of MUFG (incumbent)
Note: The following abbreviations are used in the table above:
“BK” refers to MUFG Bank, Ltd. or its former name The Bank of Tokyo-Mitsubishi UFJ, Ltd.
“TB” refers to Mitsubishi UFJ Trust and Banking Corporation.
“SCHD” refers to Mitsubishi UFJ Securities Holdings Co., Ltd.
“BK(US)” refers to MUFG Union Bank, N.A.
“MUAH” refers to MUFG Americas Holdings Corporation.
Corporate Executives
The following table sets forth our corporate executives as of July 1, 2019, together with their respective
dates of birth, positions and experience:
Name
(Date of Birth)
Nobuyuki Hirano
(October 23, 1951)
Mikio Ikegaya
(July 6, 1958)
Saburo Araki
(August 6, 1957)
Kanetsugu Mike
(November 4, 1956)
Hironori Kamezawa
(November 18, 1961)
Muneaki Tokunari
(March 6, 1960)
Position in MUFG
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
Senior Managing
Corporate Executive
(Group CFO)
See “Members of the Board of Directors” under this Item 6.A.
Business Experience
See “Members of the Board of Directors” under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
April 1982
June 2009
June 2011
April 2012
June 2012
June 2013
June 2014
June 2015
Joined MTB
Executive Officer of TB
Executive Officer of MUFG
Managing Executive Officer of TB
Managing Director of TB
Member of the Board of Directors of
MUFG
Senior Managing Director of TB
Managing Officer of MUFG
Managing Director of BK
Member of the Board of Directors,
Managing Corporate Executive of
MUFG
May 2016
Senior Managing Director of BK
(incumbent)
146
Name
(Date of Birth)
Position in MUFG
Business Experience
Member of the Board of Directors, Senior
Managing Corporate Executive of
MUFG
June 2018
Senior Managing Corporate Executive of
MUFG (incumbent)
Masamichi Yasuda
Senior Managing
(August 22, 1960)
Corporate Executive
April 1983
June 2009
Joined The Bank of Tokyo, Ltd
Executive Officer of BK, seconded to
(Group Head, Global
Markets Business
Group)
May 2011
May 2014
May 2015
June 2015
May 2017
Union Bank
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors,
Managing Executive Officer of BK
Member of the Board of Directors of
SCHD
Member of the Board of Directors,
Managing Corporate Executive of
MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Corporate Executive of
MUFG
June 2018
Senior Managing Corporate Executive of
April 2019
Senior Managing Executive Officer of
MUFG (incumbent)
Kenji Yabuta
(April 27, 1960)
Senior Managing
Corporate Executive
(Group Head, Japanese
Corporate &
Investment Banking
Business Group
Head of Research &
Advisory Unit)
April 1983
June 2009
May 2013
May 2017
April 2018
May 2018
June 2018
Naoki Hori
(January 27, 1961)
Senior Managing
Corporate Executive
(Group Head, Retail &
April 1983
June 2010
Commercial
Banking Business
Group)
May 2013
May 2016
June 2016
June 2017
May 2018
147
SCHD (incumbent)
Member of the Board of Directors, Deputy
President of MUMSS (incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Senior Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
Deputy President of BK
Member of the Board of Directors, Deputy
President of BK (incumbent)
Joined The Sanwa Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors,
Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
Name
(Date of Birth)
Masato Miyachi
(June 14, 1960)
Position in MUFG
Business Experience
April 2019
Member of the Board of Directors, Deputy
President of BK (incumbent)
Senior Managing
Corporate Executive
(Group Head, Global
Corporate &
Investment Banking
Business Group)
April 1984
June 2010
May 2014
October 2014
May 2017
May 2018
June 2018
July 2018
Joined The Bank of Tokyo, Ltd.
Executive Officer of BK
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Chairman of MUAH (incumbent)
Chairman of BK(US) (incumbent)
Senior Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
April 2019
Member of the Board of Directors, Deputy
President of BK (incumbent)
Sunao Yokokawa
Senior Managing
(December 10, 1963)
Corporate Executive
(Group Head, Asset
Management &
Investor Services
Business)
Takayoshi Futae
Senior Managing
(January 16, 1961)
Corporate Executive
(Group Head, Global
Commercial
Banking Business
Group
Group Chief
Operational Officer,
or Group COO-I)
April 1986
June 2012
May 2014
June 2015
June 2017
April 2019
April 1983
June 2010
May 2014
May 2016
May 2017
April 2019
June 2019
Joined MTB
Executive Officer of TB
Executive Officer of MUFG
Managing Executive Officer of TB
Director and Managing Executive Officer
of TB
Managing Corporate Executive of MUFG
Director and Senior Managing Executive
Officer of TB (incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
Joined The Sanwa Bank, Limited
Executive Officer of The Bank of BK
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Senior Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG
Senior Managing Executive Officer of
SCHD (incumbent)
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(incumbent)
Iwao Nagashima
Senior Managing
April 1985
Joined The Mitsubishi Trust and Banking
(March 15, 1963)
Corporate Executive
(Group Chief Human
Resource Officer, or
Group CHRO
Group Deputy Chief
June 2011
June 2013
June 2015
Corporation
Executive Officer of TB
Managing Executive Officer of TB
Executive Officer of MUFG
Director and Managing Executive Officer
of TB
Digital
Transformation
Officer, or Group
Deputy CDTO)
June 2016
Managing Executive Officer of TB
Director and Senior Managing Executive
Officer of TB
148
Name
(Date of Birth)
Position in MUFG
Business Experience
April 2019
Director, Deputy President, and Executive
Officer of TB (incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
President & CEO of MU Trust Apple
Planning Company, Ltd. (incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
(incumbent)
April 1987
June 2013
January 2017
May 2018
June 2018
Member of the Board of Directors,
Managing Executive Officer of BK
(incumbent)
Member of the Board of Directors of
SCHD (incumbent)
Naomi Hayashi
(March 16, 1965)
Managing Corporate
Executive
(Group CSO
in charge of Corporate
Planning Division
(excluding Budget &
Resources
Management and
Global Business),
Corporate
Administration
Division and
sub-charge of
Digital
Transformation
Division)
Junichi Hanzawa
Managing Corporate
(January 19, 1965)
Executive
(Group Chief
April 1988
June 2014
Compliance Officer,
or Group CCO)
May 2018
April 2019
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
(incumbent)
June 2019
Member of the Board of Directors,
Hiroki Kameda
(May 17, 1965)
Managing Corporate
Executive
(Group Chief
Information Officer,
or CIO
Group Chief
Information Security
Officer, or CISO)
April 1988
June 2014
June 2018
April 2019
Managing Executive Officer of BK
(incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
President & CEO of Mitsubishi UFJ
Information Technology, Ltd.
(incumbent)
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
(incumbent)
June 2019
Member of the Board of Directors,
Managing Executive Officer of BK
(incumbent)
149
Name
(Date of Birth)
Ritsuo Ogura
Position in MUFG
Managing Corporate
(January 21, 1964)
Executive
(Group Chief Audit
Officer, or CAO)
Managing Director,
Head of Internal
Audit Division
Managing Corporate
Executive
(Group Chief Risk
Officer, or CRO)
Masahiro Kuwahara
(November 11,
1962)
April 1986
June 2012
May 2016
May 2017
April 2019
April 1986
June 2012
May 2016
May 2019
Business Experience
Joined The Sanwa Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Managing Corporate Executive of MUFG
(incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Managing Corporate Executive of MUFG
(incumbent)
June 2019
Member of the Board of Directors,
Managing Executive Officer of BK
(incumbent)
Hiroshi Mori
Managing Corporate
April 1993
Seconded to Finance Bureau of Ministry of
(February 21,1965)
Executive
Home Affairs
(Group Chief Legal
Officer, or CLO)
June 2003
Seconded to Tesac Corporation, a
Company under reorganization Trustee
representative, Manager of Corporate
Planning Department
October 2006
November 2010
January 2012
June 2013
Registered as attorney at law
Joined Nishimura & Asahi
Outside Director, USEN Corporation
Partner at Nishimura & Asahi
Substitute Auditor of KAGOME CO.,
LTD.
March 2016
Outside Director, Audit & Supervisory
Committee Member of KAGOME CO.,
LTD. (incumbent)
June 2016
Outside Director, Audit & Supervisory
June 2019
Committee Member of SCHD
Member of the Board of Directors,
Managing Executive Officer of
BK(incumbent)
Managing Corporate Executive of MUFG
(incumbent)
Note: The following abbreviations are used in the table above:
“BK” refers to MUFG Bank, Ltd. or its former name The Bank of Tokyo-Mitsubishi UFJ, Ltd.
“TB” refers to Mitsubishi UFJ Trust and Banking Corporation.
“SCHD” refers to Mitsubishi UFJ Securities Holdings Co., Ltd.
“BK(US)” refers to MUFG Union Bank, N.A.
“MUAH” refers to MUFG Americas Holdings Corporation.
The board of directors and corporate executives may be contacted through our headquarters at Mitsubishi
UFJ Financial Group, Inc., 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan.
No family relationship exists among any of our directors or corporate executives.
150
B. Compensation
The aggregate amount of compensation paid, including benefits in kind granted and any contingent and
deferred compensation, by MUFG and its subsidiaries during the fiscal year ended March 31, 2019 to our
directors (excluding outside directors), to corporate executives and to outside directors, was ¥158 million,
¥2,006 million and ¥203 million, respectively.
The compensation paid by MUFG and its subsidiaries during the fiscal year ended March 31, 2019 to our
directors and corporate executives consisted of annual base salaries, performance-based stock compensation,
bonuses and other benefits. MUFG’s compensation committee determines the compensation paid to our directors
and corporate executives.
The following table sets forth details of the aggregate compensation paid by MUFG and its subsidiaries
during the fiscal year ended March 31, 2019 to our directors (excluding outside directors) and corporate
executives:
Non-Adjustable Compensation
Adjustable Compensation
Number of
Directors and
Corporate
Executives(1)
Aggregate
Compensation
Annual
Base
Salary
Performance-
based Stock
Compensation
24 . . . . . . . . .
¥2,164
¥1,209
¥322
Cash Bonuses
(in millions)
¥393
Performance-
based Stock
Compensation
Retirement
Allowances(2) Other
¥240
—
¥0
Notes:
(1)
Includes the current directors and corporate executives as well as those who retired during the fiscal year ended March 31, 2019 but
excludes the outside directors.
(2) Represents the aggregate amount of retirement allowances paid in cash during the fiscal year ended March 31, 2019, pursuant to a
one-time shareholders’ approval in June 2007 for the retirement allowances to be paid to the directors and corporate auditors who were
elected prior to that date at the time of their retirement. A reserve in the total amount of such retirement allowances was set aside as of
September 30, 2007. For more information, see “—Retirement Allowances” below.
151
The following table sets forth the details of individual compensation paid, including benefits in kind granted
but excluding retirement allowances paid, by MUFG and its subsidiaries in an amount equal to or exceeding
¥100 million during the fiscal year ended March 31, 2019:
Directors
Aggregate
amount
Paid by
Compensation paid
Annual
Base
Salary
Performance-
based Stock
Compensation
Bonus
Kiyoshi Sono . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥152 MUFG
Mikio Ikegaya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥169 MUFG
BK
TB
Kanetsugu Mike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥181 MUFG
Saburo Araki
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK
¥131 MUFG
SCHD
MUMSS
BK
Nobuyuki Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥174 MUFG
Eiichi Yoshikawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenji Yabuta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK
¥106 MUFG
BK
SCHD
¥119 MUFG
BK
Hironori Kamezawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥116 MUFG
BK
Note: The following abbreviations are used in the table above:
“BK” refers to MUFG Bank, Ltd. (or its former name The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
“TB” refers to Mitsubishi UFJ Trust and Banking Corporation. .
“SCHD” refers to Mitsubishi UFJ Securities Holdings Co., Ltd.
“MUMSS” refers to Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
(in millions)
¥48
33
¥35
35
¥50
33
¥25
13
12
—
¥50
33
¥34
21
9
¥38
25
¥32
22
¥24
25
¥19
25
¥27
25
¥18
7
7
1
¥30
29
¥14
11
3
¥14
26
¥12
35
¥14
8
¥27
28
¥28
18
¥28
10
10
0
¥20
12
¥ 8
4
2
¥10
6
¥ 9
6
Annual Base Salary
Annual base salaries were paid to our directors (including outside directors) and corporate executives in the
form of monthly cash installment payments. The aggregate annual base salary paid to our directors (excluding
outside directors) and corporate executives for the fiscal year ended March 31, 2019 was ¥1,209 million. The
aggregate annual base salary paid to our outside directors for the same period was ¥203 million.
Performance-based Stock Compensation Plans
Under our performance-based stock compensation plans, qualified directors (excluding outside directors and
directors serving as audit committee members), corporate executives and others of MUFG and its major domestic
subsidiaries are assigned, on a monthly basis, (1) points based on their job responsibilities, or non-adjustable
points, and (2) additional points based on their job responsibilities which are adjusted at the end of each fiscal
year and at the end of each plan period to reflect the extent to which a financial performance target determined by
the compensation committee is attained, or adjustable points. Each plan period corresponds to the period covered
by the three-year medium-term business plan of MUFG. Each accumulated point represents a right to receive one
share of MUFG common stock from a trust established in Japan to administer the plan grants as determined by
the compensation committee.
152
The right to receive shares of MUFG common stock in exchange for non-adjustable points becomes vested
and nonforfeitable, and the shares are delivered, upon the grantee’s departure from his or her job responsibilities
based on which the right was granted. The right to receive shares of MUFG common stock in exchange for
adjustable points becomes vested and nonforfeitable, and the shares are delivered, at the end of each plan period.
The vesting in either case is subject to conditions imposed by the compensation committee, including
non-engagement in misconduct. A portion of the shares subject to a grantee’s vested right may be delivered in
cash.
The grantees are entitled to “dividend equivalent credits” on their granted but unvested rights under the plan
when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the grantees would have
received on the shares had the shares been issued to the grantees in exchange for their granted but unvested rights
under the plan, less expenses relating to the administration of the plan. Accumulated dividend equivalents are
paid to grantees at the time of the delivery of the shares.
The shares to be delivered to grantees are purchased on the open market by the trustee of the trust pursuant
to a trust agreement among MUFG, the trustee and the independent caretaker of the trust. Each plan is funded in
cash up to a maximum aggregate amount determined by our compensation committee.
The initial performance-based stock compensation plan commenced on July 1, 2016. The grants under the
plan were tied to MUFG’s previous medium-term business plan for the three-year period ended March 31, 2018.
The trust for the plan was funded with ¥9.8 billion in cash, and 18,785,400 shares of MUFG common stock were
purchased by the trustee of the plan trust in May 2016. The plan was adopted after our compensation committee
decided in May 2016 to cease to provide any additional stock acquisition rights under our previous stock-based
compensation structure and to introduce the performance-based stock compensation plan.
The second performance-based stock compensation plan commenced on December 1, 2016. The trust for
the plan was funded with 8.8 billion in cash, and an aggregate of 13,004,300 shares of MUFG common stock
were purchased by the trustee of the plan trust in November 2016 and May 2017. The plan was adopted to
replace the outstanding stock acquisition rights under our previous stock-based compensation structure. Upon the
adoption of the plan, the stock acquisition rights that had been allotted to grantees but remained unexercised
under the then-outstanding stock-based compensation plans were exchanged for points under the performance-
based stock compensation plan, and the rights to receive shares of MUFG common stock represented by these
points were vested.
On May 15, 2018, the compensation committee approved new grants under the initial performance-based
stock compensation plan, which was amended in connection with the launch of MUFG’s current medium-term
business plan for the three-year period ending March 31, 2021. The trust period of the plan trust was extended
until August 31, 2021, and the maximum amount of funds to be contributed to the plan trust was reset at
¥26.3 billion. The formula for determining adjustable points under the plan was also revised. In May 2018, the
plan trust was funded with ¥9.6 billion in cash, and 13,049,600 shares of MUFG common stock were purchased
by the trustee of the plan trust.
For more information on the Performance-based Stock Compensation Plans, see Note 33 to our consolidated
financial statements included elsewhere in this Annual Report. See also “Item 16E. Purchases of Equity
Securities by the Issuer and Affiliated Purchasers.”
Stock-based Compensation Plans
We previously issued stock acquisition rights to further motivate our directors (excluding outside directors)
and certain of our officers to contribute to the improvement of our stock prices and profits. The number of stock
acquisition rights granted to each director and officer was determined by comprehensively taking into account
each grantee’s seniority of the position held at MUFG or its subsidiaries, experience and contribution to our
153
performance throughout the period of the grantee’s service. On June 27, 2013, our shareholders approved
modifications to the previous shareholder authorization for granting stock acquisition rights to our directors,
corporate auditors and certain of our officers so that no outside directors or corporate auditors (including outside
corporate auditors) would be eligible for any stock-based compensation plan adopted by the board of directors on
or after that date.
In June 2015, our previous governance framework with the board of directors and a separate board of
corporate auditors was replaced with our current governance framework with the board of directors and board
committees. Under our previous governance framework, the maximum aggregate amount of each type of
compensation for our directors and corporate auditors was approved at a general meeting of our shareholders.
The amount and allocation of compensation for each director were then proposed to, and voted upon by, the
board of directors. The amount and allocation of compensation for each corporate auditor were determined
through discussions and agreement among the corporate auditors. The nomination and compensation committee
deliberated and made proposals to the board of directors regarding matters relating to, among other things, the
compensation of our directors. For information regarding our governance framework, see “—C. Board
Practices.”
As part of our compensation structure, on June 29, 2010, the board of directors adopted another stock-based
compensation plan entitled “Fourth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on
July 16, 2010, we allotted an aggregate of 8,014 stock acquisition rights to our directors and an aggregate of
1,149 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 15, 2040, but only after the date on which a grantee’s service as a director and an officer or as a
corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock
acquisition right was ¥36,600.
As part of our compensation structure, on June 29, 2011, the board of directors adopted another stock-based
compensation plan entitled “Fifth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on
July 20, 2011, we allotted an aggregate of 7,740 stock acquisition rights to our directors and an aggregate of
1,160 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 19, 2041, but only after the date on which a grantee’s service as a director and an officer or as a
corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock
acquisition right was ¥33,700.
As part of our compensation structure, on June 28, 2012, the board of directors adopted another stock-based
compensation plan entitled “Sixth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on
July 18, 2012, we allotted an aggregate of 10,002 stock acquisition rights to our directors and an aggregate of
1,161 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 17, 2042, but only after the date on which a grantee’s service as a director and an officer or as a
corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock
acquisition right was ¥33,100.
As part of our compensation structure, on June 27, 2013, the board of directors adopted a stock-based
compensation plan entitled “Seventh Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group,
154
Inc.” for our directors (excluding outside directors) and certain of our officers. Under the stock-based
compensation plan, on July 17, 2013, we allotted an aggregate of 4,103 stock acquisition rights to our directors
(excluding outside directors) for their respective services to MUFG and its subsidiaries. Each stock acquisition
right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The
stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 16, 2043,
but only after the date on which a grantee’s service as a director and an officer of each of MUFG and the relevant
subsidiaries terminates. The fair value of each stock acquisition right was ¥61,100.
For more information on the Performance-based Stock Compensation Plans, see Note 33 to our consolidated
financial statements included elsewhere in this Annual Report.
Bonuses
We from time to time pay cash bonuses to our directors and corporate executives to further motivate them to
contribute to the improvement of our stock prices and profits if such bonuses are deemed appropriate based on a
balanced scorecard approach taking into account the results of operations of the MUFG Group and each
director’s or corporate executive’s individual performance of his or her duties as a director or corporate executive
in light of both quantitative and qualitative criteria, including our medium-term strategy for improving our
corporate value. None of the outside directors is eligible to receive a cash bonus. The compensation committee
determines the cash bonus for each director and corporate executive based on our financial results and his or her
job performance for the preceding fiscal year as well as his or her seniority and experience. The aggregate cash
bonus paid to our directors and corporate executives for the fiscal year ended March 31, 2019 was ¥393 million.
Retirement Allowances
Prior to June 28, 2007, in accordance with customary Japanese practice, when a director or corporate auditor
retired, a proposal to pay a retirement allowance was submitted at the annual ordinary general meeting of
shareholders for approval. The retirement allowance consisted of a one-time payment of a portion of the
allowance paid at the time of retirement and periodic payments of the remaining amount for a prescribed number
of years. After the shareholders’ approval was obtained, the retirement allowance for a director or corporate
auditor was fixed by the board of directors or by consultation among the corporate auditors in accordance with
our internal regulations and practice and generally reflected the position of the director or corporate auditor at the
time of retirement, the length of his service as a director or corporate auditor and his contribution to our
performance. Historically, MUFG did not set aside reserves for any retirement payments for directors and
corporate auditors made under this practice.
Pursuant to a one-time shareholders’ approval in June 2007, retirement allowances are paid in cash to the
directors and corporate auditors who were elected prior to that date at the time of their retirement. A reserve in
the total amount of such retirement allowances was set aside as of September 30, 2007. No retirement allowance
was paid by MUFG and its subsidiaries pursuant to the one-time shareholder approval during the fiscal year
ended March 31, 2019 to our directors (excluding outside directors), to corporate auditors (excluding outside
corporate auditors) and to outside directors and corporate auditors, who have retired from their respective
positions held at MUFG or, if such directors and corporate auditors concurrently held positions at MUFG’s
subsidiaries, who have retired from such positions.
MUFG Americas Holdings Corporation Stock Bonus Plan
Upon the integration of the U.S. branch banking operations of MUFG Bank with MUFG Union Bank’s
operations on July 1, 2014, MUFG Americas Holdings assumed the obligations under the Bank of Tokyo-
Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock Bonus Plan described below. Effective June 8, 2015,
MUFG Americas Holdings amended and restated this plan as the MUFG Americas Holdings Corporation Stock
Bonus Plan.
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Under the amended plan, qualified key employees of MUFG Americas Holdings are granted Restricted
Share Units, or RSUs, representing a right to receive American Depositary Receipts, or ADRs, evidencing ADSs,
each exchangeable for one share of MUFG common stock, from an independent trust established to administer
the plan grants, upon the satisfaction of vesting conditions, to be determined pursuant to the plan as well as a
Restricted Share Unit Agreement between MUFG Americas Holdings and the grantees.
Unless otherwise provided in the relevant Restricted Share Unit Agreement, RSUs become vested and
nonforfeitable as follows: one-third (33 1/3%) of a grantee’s RSUs vests on each one year anniversary of the date
of the grant such that all of the RSUs become fully vested after three years from the grant date so long as the
grantee satisfies the specified continuous service requirements and any other conditions under the applicable plan
documents, subject to certain clawback and notice period provisions.
Under the plan, the grantees are entitled to “dividend equivalent credits” on their granted but unvested RSUs
when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the grantees would have
received on the shares had the shares been issued to the grantees in exchange for their granted but unvested
RSUs. Accumulated dividend equivalents are paid to grantees in whole shares on an annual basis. Any fractional
share will be paid to the participants in cash.
Grants made under the plan are not entitled to any dividend rights, voting rights, or other stockholder rights
unless and until RSUs are vested and ADSs are delivered to grantees.
The ADSs to be delivered to grantees will be purchased on the open market by the trustee of the
independent trust pursuant to a trust agreement between MUFG Americas Holdings and the trustee. As of
June 30, 2019, 82,804,285 RSUs have been granted under the plan, of which 37,372,404 RSUs were outstanding
as of June 30, 2019.
For more information on the plan, see Note 33 to our consolidated financial statements included elsewhere
in this Annual Report. See also “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers.”
Share Ownership
As of July 1, 2019, our directors and corporate executives held the following numbers of shares of our
common stock:
Directors
Number of Shares
Registered
Mariko Fujii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kaoru Kato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Haruka Matsuyama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toby S. Myerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hirofumi Nomoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tsutomu Okuda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yasushi Shingai
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tarisa Watanagase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Akira Yamate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tadashi Kuroda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junichi Okamoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
3,300
368*
25,000
26,100
—
—
—
124,600
182,800
156
Corporate Executives
Nobuyuki Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mikio Ikegaya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saburo Araki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kanetsugu Mike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hironori Kamezawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Muneaki Tokunari
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masamichi Yasuda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenji Yabuta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naoki Hori
Masato Miyachi
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunao Yokokawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takayoshi Futae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Iwao Nagashima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naomi Hayashi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junichi Hanzawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hiroki Kameda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ritsuo Ogura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masahiro Kuwahara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hiroshi Mori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*
Held in the form of ADRs.
Number of Shares
Registered
80,400
75,630
210,980
49,055
25,500
254,900
35,800
38,000
41,800
6,800
21,800
8,730
81,000
1,210
39,900
40,600
16,400
18,700
—
None of the shares of our common stock held by our directors and corporate executives have voting rights
that are different from shares of our common stock held by any other shareholder.
For information on the performance-based stock compensation and stock-based compensation plans for our
directors and corporate executives, see “—Performance-based Stock Compensation Plans” and “—Stock-based
Compensation Plans.”
C. Board Practices
Our articles of incorporation provide for a board of directors with statutorily mandated nominating and
governance committee, audit committee and compensation committee, each consisting of members of the board
of directors. We have also elected, though not statutorily mandated under the Companies Act of Japan, to
establish a risk committee consisting of directors and outside professionals. In May 2016, we established a
U.S. risk committee pursuant to the U.S. enhanced prudential standards for foreign banking organizations. Our
corporate executives are responsible for executing and managing our business operations based on a delegation
of authority by the board of directors, and our directors set our key management policies and oversee the
execution of duties by these corporate executives.
In June 2015, our shareholders approved an amendment to our articles of incorporation to adopt our current
governance framework with a board of directors and board committees. We previously had a governance
framework with a board of directors and a board of corporate auditors. The Companies Act permits three types of
governance system for large companies such as MUFG: (1) a company with a nominating committee, an audit
committee and a compensation committee, (2) a company with a board of corporate auditors, and (3) a company
with an audit and supervisory committee. Our previous governance framework was based on the second system,
and our newly adopted governance system is based on the first system.
With respect to companies adopting the first system, including MUFG, each of the nominating, audit and
compensation committees must consist of members of the board of directors, and the majority of each committee
must be outside directors as defined by the Companies Act. In addition, the board of directors must appoint
corporate executives (shikkoyaku) to execute and manage the business operations of the company under the
157
authority delegated by the board of directors. Based on this system, our current governance framework is
designed to facilitate more flexible and swifter decision-making and increase transparency in our management
processes.
An “outside director” is defined by the Companies Act as a person who meets all of the following
conditions:
‰
‰
‰
‰
‰
the person is not currently, and has not been in the ten years prior to his or her assumption of office as
outside director, an executive director, who is a director concurrently performing an executive role
(gyomu shikko torishimariyaku), a corporate executive, a manager (shihainin), or any other type of
employee of the company or any of its subsidiaries;
if the person has been a non-executive director, a corporate auditor, or an accounting adviser (kaikei
sanyo) of the company or any of its subsidiaries within the ten years prior to his or her assumption of
office as outside director, the person was not an executive director, a corporate executive, a manager or
any other type of employee of the company or any of its subsidiary in the ten years prior to his or her
assumption of office as such;
the person is not a director, a corporate executive officer, a manager or any other type of employee of
the company’s parent company, or a person who controls the company;
the person is not an executive director, a corporate executive officer, a manager or any other type of
employee of another subsidiary of the company’s parent company; and
the person is not the spouse or a family member within the second degree of kinship of a director, a
corporate executive, a manager, or any other type of important employee of the company or a person
who controls the company.
Board of Directors
Our board of directors consists of directors who are elected at a general meeting of shareholders. Under our
articles of incorporation, the number of directors may not exceed 20. We currently have 16 directors, nine of
whom are outside directors and two of whom are internal non-executive directors.
The regular term of office of a director is one year from the date of election, and directors may serve their
terms until the close of the annual general meeting of shareholders held for the following year after their election.
Directors may serve any number of consecutive terms.
Under the Companies Act, the board of directors has the authority to determine our basic management
policy, make decisions on the execution and management of our business operations, and oversee the execution
by the corporate executives of their duties. The board of directors may delegate, to the extent permitted by the
Companies Act, the authority to make decisions on the execution and management of our business operations.
Our board of directors has delegated most of this authority to the corporate executives.
The board of directors elects the Chairman and the Deputy Chairman from among its members and appoints
key management members based on recommendations submitted to it by the nominating committee.
Under the Companies Act, a resolution of the board of directors is required if any director wishes to engage
in any business that is in competition with us or any transaction with us. Additionally, no director may vote on a
proposal, arrangement or contract in which that director is deemed to be particularly interested.
Neither the Companies Act nor our articles of incorporation contain special provisions as to the borrowing
power exercisable by a director, the retirement age of our directors, or a requirement of our directors to hold any
shares of our capital stock.
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Under the Companies Act and our articles of incorporation, we may exempt, by resolution of the board of
directors, our directors from liabilities to MUFG arising in connection with their failure to execute their duties in
good faith and without gross negligence within the limits stipulated by applicable laws and regulations. In
addition, we have entered into a liability limitation agreement with each outside director and non-executive
director which limits the maximum amount of their liability to MUFG arising in connection with a failure to
execute their duties in good faith and without gross negligence to the greater of either ¥10 million or the
aggregate sum of the amounts prescribed in Paragraph 1 of Article 425 of the Companies Act and Articles 113
and 114 of the Companies Act Enforcement Regulations.
None of our directors is party to a service contract with MUFG or any of its subsidiaries that provides for
benefits upon end of their director term.
Nominating Committee
Our nominating committee, which we call the nominating and governance committee, determines the
contents of proposals regarding the election and removal of director candidates to be submitted to general
meetings of shareholders. The committee also considers and makes recommendations to the board of directors
regarding the appointment and removal of the Chairman and the Deputy Chairman of the board of directors and
the President & Group CEO of MUFG as well as the chairman and the deputy chairman of the board of directors,
the president and others of each of our major subsidiaries. In addition, the committee discusses and makes
recommendations to the board of directors on matters pertaining to our governance policy and framework.
Under the Companies Act, the nominating committee must consist of at least three directors, and the
majority of its members must be outside directors. Our nominating and governance committee currently consists
of five directors. The chairman of the committee is Tsutomu Okuda, an outside director. The other members of
this committee are Mariko Fujii, Haruka Matsuyama and Hirofumi Nomoto, who are outside directors, and
Kanetsugu Mike, Director, President & Group CEO. Between April 2018 and March 2019, the nominating and
governance committee met 13 times.
Audit Committee
The audit committee determines the contents of proposals pertaining to the election, termination and
non-appointment of our independent auditor to be submitted to general meetings of shareholders. The committee
also monitors and audits the execution by the directors and the corporate executives of their duties and prepares
audit reports to the board of directors. In order to effectively perform its duties, the committee reviews, inspects
and investigates, as necessary, the management of the operations of MUFG and its subsidiaries, including
financial reporting and internal controls. In addition, the committee has the power to consent to decisions on the
compensation to be paid to our independent auditor.
Under the Companies Act, the audit committee must consist of at least three non-executive directors, and
the majority of its members must be outside directors. Our committee currently has five members. The chairman
of the committee is Akira Yamate, an outside director. The other members of the committee are Kaoru Kato and
Yasushi Shingai, who are outside directors, and Tadashi Kuroda and Junichi Okamoto, who are non-executive
directors. Between April 2018 and March 2019, the audit committee met 17 times.
On May 24, 2019, we became aware that a member of our audit committee did not meet the independence
standard for audit committee members set forth in Rule 10A-3(b)(1) of the U.S. Securities Exchange Act of 1934
as a result of a ¥195,580 payment that such committee member received from Mitsubishi UFJ Research and
Consulting Co., Ltd., our consolidated subsidiary, in connection with a one-time speaking engagement held on
December 6, 2018. We promptly notified the NYSE of this matter. On June 6, 2019, the committee member
returned the payment to the subsidiary. Based on subsequent discussions between us and the NYSE, in light of
the fact that the violation was inadvertent and the committee member returned the payment to the subsidiary, the
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NYSE has indicated that it does not intend to take any further action relating to this matter. Since June 6, 2019,
the committee member has satisfied the independence standard for audit committee members set forth in
Rule 10A-3(b)(1) of the U.S. Securities Exchange Act of 1934.
Compensation Committee
The compensation committee establishes our policy regarding the determination of the compensation of
MUFG’s directors, corporate executives, executive officers (shikko yakuin) and others and also determines the
details of individual compensation based on the policy. The committee discusses and makes recommendations to
the board of directors regarding the establishment, revision and abolition of compensation systems for the
chairman, the deputy chairman, the president and others of each of our major subsidiaries.
Under the Companies Act, the compensation committee must consist of at least three directors, and the
majority of its members must be outside directors. Our compensation committee currently consist of five
directors. The chairman of the committee is Haruka Matsuyama, an outside director. The other members of this
committee are Mariko Fujii, Hirofumi Nomoto and Tsutomu Okuda, who are outside directors, and Kanetsugu
Mike, Director, President & Group CEO. Between April 2018 and March 2019, the compensation committee met
7 times.
Risk Committee
In addition to the foregoing three committees, which are mandated by the Companies Act, we have a risk
committee, which was initially established under our previous governance framework and which we continue to
have under our current governance framework on a voluntary basis. The risk committee deliberates and makes
recommendations to the board of directors on matters regarding group-wide risk management as well as top risk
matters.
MUFG Corporate Governance Policies provide that the committee shall consist of directors and outside
professionals. Outside professionals are professionals with no prior employment relationship with any of the
MUFG group companies. The committee currently has seven members. The chairperson of the committee is
Mariko Fujii, an outside director. The other members of this committee are Toby S. Myerson, Yasushi Shingai
and Tarisa Watanagase, who are outside directors, Naomi Hayashi, Managing Corporate Executive and Group
CSO, and Kenzo Yamamoto and Naoko Nemoto, who are external experts. Between April 2018 and March 2019,
the risk committee met four times.
U.S. Risk Committee
The U.S. risk committee oversees the risk management function for our combined U.S. operations. Its
oversight role includes, but is not limited to, all roles and responsibilities required under the FRB’s final rules for
Enhanced Prudential Standards for foreign banking organizations. The committee monitors liquidity and all other
types of risk exposures, reviews the risk management policies and procedures, and oversees compliance with
such policies and procedures for our combined U.S. operations. The committee is a subcommittee of the board of
directors of MUFG, and reports and makes recommendations to MUFG’s board of directors and MUFG’s risk
committee.
The members of the U.S. risk committee are appointed by MUFG’s board of directors after consideration of
member candidates reviewed and recommended by MUFG’s risk committee and nominating and governance
committee. The committee shall consist of members of the MUFG Americas Holdings Risk Committee,
delegates from MUFG, the Chairman of the MUFG Americas Holdings Board and MUFG Americas Holdings’
CEO, with the chairperson of the committee being an outside director of MUFG Americas Holdings. The
committee currently has eight members. The chairperson of the committee is Ann F. Jaedicke, an outside director
of MUFG Americas Holdings. The other members of this committee are Dean A. Yoost, Suneel Kamlani, Toby
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Myerson and Roberta Bienfait, who are outside directors of MUFG Americas Holdings, Masato Miyachi, the
Chairman of the MUFG Americas Holdings Board, Masahiro Kuwahara, Managing Corporate Executive and
Group CRO of MUFG and Stephen Cummings, MUFG Americas Holdings’ CEO.
Corporate Executives
Our corporate executives are responsible for executing and managing our business operations within the
scope of the authority delegated to them by the board of directors.
Under the Companies Act, at least one corporate executive must be appointed by a resolution of the board of
directors. We currently have 19 corporate executives. Under our articles of incorporation, the board of directors
shall appoint a president and a deputy president, who, as representative corporate executives, may represent us
severally. The term of office of each corporate executive expires at the conclusion of the first meeting of the
board of directors convened after the ordinary general meeting of shareholders for the last fiscal year that ends
within one year following the corporate executive’s assumption of office.
Under the Companies Act, a resolution of the board of directors is required if any corporate executive
wishes to engage in any business that is in competition with us or any transaction with us.
Under the Companies Act and our articles of incorporation, we may exempt, by resolution of the board of
directors, our corporate executives from liabilities to MUFG arising in connection with their failure to execute
their duties in good faith and without gross negligence within the limits stipulated by applicable laws and
regulations. We, however, currently have no such arrangements with any of our corporate executives.
161
D. Employees
As of March 31, 2019, we had approximately 112,700 employees, an increase of approximately 1,600
employees compared with the number of employees as of March 31, 2018. In addition, as of March 31, 2019, we
had approximately 32,000 part-time and temporary employees. The following tables show the percentages of our
employees across our different business units and in different locations as of March 31, 2019:
Business unit
MUFG Bank:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail & Commercial Banking Business Unit
Japanese Corporate & Investment Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Corporate & Investment Banking Business Unit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Commercial Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Center/Corporate Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20%
3
2
31
1
20
Mitsubishi UFJ Trust and Banking:
Trust-Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Securities Holdings:
Sales Marketing Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Investment Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Center and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS:
Business Marketing Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit Risk Management & Risk Assets Administration Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operations Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systems Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
4
1
1
2
3
1
0
1
2
1
1
0
0
0
2
100%
162
Location
MUFG Bank:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30%
12
2
33
1
Mitsubishi UFJ Trust and Banking:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Securities Holdings:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
1
1
0
5
0
1
0
3
0
0
0
2
100%
Most of our employees are members of an employees’ union, which negotiates on behalf of employees in
relation to remuneration and working conditions. We believe our labor relations to be good.
E. Share Ownership
The information required by this item is set forth in “—B. Compensation.”
Item 7. Major Shareholders and Related Party Transactions.
A. Major Shareholders
Common Stock
As of March 31, 2019, we had 695,521 registered shareholders of our common stock. The ten largest
holders of our common stock appearing on the register of shareholders as of March 31, 2019, and the number and
the percentage of such shares held by each of them, were as follows:
Name
Number of shares
held
Percentage of
total shares in issue(3)
The Master Trust Bank of Japan, Ltd. (Trust account)(1) . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account)(1)
SSBTC CLIENT OMNIBUS ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 5)(1) . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 9)(1) . . . . . . . . . . . . . . . . .
Government of Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JP Morgan Chace Bank 385151 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State Street Bank West Client-Treaty 505234 . . . . . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 1)(1) . . . . . . . . . . . . . . . . .
. . . .
The Bank of New York Mellon as Depositary Bank for DR Holders(2)
738,305,200
679,609,600
338,906,515
266,418,200
205,451,700
194,590,625
193,449,305
189,409,851
177,577,500
175,825,882
5.40%
4.97
2.47
1.94
1.50
1.42
1.41
1.38
1.29
1.28
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,159,544,378
23.11%
163
Includes the shares held in trust accounts, which do not disclose the names of beneficiaries.
Notes:
(1)
(2) An owner of record for our ADSs.
(3) Numbers are truncated after two decimal points.
(4) According to a beneficial ownership report on Schedule 13G filed with the SEC by BlackRock Inc. on February 6, 2019, BlackRock and
its consolidated subsidiaries beneficially owned an aggregate of 5.6% of the outstanding shares of our common stock as of December 31,
2018. Other than as described in the table above, we have not independently confirmed this beneficial ownership information.
As of March 31, 2019, 1,806,395 shares, representing approximately 0.01% of our outstanding common
stock, were held by our directors and corporate executives.
As of March 31, 2019, 1,893,888,527 shares, representing 13.85% of our outstanding common stock, were
owned by 408 U.S. shareholders of record who are resident in the United States, one of whom is the ADR
depository’s nominee holding 175,825,882 shares, or 1.28%, of our total issued shares of common stock.
Our major shareholders do not have different voting rights.
B. Related Party Transactions
As of March 31, 2019, we held approximately 24.0% of the voting rights in Morgan Stanley and Series C
Preferred Stock with a face value of approximately $521.4 million and 10% dividend. We also have two
representatives appointed to Morgan Stanley’s board of directors. We adopted the equity method of accounting
for our investment in Morgan Stanley beginning with the fiscal year ended March 31, 2012. In April 2018, we
entered into a sales plan with Morgan Stanley and Morgan Stanley & Co. LLC, pursuant to which we will sell
portions of the shares of Morgan Stanley common stock that we hold to Morgan Stanley through Morgan
Stanley & Co. LLC acting as agent for Morgan Stanley to the extent necessary to ensure that our beneficial
ownership will remain below 24. 9%.
We and Morgan Stanley have two securities joint venture companies, namely, Mitsubishi UFJ Morgan
Stanley Securities and Morgan Stanley MUFG Securities, in Japan. We hold a 60% economic interest in
Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities, and Morgan Stanley holds a
40% economic interest in Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. We
hold a 60% voting interest and Morgan Stanley holds a 40% voting interest in Mitsubishi UFJ Morgan Stanley
Securities, and we hold a 49% voting interest and Morgan Stanley holds a 51% voting interest in Morgan Stanley
MUFG Securities.
We and Morgan Stanley continue to pursue a variety of business opportunities in Japan and abroad in
accordance with the global strategic alliance. For a detailed discussion of our global alliance with Morgan
Stanley, see “Item 4.B. Information on the Company—Business Overview—Global Strategic Alliance with
Morgan Stanley.”
We and our banking subsidiaries had, and expect to have in the future, banking transactions and other
transactions in the ordinary course of business with our related parties. Although for the fiscal year ended
March 31, 2019, such transactions included, but were not limited to, call money, loans, electronic data
processing, leases and management of properties, those transactions were immaterial and were made at
prevailing market rates, terms and conditions and do not involve more than the normal risk of collectability or
present other unfavorable features.
None of our directors or corporate executives, nor any of the close members of their respective families, has
had any transactions or has any presently proposed transactions that are material or any transactions that are
unusual in their nature or conditions, involving goods, services or tangible or intangible assets, to which we were,
are or will be a party.
164
No loans have been made to our directors or corporate executives other than in the normal course of
business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, involving no more than the normal risk of collectability and
presenting no other unfavorable features. In addition, no loans have been made to our directors or corporate
executives other than as permitted under Section 13(k) of the U.S. Securities Exchange Act and Rule 13k-1
promulgated thereunder.
No family relationship exists among any of our directors or corporate executives. No arrangement or
understanding exists between any of our directors or corporate executives and any other person pursuant to which
any director or corporate executive was elected to their position at MUFG.
As part of our compensation structure, we have granted performance-based stock compensation rights and
stock acquisition rights to our directors and corporate executives. For a detailed discussion of the stock
acquisition rights, see “Item 6.B. Directors, Senior Management and Employees—Compensation.”
C.
Interests of Experts and Counsel
Not applicable.
Item 8.
Financial Information.
A. Consolidated Statements and Other Financial Information
The information required by this item is set forth in our consolidated financial statements starting on
page F-1 of this Annual Report and in “Selected Statistical Data” starting on page A-1 of this Annual Report.
Pursuant to Rule 3-09 of Regulation S-X, the financial statements and supplementary data of Morgan
Stanley, our equity method investee, as of and for the fiscal year ended December 31, 2018, are incorporated in
this Annual Report as Exhibit 99(c) by reference to Morgan Stanley’s annual report on Form 10-K filed on
February 26, 2019.
Legal Proceedings
From time to time, we are involved in various litigation matters and other legal proceedings, including
regulatory actions. Although the final resolution of any such matters and proceedings could have a material effect
on our consolidated operating results for a particular reporting period, based on our current knowledge and
consultation with legal counsel, we believe the current litigation matters and other legal proceedings, when
ultimately determined, will not materially affect our results of operations or financial position.
On November 8, 2017, MUFG Bank filed suit against the Superintendent of DFS in the U.S. District Court
for the Southern District of New York, seeking declaratory and injunctive relief to prevent DFS from exercising
further authority over MUFG Bank’s New York Branch and to confirm the validity of the New York Branch’s
federal banking license issued by the OCC, effective November 7, 2017. On January 31, 2018, DFS filed an
answer denying MUFG Bank’s allegations and asserting defenses to MUFG’s requests for relief, together with
counterclaims seeking monetary penalties against MUFG Bank based on purported violations of law alleged to
have occurred prior to the federal license conversion. On March 19, 2018, MUFG Bank moved to dismiss all of
DFS’s counterclaims as preempted by federal law and for failure to state a claim under New York law. On
June 24, 2019 in New York time, MUFG Bank reached a settlement with DFS to resolve the lawsuit. MUFG
Bank paid a $33 million settlement payment. This settlement resolves the pending federal civil litigation in its
entirety, and does not constitute a regulatory order or involve a monetary penalty.
For more information, see “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We
may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects
of our operations, which could result in significant financial losses, restrictions on our operations and damage to
our reputation.” and Note 27 to our consolidated financial statements included elsewhere in this Annual Report.
165
Distributions
Our board of directors submits a recommendation for a year-end dividend for our shareholders’ approval at
the ordinary general meeting of shareholders customarily held in June of each year. The year-end dividend is
usually distributed immediately following shareholders’ approval to holders of record at the end of the preceding
fiscal year. In addition to year-end dividends, we may make cash distributions by way of interim dividends to
shareholders of record as of September 30 of each year as distribution of surplus by resolution of our board of
directors. Year-end dividends in the amount of ¥11.0 per share of our common stock (in addition to interim
dividends of ¥11.0 per share of our common stock) for the fiscal year ended March 31, 2019 were approved by
shareholders at the ordinary general meeting of shareholders held on June 27, 2019.
See “Item 10.B. Additional Information—Memorandum and Articles of Association” for additional
information on our dividends policy.
Under the Japanese foreign exchange regulations currently in effect, dividends paid on shares held by
non-residents of Japan may be converted into any foreign currency and repatriated abroad. Under the terms of the
deposit agreement pursuant to which ADSs are issued, the depositary is required, to the extent that in its
judgment it can convert Japanese yen on a reasonable basis into U.S. dollars and transfer the resulting
U.S. dollars to the United States, to convert all cash dividends that it receives in respect of deposited shares into
U.S. dollars and to distribute the amount received, after deduction of any applicable withholding taxes, to the
holders of ADSs. See “Item 10.D. Additional Information—Exchange Controls” and “Item 12.D. Description of
Securities Other than Equity Securities—American Depositary Shares.”
B. Significant Changes
Other than as described in this Annual Report, no significant changes have occurred since the date of our
consolidated financial statements included in this Annual Report.
Item 9.
The Offer and Listing.
A. Offer and Listing Details
The principal market for our common stock is the Tokyo Stock Exchange in Japan. Our common stock is
also listed on the Nagoya Stock Exchange in Japan. The listing code assigned to our common stock in Japan is
8306.
In the United States, ADSs, each representing one share of common stock, are quoted on the New York
Stock Exchange under the symbol, “MUFG.”
B. Plan of Distribution
Not applicable.
C. Markets
The information required by this item is set forth in “—A. Offer and Listing Details.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
166
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information.
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Our Corporate Purpose
Article 2 of our Articles of Incorporation provides that our corporate purpose is to carry on the following
businesses:
‰
‰
‰
administration of management of banks, trust banks, specialized securities companies, insurance
companies or other companies which we may own as our subsidiaries under the Banking Law;
any businesses incidental to the foregoing businesses mentioned in the preceding item; and
any other businesses in which bank holding companies are permitted to engage under the Banking Law
in addition to the foregoing businesses mentioned in the preceding two items.
Board of Directors
For discussion of the provisions of our Articles of Incorporation as they apply to our directors, see
“Item 6.C. Directors, Senior Management and Employees—Board Practices.”
Common Stock
As of March 31, 2019, a total of 13,667,770,520 shares of common stock (including 745,921,774 shares of
common stock held by us and our consolidated subsidiaries as treasury stock) had been issued. Each of the shares
issued and outstanding was fully paid and non-assessable.
For a description of our common stock, see Exhibit 2(c) to this Annual Report.
Preferred Stock
We currently have no shares of preferred stock issued.
For a description of preferred stock we are authorized to issue under our Articles of Incorporation, see
Exhibit 2(c) to this Annual Report.
C. Material Contracts
Except as described elsewhere in this Annual Report, all material contracts entered into by us in the past two
years preceding the filing of this Annual Report were entered into in the ordinary course of business.
D. Exchange Controls
Foreign Exchange and Foreign Trade Law
The Foreign Exchange and Foreign Trade Law of Japan and the cabinet orders and ministerial ordinances
incidental thereto, collectively known as the Foreign Exchange Law, set forth, among other matters, regulations
167
relating to the receipt by non-residents of Japan of payment with respect to shares to be issued by us and the
acquisition and holding of shares by non-residents of Japan and foreign investors, both as defined below. It also
applies in some cases to the acquisition and holding of ADSs representing such shares acquired and held by
non-residents of Japan and foreign investors. Generally, the Foreign Exchange Law currently in effect does not
affect the right of a non-resident of Japan to purchase or sell an ADS outside Japan for non-Japanese currency.
“Non-residents of Japan” are defined as individuals who are not resident in Japan and corporations whose
principal offices are located outside Japan. Generally, the branches and offices of non-resident corporations
which are located in Japan are regarded as residents of Japan while the branches and offices of Japanese
corporations located outside Japan are regarded as non-residents of Japan.
“Foreign investors” are defined as:
‰
‰
‰
‰
natural persons who are non-resident of Japan;
corporations which are organized under the laws of foreign countries or whose principal offices are
located outside Japan;
corporations of which 50% or more of the shares are directly or indirectly held by individuals not
resident of Japan and corporations which are organized under the laws of foreign countries or whose
principal offices are located outside Japan; and
corporations, a majority of officers (or a majority of officers having the power of representation) of
which are non-resident individuals.
Dividends and Proceeds of Sales
Under the Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan of, shares held by
non-residents of Japan may in general be converted into any foreign currency and repatriated abroad. The
acquisition of our shares by non-residents of Japan by way of a stock split is not subject to any notification or
reporting requirements.
Acquisition of Shares
In general, a non-resident of Japan who acquires shares from a resident of Japan is not subject to any prior
filing requirement, although the Foreign Exchange Law empowers the Minister of Finance of Japan to require a
prior approval for any such acquisition in certain limited circumstances.
If a foreign investor acquires our shares, and, together with parties who have a special relationship with that
foreign investor, holds 10% or more of our issued shares as a result of such acquisition, the foreign investor must
file a report of such acquisition with the Minister of Finance and any other competent Minister by the fifteenth
day of the month immediately following the month to which the date of such acquisition belongs. In certain
limited circumstances, however, a prior notification of such acquisition must be filed with the Minister of
Finance and any other competent Minister, who may modify or prohibit the proposed acquisition.
Deposit and Withdrawal under American Depositary Facility
The deposit of shares with us, in our capacity as custodian and agent for the depositary, in Tokyo, the
issuance of ADSs by the depositary to a non-resident of Japan in respect of the deposit and the withdrawal of the
underlying shares upon the surrender of the ADSs are not subject to any of the formalities or restrictions referred
to above. However, where as a result of a deposit or withdrawal the aggregate number of shares held by the
depositary, including shares deposited with us as custodian for the depositary, or the holder surrendering ADSs,
as the case may be, would be 10% or more of the total outstanding shares, a report will be required, and in
specified circumstances, a prior notification may be required, as noted above.
168
Reporting of Substantial Shareholdings
The Financial Instruments and Exchange Act of Japan requires any person who has become, beneficially
and solely or jointly, a holder of more than 5% of the total issued shares of capital stock of a company listed on
any Japanese financial instruments exchange or whose shares are traded on the over-the-counter market in Japan
to file with the director of a competent finance bureau within five business days a report concerning such
shareholdings.
A similar report must also be filed in respect of any subsequent change of 1% or more in any such holding
ratio or any change in material matters set out in reports previously filed, with certain exceptions. For this
purpose, shares issuable to such person upon exchange of exchangeable securities, conversion of convertible
securities or exercise of share subscription warrants or stock acquisition rights (including those incorporated in
bonds with stock acquisition rights) are taken into account in determining both the number of shares held by such
holder and the issuer’s total issued shares of capital stock.
E. Taxation
Japanese Taxation
The following sets forth the material Japanese tax consequences to owners of shares of our common stock or
ADSs who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan
to which the relevant income is attributable, which we refer to as “non-resident holders” in this section. The
statements regarding Japanese tax laws below are based on the laws in force and as interpreted by the Japanese
taxation authorities as at the date of this Annual Report and are subject to changes in the applicable Japanese
laws, double taxation treaties, conventions or agreements or interpretations thereof occurring after that date. This
summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential
investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and
disposition of shares of our common stock or ADSs, including specifically the tax consequences under Japanese
law, the laws of the jurisdiction of which they are resident and any tax treaty between Japan and their country of
residence, by consulting their own tax advisers.
For the purpose of Japanese tax law and the Convention between the Government of the United States of
America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income, or the Tax Convention, a U.S. holder of ADSs will be treated as the owner of the shares of our
common stock underlying the ADSs evidenced by the ADRs.
Generally, a non-resident holder of shares of our common stock or ADSs is subject to Japanese withholding
tax on dividends paid by us. In the absence of any applicable tax treaty, convention or agreement reducing the
rate of withholding tax, the rate of Japanese withholding tax applicable to dividends paid by us to non-resident
holders is (i) 15.315% for dividends to be paid on or before December 31, 2037 and (ii) 15% for dividends to be
paid thereafter, except for dividends paid to any individual non-resident holder who holds 3% or more of our
issued shares for which the applicable rate is (a) 20.42% for dividends to be paid on or before December 31,
2037 and (b) 20% for dividends to be paid thereafter, pursuant to Japanese tax law.
The Tax Convention establishes the maximum rate of Japanese withholding tax which may be imposed on
dividends paid to a U.S. resident not having a permanent establishment in Japan. Under the Tax Convention, the
maximum withholding rate for U.S. holders (as defined below) is generally set at 10% of the gross amount
distributed. However, the maximum rate is 5% of the gross amount distributed if the recipient is a corporation
and owns directly or indirectly, on the date on which entitlement to the dividends is determined, at least 10% of
the voting shares of the paying corporation. Furthermore, the amount distributed shall not be taxed if the
recipient is (i) a pension fund which is a U.S. resident, provided that such dividends are not derived from the
carrying on of a business, directly or indirectly, by such pension fund or (ii) a parent company with a controlling
interest in the paying company and satisfies certain other requirements. U.S. holders (as defined below) are urged
to consult their own tax advisors with respect to their eligibility for benefits under the Tax Convention.
169
Japanese tax law provides in general that if the Japanese statutory rate is lower than the maximum rate
applicable under tax treaties, conventions or agreements, the Japanese statutory rate as stated above shall be
applicable.
Non-resident holders of shares who are entitled to a reduced rate of Japanese withholding tax on payments
of dividends on the shares of our common stock or ADSs by us are required to submit an Application Form for
the Income Tax Convention regarding Relief from Japanese Income Tax on Dividends, or an Application Form
for the Income Tax Convention, in advance through a paying handling agent to the relevant tax authority before
the payment of dividends. A standing proxy for non-resident holders may provide this application service for the
non-resident holders. In this regard, a certain simplified special filing procedure is available for non-resident
holders to claim treaty benefits of exemption from or reduction of Japanese withholding tax with respect to
dividends to be paid on or after January 1, 2014, by submitting a Special Application Form for Income Tax
Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on
Dividends of Listed Stocks (together with any other required forms and documents). With respect to ADSs, this
reduced rate or exemption will be applicable to non-resident holders of ADSs if the depositary or its agent
submits two Application Forms (one before payment of dividends and the other within eight months after the
record date concerning such payment of dividends), together with certain other documents. To claim this reduced
rate or exemption, non-resident holders of ADSs will be required to file a proof of taxpayer status, residence and
beneficial ownership, as applicable, and to provide other information or documents as may be required by the
depositary. Non-resident holders who are entitled, under any applicable tax treaty, to a reduced rate of Japanese
withholding tax below the rate otherwise applicable under Japanese tax law, or exemption therefrom, as the case
may be, but fail to submit the required application in advance may nevertheless be entitled to claim a refund from
the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax
treaty (if such non-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full
amount of tax withheld (if such non-resident holders are entitled to an exemption under the applicable tax treaty),
as the case may be, by complying with a certain subsequent filing procedure. We do not assume any
responsibility to ensure withholding at the reduced rate, or an exemption therefrom, for non-resident holders who
would be so eligible under an applicable tax treaty but where the required procedures as stated above are not
followed.
Gains derived from the sale or other disposition of shares of our common stock or ADSs by a non-resident
holder are not, in general, subject to Japanese income or corporation taxes or other Japanese taxes.
Any deposits or withdrawals of shares of our common stock by a non-resident holder in exchange for ADSs
are not subject to Japanese income or corporation tax.
Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired
shares of our common stock or ADSs as legatee, heir or donee, even if none of the individual, the decedent or the
donor is a Japanese resident.
U.S. Taxation
The following sets forth the material U.S. federal income tax consequences of the ownership of shares and
ADSs by a U.S. holder, as defined below. This summary is based on U.S. federal income tax laws, including the
U.S. Internal Revenue Code of 1986, or the Code, its legislative history, existing and proposed Treasury
regulations thereunder, published rulings and court decisions, and the Tax Convention (as defined above), all of
which are subject to change, possibly with retroactive effect.
The following summary is not a complete analysis or description of all potential U.S. federal income tax
consequences to a particular U.S. holder. It does not address all U.S. federal income tax considerations that may
be relevant to all categories of potential purchasers, certain of which (such as banks or other financial
institutions, insurance companies, dealers in securities, tax-exempt entities, non-U.S. persons, persons holding a
170
share or an ADS as part of a “straddle,” “hedge,” conversion or integrated transaction, holders whose “functional
currency” is not the U.S. dollar, holders liable for alternative minimum tax, holders required to report income no
later than when such income is reported on an “applicable financial statement,” and holders of 10% or more of
our shares by vote or value) are subject to special tax treatment. This summary does not address any foreign,
state, local or other tax consequences of investments in our shares or ADSs.
This summary addresses only shares or ADSs that are held as capital assets within the meaning of
Section 1221 of the Code.
As used herein, a “U.S. holder” is a beneficial owner of shares or ADSs, as the case may be, that is:
‰
‰
‰
‰
a citizen or resident of the United States as determined for U.S. federal income tax purposes;
a corporation or other entity taxable as a corporation created or organized under the laws of the
United States, any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
a trust
‰
‰
the administration of which is subject to (1) the supervision of a court within the United States and
(2) the control of one or more U.S. persons as described in Section 7701(a)(30) of the Code; or
that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.
If a partnership holds shares or ADSs, the tax treatment of a partner will generally depend on the status of
the partner and the activities of the partnership. If you are a partner of a partnership holding shares or ADSs, you
should consult your tax advisor.
We urge U.S. holders to consult their own tax advisors concerning the U.S. federal, state and local and
other tax consequences to them of the purchase, ownership and disposition of shares or ADSs.
This summary is based in part on the assumption that each obligation under the deposit agreement and any
related agreement will be performed in accordance with its respective terms. Subject to the discussion in the next
paragraph, for U.S. federal income tax purposes, holders of ADSs will be treated as the owners of the shares
represented by the ADSs. Accordingly, withdrawals or deposits of shares in exchange for ADSs generally will
not be subject to U.S. federal income tax.
The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder
of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the
beneficial ownership of the underlying shares (for example, pre-releasing ADSs to persons who do not have
beneficial ownership of the securities underlying the ADSs). Accordingly, the discussion on the creditability of
Japanese taxes and the availability of the reduced rate of tax for dividends received by certain non-corporate
U.S. holders, each as described below, could be affected by actions taken by intermediaries in the chain of
ownership between the holder of ADSs and us if, as a result of such actions, the holders of ADSs are not properly
treated as beneficial owners of the underlying shares. We are not aware of any intention to take any such actions,
and accordingly, the remainder of this discussion assumes that holders of ADSs will be properly treated as
beneficial owners of the underlying shares.
Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that
is treated as a “passive foreign investment company” (a “PFIC”) for any taxable year during which the
U.S. holder held shares or ADSs, as discussed in more detail below. U.S. holders should consult their own tax
advisors as to the potential application of the PFIC rules to their ownership and disposition of shares or ADSs.
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Taxation of Dividends
Subject to the application of the PFIC rules discussed below, U.S. holders will include the gross amount of
any distribution received with respect to shares or ADSs (before reduction for Japanese withholding taxes), to the
extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax
purposes), as ordinary income in their gross income. As discussed below, for certain U.S. holders, dividends may
be eligible for a reduced rate of taxation. The amount of distribution of property other than cash will be the fair
market value of such property on the date of the distribution. Dividends received by a U.S. holder will not be
eligible for the “dividends-received deduction” allowed to U.S. corporations in respect of dividends received
from other U.S. corporations. To the extent that an amount received by a U.S. holder exceeds such holder’s
allocable share of our current earnings and profits, such excess will be applied first to reduce such holder’s tax
basis in its shares or ADSs, thereby increasing the amount of gain or decreasing the amount of loss recognized on
a subsequent disposition of the shares or ADSs. Then, to the extent such distribution exceeds such U.S. holder’s
tax basis, such excess will be treated as capital gain. However, we do not maintain calculations of our earnings
and profits in accordance with U.S. federal income tax principles, and U.S. holders should therefore assume that
any distribution by us with respect to shares or ADSs will constitute ordinary dividend income. The amount of
the dividend will be the U.S. dollar value of the Japanese yen payments received. This value will be determined
at the spot Japanese yen/U.S. dollar rate on the date the dividend is received by the depositary in the case of
U.S. holders of ADSs, or by the shareholder in the case of U.S. holders of shares, regardless of whether the
dividend payment is in fact converted into U.S. dollars at that time. If the Japanese yen received as a dividend are
not converted into U.S. dollars on the date of receipt, a U.S. holder will have basis in such Japanese yen equal to
their U.S. dollar value on the date of receipt, and any foreign currency gains or losses resulting from the
conversion of the Japanese yen will generally be treated as U.S. source ordinary income or loss. If the Japanese
yen received as a dividend are converted into U.S. dollars on the date of receipt, a U.S. holder will generally not
be required to recognize foreign currency gain or loss in respect of the dividend income.
If a U.S. holder is eligible for benefits under the Tax Convention, the holder may be able to claim a reduced
rate of Japanese withholding tax. All U.S. holders should consult their tax advisors about their eligibility for
reduction of Japanese withholding tax. A U.S. holder may claim a deduction or a foreign tax credit, subject to
other applicable limitations, only for tax withheld at the appropriate rate. A U.S. holder would be allowed a
foreign tax credit for withholding tax for any portion of the tax that could have been avoided by claiming benefits
under the Tax Convention. For foreign tax credit limitation purposes, the dividend will be income from sources
outside the United States. The limitation on foreign taxes eligible for credit is calculated separately with respect
to specific classes of income. For this purpose, dividends we pay will constitute “passive income” or, in the case
of certain U.S. holders, “financial services income.” The rules governing U.S. foreign tax credits are very
complex and U.S. holders should consult their tax advisors regarding the availability of foreign tax credits under
their particular circumstances.
Subject to applicable exceptions with respect to short-term and hedged positions, qualified dividends
received by non-corporate U.S. holders from a qualified corporation may be eligible for reduced rates of taxation.
Qualified corporations include those foreign corporations eligible for the benefits of a comprehensive income tax
treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes
and that includes an exchange of information provision. The Tax Convention meets these requirements. Subject
to the PFIC discussion below, we believe that we are a qualified foreign corporation and that dividends received
by U.S. investors with respect to our shares or ADSs will be qualified dividends. Dividends received by U.S.
investors from a foreign corporation that was a PFIC in either the taxable year of the distribution or the preceding
taxable year are not qualified dividends.
Passive Foreign Investment Company Considerations
Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that
is treated as a PFIC, for any taxable year during which the U.S. holder held shares or ADSs. A foreign
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corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is
passive income (the “income test”), or (ii) 50% or more of the average fair market value of its assets (determined
quarterly) is attributable to assets that produce or are held for the production of passive income (the “asset test”).
For this purpose, passive income generally includes dividends, interest, royalties, rents and certain gains from the
sale of stock and securities. If a foreign corporation owns at least 25% (by value) of the stock of another
corporation, the corporation will be treated, for purposes of the PFIC tests, as owning a proportionate share of the
other corporation’s assets and receiving its proportionate share of the other corporation’s income. The
determination of whether a foreign corporation is a PFIC is made annually.
Proposed Treasury regulations convert what would otherwise be passive income into non-passive income
when such income is banking income earned by an active bank. Based upon these proposed Treasury regulations,
and upon certain management estimates and assumptions, we do not believe that we were a PFIC for the year
ended March 31, 2019 because we did not meet either the income test or the asset test. The determination of
whether we are a PFIC must be made annually and involves a fact-intensive analysis based upon, among other
things, the composition of our income and assets and the value of our assets from time to time. It is possible that
we may become a PFIC in the fiscal year ending March 31, 2020 or any future taxable year due to changes in our
income or asset composition and the expiration of the temporary IRS guidance described above. In addition, a
decrease in the price of our shares may also result in our becoming a PFIC. Furthermore, there can be no
assurance that the above-described proposed Treasury regulations will be finalized in their current form.
Moreover, the application of the proposed Treasury regulations is not clear. If we were classified as a PFIC in
any year during which a U.S. holder owns shares or ADSs and the U.S. holder does not make a “mark-to-market”
election, as discussed below, we generally would continue to be treated as a PFIC as to such U.S. holder in all
succeeding years, regardless of whether we continue to meet the income or asset test discussed above. U.S.
Holders are urged to consult their own tax advisors with respect to the tax consequences to them if we were to
become a PFIC for any taxable year in which they own our shares or ADSs.
If we were classified as a PFIC for any taxable year during which a U.S. holder holds our shares or ADSs,
the U.S. holder would generally not receive capital gains treatment upon the sale of the shares or ADSs and
would be subject to increased tax liability (generally including an interest charge) upon the sale or other
disposition of the shares or ADSs or upon the receipt of certain distributions treated as “excess distributions,”
unless the U.S. holder makes the mark-to-market election described below. An excess distribution generally
would be any distribution to a U.S. holder with respect to shares or ADSs during a single taxable year that is
greater than 125% of the average annual distributions received by a U.S. holder with respect to shares or ADSs
during the three preceding taxable years or, if shorter, during the U.S. holder’s holding period for the shares or
ADSs.
Mark-to-Market Election.
If the shares or ADSs are regularly traded on a registered national securities
exchange or certain other exchanges or markets, then such shares or ADSs would constitute “marketable stock”
for purposes of the PFIC rules, and a U.S. holder would not be subject to the foregoing PFIC rules if such holder
made a mark-to-market election. After making such an election, the U.S. holder generally would include as
ordinary income each year during which the election is in effect and during which we are a PFIC the excess, if
any, of the fair market value of our shares or ADSs at the end of the taxable year over such holder’s adjusted
basis in such shares or ADSs. These amounts of ordinary income would not be eligible for the favorable tax rates
applicable to qualified dividend income or long-term capital gains. A U.S. holder also would be allowed to take
an ordinary loss in respect of the excess, if any, of the holder’s adjusted basis in our shares or ADSs over their
fair market value at the end of the taxable year (but only to the extent of the net amount of income that was
previously included as a result of the mark-to-market election). A U.S. holder’s tax basis in our shares or ADSs
would be adjusted to reflect any income or loss amounts resulting from a mark-to-market election. If made, a
mark-to-market election would be effective for the taxable year for which the election was made and for all
subsequent taxable years unless the shares or ADSs cease to qualify as “marketable stock” for purposes of the
PFIC rules or the IRS consented to the revocation of the election. In the event that we are classified as a PFIC,
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U.S. holders are urged to consult their tax advisors regarding the availability of the mark-to-market election, and
whether the election would be advisable in the holder’s particular circumstances.
QEF Election. The PFIC rules outlined above also would not apply to a U.S. holder if such holder
alternatively elected to treat us as a “qualified electing fund” or “QEF.” An election to treat us as a QEF will not
be available, however, if we do not provide the information necessary to make such an election. We will not
provide U.S. holders with the information necessary to make a QEF election, and thus, the QEF election will not
be available with respect to our shares.
Notwithstanding any election made with respect to our shares, dividends received with respect to our shares
will not constitute “qualified dividend income” if we are a PFIC in either the year of the distribution or the
preceding taxable year. Dividends that do not constitute qualified dividend income are not eligible for taxation at
the reduced tax rate described above in “—Taxation of Dividends.” Instead, such dividends would be subject to
tax at ordinary income rates.
If a U.S. holder owns shares or ADSs during any year in which we are a PFIC, the U.S. holder must also file
IRS Form 8621 regarding distributions received on the shares or ADSs, any gain realized on the shares or ADSs,
and any “reportable election” in accordance with the instructions to such form. In addition, each U.S. holder is
required to file a separate IRS Form 8621 if such U.S. holder owns shares or ADSs during any year in which we
are a PFIC whether or not such U.S. holder received distributions on the shares or ADSs, realized a gain on the
shares or ADSs or made a “reportable election” during such year. U.S. holders are urged to consult their own tax
advisors concerning the U.S. federal income tax consequences of holding shares or ADSs if the Company were
considered a PFIC in any taxable year.
Taxation of Capital Gains
Subject to the application of the PFIC rules discussed above, upon a sale or other disposition of shares or
ADSs, a U.S. holder will recognize a gain or loss in an amount equal to the difference between the U.S. dollar
value of the amount realized and the U.S. holder’s tax basis, determined in U.S. dollars, in such shares or ADSs.
Such gains or losses will be capital gains or losses and will be long-term capital gains or losses if the U.S.
holder’s holding period for such shares or ADSs exceeds one year. Long-term capital gains of non-corporate
U.S. holders (including individuals) are generally eligible for reduced rates of taxation. A U.S. holder’s adjusted
tax basis in its shares or ADSs will generally be the cost to the holder of such shares or ADSs. Any such gains or
losses realized by a U.S. holder upon disposal of the shares or ADSs will generally be income or loss from
sources within the United States for foreign tax credit limitation purposes. The deductibility of capital losses is
subject to limitations under the Code.
Information Reporting and Backup Withholding
Dividends paid on shares or ADSs to a U.S. holder, or proceeds from a U.S. holder’s sale or other
disposition of shares or ADSs, may be subject to information reporting requirements. Those dividends or
proceeds from sale or disposition may also be subject to backup withholding unless the U.S. holder:
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‰
is a corporation or other exempt recipient, and, when required, demonstrates this fact; or
provides a correct taxpayer identification number on a properly completed U.S. IRS Form W-9 or other
appropriate form which certifies that the U.S. holder is not subject to backup withholding and otherwise
complies with applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable
against the U.S. holder’s U.S. federal income tax liability or refundable to the extent that it exceeds such liability
if the U.S. holder provides the required information to the IRS. If a U.S. holder is required to and does not
provide a correct taxpayer identification number, the U.S. holder may be subject to penalties imposed by the IRS.
All holders should consult their tax advisors as to their qualification for the exemption from backup withholding
and the procedure for obtaining an exemption.
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In addition, certain U.S. holders who are individuals that hold certain foreign financial assets (which may
include our shares or ADSs) are required to report information relating to such assets, subject to certain
exceptions. U.S. holders should consult their tax advisors regarding the effect, if any, of this requirement on their
ownership and disposition of our shares and ADSs.
Additional Tax on Investment Income
U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds will be
subject to an additional 3.8% tax on unearned income, including, among other things, dividends on, and capital
gains from the sale or other taxable disposition of, shares or ADSs, subject to certain limitations and exceptions.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We file periodic reports and other information with the SEC. You may read and copy any document that we
file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. The SEC also
maintains a web site that contains reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC (http://www.sec.gov).
I.
Subsidiary Information
Please refer to the discussion under “Item 4.C. Information on the Company—Organizational Structure.”
Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.
In the current market and regulatory environment, financial groups such as us are expected to ensure
increasingly more sophisticated and comprehensive risk management. Risk management plays an increasingly
important role in our operations as a financial group operating globally through various subsidiaries.
We identify various risks arising from businesses based on group-wide uniform criteria and implement
integrated risk management to ensure a stronger financial condition and to maximize shareholder value. Based on
this approach, we identify, measure, control and monitor a wide variety of risks so as to achieve a stable balance
between earnings and risks. We undertake risk management to create an appropriate capital structure and to
achieve optimal allocation of resources.
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Risk Classification
At the holding company level, we broadly classify and define risk categories faced by the Group, including
those that are summarized below. Group companies perform more detailed risk management based on their
respective operations.
Type of Risk
Credit Risk
Market Risk
Funding Liquidity Risk
Operational Risk
‰ Operations Risk
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‰
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Information Risk
IT Risk
Tangible Asset Risk
Personnel Risk
Incompliance with
Laws and Regulations
Risk
Legal Risk
Reputation Risk
Model Risk
Definition
The risk of financial loss in credit assets (including off-balance sheet
instruments) caused by deterioration in the credit conditions of counterparties.
This category includes country risk.
The risk of financial loss where the value of our assets and liabilities could be
adversely affected by changes in market variables such as interest rates,
securities prices and foreign exchange rates. Market liquidity risk is the risk of
financial loss caused by the inability to secure market transactions at the
required volume or price levels as a result of market turbulence or lack of
trading liquidity.
The risk of incurring loss if a poor financial position at a group company
hampers the ability to meet funding requirements or necessitates fund
procurement at interest rates markedly higher than normal.
The risk of loss resulting from inadequate or failed internal processes, people
or systems, or from external events.
The risk of incurring losses arising from negligence of correct operational
processing, incidents or misconduct involving officers or staff, as well as risks
similar to this risk.
The risk of loss caused by loss, alteration, falsification or leakage of personal
or other confidential information, as well as risks similar to these risks.
The risk of loss arising from destruction, suspension, malfunction or misuse of
IT, or unauthorized alteration and leakage of electronic data caused by
insufficient IT systems planning, development or operations or by
vulnerabilities of or external threats to IT system security, including
cybersecurity, as well as risks similar to these risks.
The risk of loss due to damage to tangible assets or deterioration in the
operational environment caused by disasters or inadequate asset maintenance,
as well as risks similar to this risk. Tangible assets include movable and
immovable property, including owned or leased land and buildings, facilities
incidental to buildings, and fixtures and fittings.
The risk of loss due to an outflow or loss of human resources or deterioration
in employee morale, as well as risks similar to this risk.
The risk of loss due to failure to comply with laws and regulations, as well as
risks similar to these risks.
The risk of a loss due to failure to identify or address legal issues relating to
contracts and other business operations or insufficient handling of lawsuits, as
well as risks similar to these risks.
The risk of harm to our corporate value arising from perceptions of our
customers, shareholders, investors or other stakeholders and in the market or
society that we deviate from their expectations or confidence.
The risk of loss due to decision-making based on information provided by an
inaccurate model or the misuse of a model.
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Risk Management System
We have adopted an integrated risk management system to promote close cooperation among the holding
company and group companies. The holding company and the major subsidiaries (which include MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings) each appoint a chief risk officer and
establish an independent risk management division. The board of directors of the holding company determines risk
management policies for various types of risks based on the discussions at, and reports and recommendations from,
committees established specially for risk management purposes. The holding company has established committees
to oversee management in managing risks relevant to the Group. Following the fundamental risk management
policies determined by the board of directors, each group company establishes its own systems and procedures for
identifying, analyzing and managing various types of risks from both quantitative and qualitative perspectives. The
holding company seeks to enhance group-wide risk identification, to integrate and improve the Group’s risk
management system and related methods, to maintain asset quality, and to eliminate concentrations of specific risks.
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The following diagram summarizes our integrated risk management framework:
Risk Management System
MUFG
Risk Committee
Board of Directors
U.S. Risk Committee
Executive Committee
Risk Management Committee
Operational Risk
Working Group
Crisis Management
Working Group
Loan and Investment
Committee
Group-wide
Credit Committee
Corporate Risk Management
Division
(cordinates risk management)
Credit Policy &
Planning Division
Global Compliance Division
Operations & Systems
Planning Division
Corporate Administration
Division
Management Planning
Committee
(including ALM)
Market Risk,
Funding Liquidity Risk,
Operational Risk,
Operations Risk,
Reputation Risk, Model Risk
Credit Risk
Information Risk
Information Risk,
Information Risk
Incompliance with Laws and
Incompliance with Laws and
Incompliance with Laws and
Regulations Risk
Requlations Risk
Requlations Risk
IT Risk
Tangible Asset Risk
Human Resources Division
Personnel Risk
Legal Division
Legal Risk
Setting of basic
policies/guidance/
advice, etc.
Consultation/
reporting, etc.
MUFG Group Companies
Risk Management
Committee
Operational Risk
Working Group
Crisis Management
Working Group
Loan and Investment
Committee
Credit Committee
CPM Committee
Customer Protection
Committee,
System Strategy
Committee
MUFG BANK
Board of Directors
Executive Committee
Corporate Risk Management
Division
(cordinates risk management)
Credit Policy & Planning
Division
Transaction Banking
Planning Office
Operations Planning
Division
Information Systems
Planning Division
Global Compliance
Division
Corporate Planning Meeting
ALM Committee
Market Risk,
Funding Liquidity Risk,
Operational Risk,
Reputation Risk,
Model Risk
Credit Risk
Settlement Risk
Operations Risk
IT Risk
Information Risk
Global Financial
Crimes Division
Incompliance with Laws and
Regulations Risk
Corporate Administration
Division
Tangible Asset Risk
Human Resources
Division
Personnel Risk
Legal Division
Legal Risk
Risk Management
Committee
(including crisis
management)
Capital Management
Committee
Credit Committee
MUTB
Board of Directors
Executive Committee
ALM Committee
Corporate Risk Management
Division
(cordinates risk management)
Credit Risk, Market Risk,
Funding Liquidity Risk,
Operational Risk,
Reputation Risk,
Model Risk,
Operations Risk,
Information Risk
Business Process and
IT Planning Division
IT Risk
Global Compliance
Division
Incompliance with Laws
and Regulations Risk,
Legal Risk
Corporate
Administration Division
Tangible Asset Risk
Personnel Division
Personnel Risk
Legal Division
Legal Risk
M
i
t
s
u
b
i
s
h
i
U
F
J
S
e
c
u
r
i
t
i
e
s
O
t
h
e
r
C
o
m
p
a
n
i
e
s
Crisis Management Framework
In order to have a clear critical response rationale and associated decision-making criteria, we have
developed systems designed to ensure that our operations are not interrupted or can be restored to normal quickly
in the event of a natural disaster or system failure so as to minimize any disruption to customers and markets. A
crisis management team within the holding company is the central coordinating body in the event of any
emergency. Based on information collected from crisis management personnel at the major subsidiaries, this
central body would assess the overall impact of a crisis on the Group’s business and establish task forces that
178
could implement all countermeasures to restore full operations. We have business continuity plans to maintain
continuous operational viability in the event of natural disasters, system failures and other types of emergencies.
Regular training drills are conducted to upgrade the practical effectiveness of these systems.
Recognizing that our operations, particularly in Japan, are subject to the risk of earthquakes and other
natural disasters as well as accidents resulting from such disasters, including a sudden massive blackout in major
metropolitan areas in Japan, and that our contingency plans may not address all eventualities that may occur in
the event of a material disruption to our operations, we conduct a comprehensive review of our existing business
continuity plan to more effectively respond to such extreme scenarios, and contemplate and implement measures
to augment our current business continuity management framework, including enhancing our off-site back-up
data storage and other information technology systems.
Implementation of Basel Standards
In determining capital ratios under the FSA guidelines implementing Basel III, we and our banking
subsidiaries used the Advanced Internal Ratings-Based approach, or the AIRB approach, to calculate capital
requirements for credit risk as of March 31, 2019. The Standardized Approach is used for some subsidiaries that
are considered to be immaterial to the overall MUFG capital requirements, and MUFG Americas Holdings has
adopted a phased rollout of the Internal Ratings-Based Approach. We reflect market risk in our risk-weighted
assets by applying the Internal Models Approach to calculate general market risk and the Standardized
Measurement Method to calculate specific risk. Under the Internal Models Approach, we principally use a
historical simulation model to calculate value-at-risk, or VaR, amounts by estimating the profit and loss on our
portfolio by applying actual fluctuations in historical market rates and prices over a fixed period. Under the FSA
guidelines implementing Basel III, we reflect operational risk in our risk-weighted assets by using the
Standardized Approach and the Advanced Measurement Approach.
Based on the Basel III framework, the Japanese capital ratio framework has been revised to implement the
more stringent requirements, which are being implemented in phases beginning on March 31, 2013. Likewise,
local banking regulators outside of Japan, such as those in the United States, have begun, or are expected, to
revise the capital and liquidity requirements imposed on our subsidiaries and operations in those countries to
implement the more stringent requirements of Basel III as adopted in those countries. We intend to carefully
monitor further developments with an aim to enhance our corporate value and maximize shareholder value by
integrating the various strengths within the Group. For more information on the Basel regulatory framework and
requirements, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.”
Credit Risk Management
Credit risk is the risk of losses due to deterioration in the financial condition of a borrower. We have
established risk management systems to maintain asset quality, manage credit risk exposure and achieve earnings
commensurate with risk.
MUFG and its major banking subsidiaries apply a uniform credit rating system for asset evaluation and
assessment, loan pricing, and quantitative measurement of credit risk. This system also underpins the calculation
of capital requirements and the management of credit portfolios. We continually seek to our upgrade credit
portfolio management, or CPM, expertise to achieve an improved risk-adjusted return based on the Group’s
credit portfolio status and flexible response capability to economic and other external changes.
Credit Risk Management System
The credit portfolios of our major banking subsidiaries are monitored and assessed on a regular basis by the
holding company to maintain and improve asset quality. A uniform credit rating and asset evaluation and
assessment system is used to ensure timely and proper evaluation of all credit risks.
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Under our credit risk management system, each of our subsidiaries in the banking, securities, consumer
finance, and leasing businesses, manages its respective credit risk on a consolidated basis based on the attributes
of the risk, while the holding company oversees and manages credit risk on an overall group-wide basis. The
holding company also convenes regular committee meetings to monitor credit risk management at banking
subsidiaries and to issue guidance where necessary.
Each major banking subsidiary has in place a system of checks and balances in which a credit administration
section that is independent of the business promotion sections screens individual transactions and manages the
extension of credit. At the management level, regular meetings of the Credit & Investment Management
Committee and related deliberative bodies ensure full discussion of important matters related to credit risk
management. Besides such checks and balances and internal oversight systems, credit examination sections also
undertake credit testing and evaluation to ensure appropriate credit risk management.
The following diagram summarizes the credit risk management framework for our major banking
subsidiaries:
Board of Directors/Executive Committee
Credit & Investment Management Committee/
related deliberative bodies
Monitoring by MUFG
Credit & Investment
Management Committee
Credit Committee
(cid:129)Decisions regarding important matters
(cid:129)Delegation of authority
Credit administration
sections
Credit screening
and management
Business promotion
sections
Regular report
(cid:129)Discussion of important matters
(cid:129)Transaction report
Quantitative risk
monitoring
Credit risk management
sections
Credit testing and evaluation
Internal audit sections
Credit Rating System
MUFG and its major banking subsidiaries use an integrated credit rating system to evaluate credit risk. The
credit rating system consists primarily of borrower rating, facility risk rating, structured finance rating and asset
securitization rating.
Country risk is also rated on a uniform group-wide basis. Our country risk rating is reviewed periodically to
take into account relevant political and economic factors, including foreign currency availability.
Risk exposure for small retail loans, such as residential mortgage loans, is managed by grouping loans into
various pools and assigning ratings at the pool level.
Borrower rating
Our borrower rating classifies borrowers into 15 grades based on evaluations of their expected debt-service
capability over the next three to five years.
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The following table sets forth our borrower grades:
Definition of MUFG Borrower Rating
MUFG
Borrower
Rating
MUFG Borrower Rating Definition
1
2
3
4
5
6
7
8
9
The capacity to meet financial commitments is extremely certain, and the borrower has the highest level of
creditworthiness.
The capacity to meet financial commitments is highly certain, but there are some elements that may result in
lower creditworthiness in the future.
The capacity to meet financial commitments is sufficiently certain, but there is the possibility that
creditworthiness may fall in the long run.
There are no problems concerning the capacity to meet financial commitments, but there is the possibility
that creditworthiness may fall in the long run.
There are no problems concerning the capacity to meet financial commitments, and creditworthiness is in the
middle range.
There are no problems concerning the capacity to meet financial commitments presently, but there are
elements that require attention if the situation changes.
There are no problems concerning the capacity to meet financial commitments presently, but long-term
stability is poor.
There are no problems concerning the capacity to meet financial commitments presently, but long-term
stability is poor, and creditworthiness is relatively low.
The capacity to meet financial commitments is somewhat poor, and creditworthiness is the lowest among
“Normal” customers.
Borrowers who must be closely monitored because of the following business performance and financial
conditions:
10 through 12
(1) Borrowers who have problematic business performance, such as virtually delinquent principal
repayment or interest payment;
(2) Borrowers whose business performance is unsteady, or who have unfavorable financial conditions;
(3) Borrowers who have problems with loan conditions, for whom interest rates have been reduced or
shelved.
10
11
12
Although business problems are not serious or their improvement is seen to be remarkable, there are elements of
potential concern with respect to the borrower’s management, and close monitoring is required.
Business problems are serious, or require long-term solutions. Serious elements concerning business
administration of the borrower have emerged, and subsequent debt repayment needs to be monitored closely.
Borrowers who fall under the criteria of Rating 10 or 11 and have a loan concession granted. Borrowers who
have “Loans contractually past due 90 days or more.” (As a rule, delinquent borrowers are categorized as
“Likely to Become Bankrupt,” but the definition here applies to borrowers delinquent for 90 days or more
because of inheritance and other special reasons.)
13
14
15
Borrowers who pose a serious risk with respect to debt repayment, loss is likely to occur in the course of
transactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in
achieving restructuring plans, and are likely to become bankrupt in the future.
While not legally bankrupt, borrowers who are considered to be virtually bankrupt because they are in
serious financial difficulty and have no prospects for an improvement in their business operations.
Borrowers who are legally bankrupt (i.e., who have no prospects for continued business operations because
of non-payment, suspension of business, voluntary liquidation, or filing for legal liquidation).
The Japanese regulatory authorities require Japanese banks to categorize borrowers as follows:
‰ Normal borrowers (generally corresponding to borrowers in categories 1 through 9 in our ratings),
which are borrowers that are performing well, with no significant financial concerns,
‰ Borrowers requiring close watch (generally corresponding to borrowers in categories 10 through 12 in
our ratings), which include loans that have been amended to allow for delays or forgiveness of interest
payments, borrowers experiencing difficulty in complying with loan terms and conditions and borrowers
that are recording losses or performing badly,
181
‰ Borrowers likely to become bankrupt (generally corresponding to borrowers in category 13 in our
ratings), which relate to borrowers who pose a serious risk with respect to debt repayment and with
whom loss is likely to occur in the course of transactions. While still not bankrupt, these borrowers are
in financial difficulty, with poor progress in achieving restructuring plans, and are likely to become
bankrupt in the future,
‰ Virtually bankrupt borrowers (generally corresponding to borrowers in category 14 in our ratings),
which are not legally bankrupt, but borrowers who are considered to be virtually bankrupt because they
are in serious financial difficulty and have no prospects for an improvement in their business operations,
and
‰ Bankrupt borrowers or de facto bankrupt borrowers (generally corresponding to borrowers in
category 15 in our ratings), which are borrowers who are legally bankrupt (i.e., who have no prospects
for continued business operations because of non-payment, suspension of business, voluntary
liquidation, or filing for legal liquidation proceedings).
The primary data utilized in our assessment of borrowers include the borrower’s financial statements and
notes thereto as well as other public disclosure made by the borrower. In addition, when appropriate and possible,
we obtain non-public financial and operating information from borrowers, such as the borrower’s business plan,
borrower’s self-evaluation of its operating assets and other borrower information about its business and products.
Based on the borrower and industry information, we assign borrower ratings mainly by applying financial
scoring models—either developed internally or by third-party vendors, depending on the borrower’s attributes,
whether the borrower is domestic or foreign, whether the borrower is a large corporation or a small and
medium-sized corporation, and whether the borrower is a corporate entity or another type of legal entity (such as
a school, hospital or fund).
For example, for domestic small and medium-sized corporations, which constitute the largest borrower
attribute in our current loan portfolio in terms of number of borrowers, we have adopted an internally developed
financial scoring model, exclusively designed and developed for such attribute. We have selected various
financial ratios that we believe to be useful and meaningful to quantitatively measure and assess the borrowers’
financial standing and repayment capability. Such financial ratios represent, among other things, borrowers’
growth, profitability, stability, cash flow, company size and capital efficiency. The model is periodically tested
against historical results. The following is an illustration of some of the financial ratios we utilize as part of our
financial scoring model:
‰
‰
‰
To measure growth: Sales growth, and growth in total assets,
To measure profitability: Current profit to sales, and profit before tax to sales, and
To measure stability: Equity ratio and current ratio.
The financial score obtained through the models is reviewed and, when necessary, adjusted downward to
reflect our qualitative assessment of the borrower’s financial strength and other factors that could affect the
borrower’s ability to service the debt. For example, we take into account: capability of turning around the
business (in case of borrowers with losses) or recovering positive net worth (in case of borrowers with negative
net worth), industry risk, management risk, legal risk, as well as our assessment of the probability of receiving
support from parent companies (if the borrower is a subsidiary of a large listed company).
When adjusting the results of primary financial scoring assigned to borrowers with losses, we consider the
severity of losses and the possibility of improving operating results. We analyze and assess whether the loss is
temporary, the trend in operating results is improving, or the loss is expected to continue for an extended period.
When adjusting the results of primary financial scoring assigned to borrowers with losses or borrowers with
negative net worth, we also analyze whether the borrower can return to a positive net worth, and the time period
needed to achieve such recovery (one to two years, three to five years, or five years or more).
182
In addition, adjustments based on industry risk are based on future prospects, applicable laws and
regulations, and other factors surrounding the industry. Adjustments for management risk reflect our assessment
of management’s track record, the composition of the management team including the board of directors, any
management succession plan as well as the risk management and compliance framework of the borrower.
Adjustments for legal risk are made when the borrower is facing a lawsuit and when there is a possibility of a
significant claim payment related to product liability, intellectual property, environmental problems, building
standard law, and other legal issues.
When assessing the probability of receiving support from parent companies, various factors are examined,
such as the parent company’s credit standings, whether key management personnel are sent by the parent,
whether the borrower is consolidated by the parent, and the proportion of the borrower in consolidated sales and
profits of the parent.
In addition, we consider outside ratings, and our internal borrower ratings may be adjusted when deemed
appropriate.
Facility risk rating
Facility risk rating is used to evaluate and classify the quality of individual credit facilities, including
guarantees and collateral. Ratings are assigned by quantitatively measuring the estimated loss rate of a facility in
the event of a default.
Structured finance rating and asset securitization rating
Structured finance rating and asset securitization rating are used to evaluate and classify the quality of
individual credit facilities, including guarantees and collateral, and focus on the structure, including the
applicable credit period, of each credit facility. In evaluating the debt service potential of a credit facility, we
scrutinize its underlying structure to determine the likelihood of the planned future cash flows being achieved.
Pool assignment
Each major banking subsidiary has its own system for pooling and rating small retail loans designed to
reflect the risk profile of its loan portfolios.
Asset evaluation and assessment system
The asset evaluation and assessment system is used to classify assets held by us according to the probability
of collection and the risk of any impairment in value based on borrower classifications consistent with the
borrower ratings and the status of collateral, guarantees, and other factors.
The system is used to conduct write-offs and allocate allowances against credit risk in a timely and adequate
manner.
Quantitative Analysis of Credit Risk
MUFG and its major banking subsidiaries manage credit risk by monitoring credit amount and expected
losses, and run simulations based on internal models to estimate the maximum amount of credit risk. These
models are used for internal management purposes, including loan pricing and measuring economic capital.
When quantifying credit risk amounts using the internal models, MUFG and its major banking subsidiaries
consider various parameters, including the probability of default, loss given default, and exposure at default used
in their borrower ratings, facility risk ratings and pool assignments as well as any credit concentration risk in
particular borrower groups or industry sectors. MUFG and its major banking subsidiaries also share credit
portfolio data in appropriate cases.
183
Loan Portfolio Management
We aim to achieve and maintain levels of earnings commensurate with credit risk exposure. Products are
priced to take into account expected losses, based on the internal credit ratings.
We assess and monitor loan amounts and credit exposure by credit rating, industry and region. Portfolios are
managed to limit concentrations of risk in specific categories in accordance with our Large Credit Guidelines.
To manage country risk, we have established specific credit ceilings by country. These ceilings are reviewed
when there is a material change in a country’s credit standing, in addition to being subject to a regular periodic
review.
Continuous CPM Improvement
With the prevalence of securitized products and credit derivatives in global markets, we seek to supplement
conventional CPM techniques with advanced methods based on the use of such market-based instruments.
Through credit risk quantification and portfolio management, we aim to improve the risk return profile of
the Group’s credit portfolio, using financial markets to rebalance credit portfolios in a dynamic and active
manner based on an accurate assessment of credit risk.
Risk Management of Strategic Equity Portfolio
Strategic equity investment risk is the risk of loss caused by a decline in the prices of our equity
investments.
We hold shares of various corporate clients for strategic purposes, in particular to maintain long-term
relationships with these clients. These investments have the potential to increase business revenue and appreciate
in value. At the same time, we are exposed to the risk of price fluctuation in the Japanese stock market. For that
reason, in recent years, it has been a high priority for us to reduce our equity portfolio to limit the risks associated
with holding a large equity portfolio, but also to respond to applicable regulatory requirements as well as
increasing market expectations and demands for us to reduce our equity portfolio. We are required to comply
with a regulatory framework that prohibits Japanese banks from holding an amount of shares in excess of their
adjusted Tier 1 capital.
We use quantitative analysis to manage the risks associated with the portfolio of equities held for strategic
purposes. According to internal calculations, the market value of our strategically held (Tokyo Stock Exchange-
listed) stocks (excluding foreign stock exchange-listed stocks) as of March 31, 2019 was subject to a variation of
approximately ¥3.1billion when TOPIX index moves one point in either direction.
We seek to manage and reduce strategic equity portfolio risk based on quantitative analysis such as the
sensitivity analysis described above. The aim is to keep this risk at appropriate levels compared with Tier 1
capital while generating returns commensurate with the degree of risk exposure.
Market Risk Management
Market risk is the risk that the value of our assets and liabilities could be adversely affected by changes in
market variables such as interest rates, securities prices, or foreign exchange rates.
Management of market risk at MUFG aims to control related risk exposure across the Group while ensuring
that earnings are commensurate with levels of risk.
184
Market Risk Management System
We have adopted an integrated system to manage market risk from our trading and non-trading activities.
The holding company monitors group-wide market risk, while each of the major subsidiaries manages its market
risks on a consolidated and global basis.
At each of the major subsidiaries, checks and balances are maintained through a system in which back and
middle offices operate independently from front offices. In addition, separate Asset-Liability Management, or
ALM, Committee and Risk Management Meetings are held at each of the major subsidiaries every month to
deliberate important matters related to market risk and control.
The holding company and the major subsidiaries allocate economic capital commensurate with levels of
market risk and determined within the scope of their capital bases. The major subsidiaries have established
quantitative limits relating to market risk based on their allocated economic capital. In addition, in order to keep
losses within predetermined limits, the major subsidiaries have also set limits for the maximum amount of losses
arising from market activities. The following diagram summarizes the market risk management system of each
major subsidiary:
Market Risk Management System of Our Major Subsidiaries
Board of Directors / Executive Committee
ALM Committee / Risk Management Meeting
Delegation of
authority
Front Office
Trading result report
Quantitative risk monitoring
Confirmation of contracts and agreements
Back Office
Report
Middle Office
(Market risk management
departments)
Market Risk Management and Control
At the holding company and the major subsidiaries, market risk exposure is reported to the Chief Risk
Officers on a daily basis. At the holding company, the Chief Risk Officer monitors market risk exposure across
the Group as well as the major subsidiaries’ control over their quantitative limits for market risk and losses.
Meanwhile, the Chief Risk Officers at the major subsidiaries monitor their own market risk exposure and their
control over their quantitative limits for market risk and losses. In addition, various analyses on risk profiles,
including stress testing, are conducted and reported to the Executive Committees and the Corporate Risk
Management Committees on a regular basis. At the business unit levels in the major subsidiaries, the market
risks on their marketable assets and liabilities, such as interest rate risk and foreign exchange rate risk, are
controlled by entering into various hedging transactions using marketable securities and derivatives.
As part of our market risk management activities, we use certain derivative financial instruments to manage
our interest rate and currency exposures. We maintain an overall interest rate risk management strategy that
incorporates the use of interest rate contracts to minimize significant unplanned fluctuations in earnings that are
caused by interest rate volatility. We enter into interest rate swaps and other contracts as part of our interest rate
risk management strategy primarily to alter the interest rate sensitivity of our loans, investment securities and
deposit liabilities. Our principal objectives in risk management include asset and liability management. Asset and
liability management is viewed as one of the methods for us to manage our interest rate exposures on interest-
earning assets and interest-bearing liabilities. Interest rate contracts, which are generally non-leveraged generic
185
interest rate and basis swaps, options and futures, allow us to effectively manage our interest rate risk position.
Option contracts primarily consist of caps, floors, swaptions and options on index futures. Futures contracts used
for asset and liability management activities are primarily index futures providing for cash payments based upon
the movement of an underlying rate index. We enter into forward exchange contracts, currency swaps and other
contracts in response to currency exposures resulting from on-balance sheet assets and liabilities denominated in
foreign currencies in order to limit the net foreign exchange position by currency to an appropriate level.
These market risk management activities are performed in accordance with the predetermined rules and
procedures. The internal auditors regularly verify the appropriateness of the management controls over these
activities and the risk evaluation models adopted.
Market Risk Measurement Model
Market risks consist of general risks and specific risks. General market risks result from changes in entire
markets, while specific risks relate to changes in the prices of individual stocks and bonds which are independent
of the overall direction of the market.
To measure market risks, MUFG uses the VaR method which estimates changes in the market value of
portfolios within a certain period by statistically analyzing past market data. Since the daily variation in market
risk is significantly greater than that in other types of risk, MUFG measures and manages market risk using VaR
on a daily basis.
Market risk for trading and non-trading activities is measured using a uniform market risk measurement
model. The principal model used for these activities is a historical simulation, or HS, model (holding period,
10 business days; confidence interval, 99%; and observation period, 701 business days). The HS model
calculates VaR amounts by estimating the profit and loss on the current portfolio by applying actual fluctuations
in market rates and prices over a fixed period in the past. This method is designed to capture certain statistically
infrequent movements, such as a fat tail, and accounts for the characteristics of financial instruments with
non-linear behavior. The holding company and banking subsidiaries also use the HS model as part of the
calculation of their Basel III regulatory capital adequacy ratios.
In calculating VaR using the HS method, we have implemented an integrated market risk measurement
system throughout the Group. Our major subsidiaries calculate their VaR based on the risk and market data
prepared by the information systems of their front offices and other departments. The major subsidiaries provide
this risk data to the holding company, which calculates overall VaR, taking into account the diversification effect
among all portfolios of the major subsidiaries.
For the purpose of internally evaluating capital adequacy on an economic capital basis in terms of market
risk, we use this market risk measurement model to calculate risk amounts based on a holding period of one year
and a confidence interval of 99.9%.
Monitoring and managing our sensitivity to interest rate fluctuations is the key to managing market risk in
MUFG’s non-trading activities. The major banking subsidiaries take the following approach to measuring risks
concerning core deposits, loan prepayments and early deposit withdrawals.
To measure interest rate risk relating to deposits without contract-based fixed maturities, the amount of
“core deposits” is calculated through a statistical analysis based on deposit balance trend data and the outlook for
interest rates on deposits, business decisions, and other factors. The amount of “core deposit” is categorized into
various groups of maturity terms of up to ten years to recognize interest rate risk. The calculation assumptions
and methods to determine the amount of core deposits and maturity term categorization are regularly reviewed.
Meanwhile, deposits and loans with contract-based maturities are sometimes cancelled or repaid before their
maturity dates. To measure interest rate risk for these deposits and loans, we reflect these early termination
186
events mainly by applying early termination rates calculated based on a statistical analysis of historical
repayment and cancellation data together with historical market interest rate data.
Summaries of Market Risks (Fiscal Year Ended March 31, 2019)
Trading activities
The aggregate VaR for our total trading activities as of March 31, 2019 was ¥20.84 billion, comprising
interest rate risk exposure of ¥20.58 billion, foreign exchange risk exposure of ¥4.44 billion, and equity-related
risk exposure of ¥1.55 billion. Compared with the VaR as of March 31, 2018, we experienced an increase in
market risk during the fiscal year ended March 31, 2019, primarily due to an increase in interest rate risk.
Our average daily VaR for the fiscal year ended March 31, 2019 was ¥14.25 billion. Based on a simple sum
of figures across market risk categories, interest rate risk accounted for approximately 67%, foreign exchange
risk for approximately 23% and equity-related risk for approximately 10%, of our total trading activity market
risks.
Due to the nature of trading operations which involves frequent changes in trading positions, market risk
varied substantially during the fiscal year, depending on our trading positions.
The following tables set forth the VaR related to our trading activities by risk category for the periods
indicated:
April 1, 2017—March 31, 2018
Average
Maximum(1) Minimum(1) March 31, 2018
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . .
¥13.58
13.28
6.59
5.96
4.66
1.81
0.01
(6.18)
¥18.46
16.93
9.79
8.46
7.69
5.72
0.20
—
¥11.29
11.47
4.70
3.94
2.62
0.62
0.00
—
¥13.27
12.79
6.72
4.63
3.83
1.99
0.00
(5.34)
(in billions)
April 1, 2018—March 31, 2019
Average
Maximum(1) Minimum(1) March 31, 2019
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . .
¥14.25
13.32
5.52
5.28
4.52
2.06
0.00
(5.65)
¥35.71
20.94
9.45
11.23
7.26
26.66
0.05
—
¥11.42
10.78
3.44
3.27
3.10
0.98
0.00
—
¥20.84
20.58
4.40
11.03
4.44
1.55
0.00
(5.73)
(in billions)
Assumptions for VaR calculations:
Historical simulation method
Holding period: 10 business days
Confidence interval: 99%
Observation period: 701 business days
Note:
(1) The maximum and minimum VaR overall and for various risk categories were taken from different days. A simple summation of VaR by
risk category is not equal to total VaR due to the effect of diversification.
187
The average daily VaR by quarter in the fiscal year ended March 31, 2019 was as follows:
Quarter
April—June 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July—September 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October—December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January—March 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily average VaR
(in billions)
¥13.84
13.71
14.51
14.96
The quantitative market risk figures from trading activities tend to fluctuate widely due to the market
sensitive nature of the trading business. During the fiscal year ended March 31, 2019, the revenue from our
trading activities has been relatively stable, keeping positive numbers in 244 days out of 259 trading days in the
period. During the same period, there were 62 days with positive revenue exceeding ¥1 billion and 1 day with
negative revenue exceeding minus ¥1 billion.
Non-trading Activities
The aggregate VaR for our total non-trading activities as of March 31, 2019, excluding market risks related
to our strategic equity portfolio and measured using the same standards as trading activities, was ¥315.5 billion.
Market risk related to interest rates equaled ¥283.1 billion and equities-related risk equaled ¥202.5 billion.
Compared with the VaR as of March 31, 2018, we experienced a decrease in market risk during the fiscal year
ended March 31, 2019, primarily due to a decrease in interest rate risk and equities-related risk. For a description
of our strategic equity investment risk management, see “—Risk Management of Strategic Equity Portfolio.”
Based on a simple sum of figures across market risk categories, interest rate risks accounted for
approximately 58% of our total non-trading activity market risks. Looking at a breakdown of interest rate related
risk by currency, as of March 31, 2019, the yen accounted for approximately 44% while the U.S. dollar
accounted for approximately 32%, and the euro approximately 24%.
The following tables set forth the VaR related to our non-trading activities by risk category for the periods
indicated:
April 1, 2017—March 31, 2018
Average Maximum(1) Minimum(1) March 31, 2018
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities(2)
Less diversification effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
¥ 305.2
236.1
146.2
8.0
233.1
(151.7)
394.6
¥330.1
253.5
174.1
10.8
271.9
—
440.5
(in billions)
¥270.1
212.6
116.5
3.4
171.0
—
348.4
¥ 304.9
231.2
128.5
10.0
225.9
(154.9)
385.9
April 1, 2018—March 31, 2019
Average Maximum(1) Minimum(1) March 31, 2019
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
¥ 290.3
219.2
114.0
9.5
215.6
(170.1)
345.3
¥309.8
240.3
140.8
11.2
245.1
—
399.2
(in billions)
¥265.2
169.6
85.9
2.8
147.4
—
308.0
¥ 283.1
169.6
122.2
4.0
202.5
(174.1)
315.5
188
Assumptions for VaR calculations:
Historical simulation method
Holding period: 10 business days
Confidence interval: 99%
Observation period: 701 business days
Notes:
(1) The maximum and minimum VaR overall for each category and in total were taken from different days. A simple summation of VaR by
risk category is not equal to total VaR due to the effect of diversification.
(2) The equities-related risk figures do not include market risk exposure from our strategic equity portfolio.
The average daily interest rate VaR by quarter in the fiscal year ended March 31, 2019 was as follows.
Quarter
April—June 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July—September 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October—December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January—March 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily average VaR
(in billions)
¥370.5
352.0
326.1
332.7
Comparing the proportion of each currency’s interest rate VaR to the total interest rate VaR as of March 31,
2019 against that as of March 31, 2018, there was a 9 percentage point decrease in the Japanese yen from 53% to
44%, a 2 percentage point increase in the U.S. dollar from 30% to 32%, and a 7 percentage point increase in the
euro from 17% to 24%.
Backtesting
We conduct backtesting in which a VaR is compared with hypothetical profits and losses on a daily basis to
verify the accuracy of our VaR measurement model. We also conduct additional backtesting using other
methods, including testing VaR against actual realized and unrealized losses and testing VaR by various
changing parameters such as confidence intervals and observation periods used in the model.
Hypothetical losses never exceeded VaR in the fiscal year ended March 31, 2019. This means that our VaR
model provided reasonably accurate measurements of market risk during the fiscal year.
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The following graph shows daily VaR of trading activities and the distribution of corresponding
hypothetical profits and losses for the fiscal year ended March 31, 2019:
daily PL
(billion Yen)
excess:0time
0
2
4
6
8
10
12
12
10
8
6
4
2
0
- 2
- 4
- 6
- 8
- 10
- 12
The following graph shows VaR of trading activities and hypothetical profits and losses on a daily basis for
VaR(billion Yen)
the fiscal year ended March 31, 2019:
(billion Yen)
12
daily PL
VaR
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
April 2018
March 2019
Stress Testing
We use an HS-VaR model, which calculates potential changes in the market value of our portfolio as a
statistically possible amount of losses that could be incurred due to market fluctuations within a certain period (or
holding period, of 10 business days) based on historical market volatility for a certain period (or observation
period, of 701 business days, or approximately three years). Actual losses may exceed the value at risk obtained
by the application of the model in the event, for example, that the market fluctuates to a degree not accounted for
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in the observation period, or that the correlations among various risk factors, including interest rates and foreign
currency exchange rates, deviate from those assumed in the model.
In order to complement these weaknesses of the HS-VaR model and measure potential losses that the model
is not designed to capture, we conduct stress testing. Through the daily stress testing, we estimate maximum
potential losses in each market on the current trading portfolio based on the worst ten-day historical volatility
recorded during the VaR observation period of 701 days. As of March 31, 2019, we held a total trading activity
position subject to estimated maximum potential losses of ¥15.4 billion as compared to ¥8.8 billion as of
March 31, 2018. In addition, the holding company and major subsidiaries conduct stress testing, as appropriate,
by applying various stress scenarios, including those which take into account estimates regarding future market
volatility, in order to better identify risks and manage our portfolio in a more stable and appropriate manner. The
holding company and major subsidiaries also measure stressed VaR relating to their trading activities based on a
one-year observation period with the highest VaR at least in the immediately preceding ten years.
Funding Liquidity Risk Management
Liquidity risk is the risk of incurring losses if a poor financial position hampers the ability to meet funding
requirements, or necessitates fund procurement at interest rates markedly higher than normal.
Our major subsidiaries maintain appropriate liquidity in both Japanese yen and foreign currencies by
managing their funding sources and mechanisms, such as liquidity gap, liquidity-supplying products such as
commitment lines, and buffer assets.
We have established a group-wide system for managing liquidity risk by categorizing the risk in the
following three stages: normal, concern and crisis. The front offices and risk management offices of the major
subsidiaries and the holding company exchange information and data on liquidity risk even at the normal stage.
At higher alert stages, we centralize information about liquidity risk and discuss issues relating to group-wide
liquidity control actions among Group companies, if necessary. We have also established a system for liaison and
consultation on funding in preparation for contingency, such as natural disasters, wars and terrorist attacks. The
holding company and the major subsidiaries conduct group-wide contingency preparedness drills on a regular
basis to ensure smooth implementation in the event of an emergency.
In addition, we have established a group-wide system for ensuring compliance with the minimum regulatory
liquidity coverage ratio requirements by categorizing the risk in the following three stages: sufficient, concern
and insufficient. The holding company and the major subsidiaries exchange information and data on LCR even at
the sufficient stage. At higher alert stages, we hold group-wide LCR liaison meetings to discuss issues relating to
LCR and, based on the discussion as well as the information and data that have been shared, take
countermeasures to improve LCR as necessary.
For more information, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Financial Condition—Sources of Funding and Liquidity.”
Operational Risk Management
Operational risk refers to the risk of loss caused by either internal control issues such as inadequate
operational processes or misconduct, system failures, or external factors such as serious political instability,
major terrorist activity, health epidemics or natural disasters. The term includes a broad range of risks that could
lead to losses, including operations risk, information risk, IT risk, tangible asset risk, personnel risk,
incompliance with laws and regulations risk, and legal risk. These risks that comprise operational risk are
referred to as sub-category risks.
The holding company has established, based on its Executive Committee’s determination, the MUFG
Operational Risk Management Policy as a group-wide policy for managing operational risk. This policy sets
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forth the core principles regarding operational risk management, including the definition of operational risk, and
the risk management system and processes. Under the policy, the board of directors and the Executive
Committee formulate fundamental principles of operational risk management and establish and maintain an
appropriate risk management system. The Chief Risk Management Officer is responsible for recognizing,
evaluating, and appropriately managing operational risk in accordance with the fundamental principles
formulated by the board of directors and the Executive Committee. A division in charge of operational risk
management has been established that is independent of business promotion sections to manage overall
operational risk in a comprehensive manner. These fundamental principles have also been approved by the
boards of directors of the major subsidiaries, providing a consistent framework for operational risk management
of the Group. The diagram below sets forth the operational risk management system of each major banking
subsidiary:
Operational Risk Management System of Our Major Banking Subsidiaries
Board of Directors/Execu(cid:2)ve Commi(cid:3)ee
commi(cid:3)ees regarding risk management
Audit Commi(cid:3)ee
(Repor(cid:2)ng to
Board of Directors)
Repor(cid:2)ng on risk profile
Instruc(cid:2)on
Repor(cid:2)ng
Instruc(cid:2)on
Head office/
domes(cid:2)c and
overseas units etc.
Instruc(cid:2)on
Control oprera(cid:2)on
divisions of the
sub-category risks
Review and
Challenge
Opera(cid:2)onal risk
management
divisions
Repor(cid:2)ng
Repor(cid:2)ng
Audit
Audit divisions
As set forth in the following diagram, we have established a risk management framework for loss data
collection, control self-assessment, and measurement of operational risk in order to appropriately identify,
recognize, evaluate, measure, control, monitor and report operational risk.
We have also established group-wide reporting guidelines with respect to loss data collection and its
monitoring. We focus our efforts on ensuring accurate assessment of the status of operational risk losses and the
implementation of appropriate countermeasures, while maintaining databases of internal and external loss events.
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The following diagram summarizes our operational risk management framework:
Operational Risk Management Framework
identify and recognize
evaluate and measure
control
monitor and report
incident
occured
causal analysis
implement preventive
measures
monitoring
record
record
major incidents and misconduct
create potential loss
create potential loss
scenario
scenario
internal loss
internal loss
data
external
external loss
data
prompt reporting to
prompt reporting to
management and
management and
relevant supervisors
relevant supervisers
risk measurement
risk measurement
allocate economic
allocate economic
capital to
capital to
business units
business units
/subsidiaries
/subsidiaries
monitoring of
monitoring of
economic capital
risk evaluation and management through Control Self-Assessment
risk evaluation and management through Control Self-Assessment
Operations Risk Management
Operations risk refers to the risk of incurring losses arising from negligence of correct operational
processing, incidents or misconduct involving officers or staff, as well as risks similar to this risk. The Group
companies offer a wide range of financial services, ranging from commercial banking products such as deposits,
exchange services and loans to trust and related services covering pensions, securities, real estate and
securitization, as well as transfer agent services. Cognizant of the potentially significant impact that operations
risk-related events could have in terms of both economic losses and damage to our reputation, our banking
subsidiaries continue to work on improving their management systems to create and apply appropriate operations
risk-related controls.
Specific ongoing measures to reduce operations risk include the development of databases to manage,
analyze and prevent the recurrence of related loss events; efforts to tighten controls over administrative
procedures and related operating authority, while striving to improve human resources management, investments
in systems to improve the efficiency of administrative operations, and programs to expand and upgrade internal
auditing and operational guidance systems.
Senior management receives regular reports on the status of our businesses from an operations risk
management perspective. We work to promote the sharing within the Group of information and expertise
concerning any operational incidents and the measures implemented to prevent any recurrence.
Efforts to upgrade the management of operations risk continue with the aim of providing our customers with
a variety of high-quality services.
Information Risk Management
Information risk refers to the risk of loss caused by loss, alteration, falsification or leakage of personal or
other confidential information, as well as risks similar to these risks. We recognize our grave social and legal
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responsibility to handle customer information properly, and we continue to work on enhancing our framework to
manage such risk.
Complying with laws and regulations requiring proper handling of customer information, we implement
information security management measures, including the establishment of an information risk management
framework, enhancement of our internal operational procedures, and training courses mandatory for all officers
and staff.
We have also formulated our Personal Information Protection Policy as the basis for our ongoing programs
designed to protect the confidentiality of personal information.
With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on
a group-wide basis of experience, knowledge and expertise related to information risk incidents.
IT Risk Management
IT risk refers to the risk of loss arising from destruction, suspension, malfunction or misuse of IT, or
unauthorized alteration and leakage of electronic data caused by insufficient IT systems planning, development
or operations or by vulnerabilities of or external threats to IT system security, including cybersecurity, as well as
risks similar to these risks.
Systems planning, development and operations include appropriate design and extensive testing phases to
ensure that systems are designed to help prevent failures while providing sufficient safeguards for the security of
electronic data including personal information.
System development projects are managed and overseen by a team dedicated to perform such management
and oversight functions, and the development status of any mission-critical IT systems is reported regularly to
senior management.
We have developed disaster countermeasures systems and have also been investing in duplication of the
Group’s IT infrastructure to minimize damage in the event of any system failure. Emergency drills are conducted
to help increase staff preparedness.
With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on
a group-wide basis of experience, knowledge and expertise related to system failures.
In addition, the risk of increasingly sophisticated cyber-attacks is a significant focus of the Board of
Directors, and the Board regularly receives reports on our cybersecurity program. We continue to work to
strengthen measures designed to address and mitigate the risk, including the establishment of MUFG-CERT, our
Computer Security Incident Response Team, implementation of multi-layered defense and detection measures,
enhancement of monitoring systems through our Security Operation Centers, and cooperation with global
organizations with relevant expertise. MUFG-CERT is charged with the responsibility of taking, coordinating
and managing prompt action in response to cyber security incidents to mitigate their impact.
Tangible Asset Risk Management
Tangible asset risk refers to the risk of loss due to damage to tangible assets or deterioration in the
operational environment caused by disasters or inadequate asset maintenance, as well as risks similar to this risk.
Tangible assets include movable physical properties and immovable properties, owned or leased, such as land,
buildings, equipment attached to buildings, fixtures and furniture. We recognize the potentially significant impact
tangible asset risk-related events can have on the management and execution of the Group’s businesses, which in
turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue
to improve our risk control framework designed to appropriately manage such risk.
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Personnel Risk Management
Personnel risk refers to the risk of loss due to an outflow or loss of human resources or deterioration in
employee morale, as well as risks similar to this risk. We recognize the potentially significant impact personnel
risk-related events can have on the management and execution of the Group’s businesses, which in turn can
result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to work
on improving our risk control framework designed to appropriately manage such risk.
Incompliance with Laws and Regulations Risk Management
Incompliance with laws and regulations risk refers to the risk of loss due to failure to compliance with laws
and regulations, as well as risks similar to these risks. We recognize the potentially significant impact compliance
risk-related events can have on the management and execution of the Group’s businesses, which in turn can
result in economic, reputation and other losses to, or diminished market confidence in, the Group. Accordingly,
we continue to work on improving our compliance risk control framework designed to appropriately manage
such risk.
Specifically, we have established our MUFG Group Code of Conduct as the basic guideline for the Group’s
directors and employees. In addition, a compliance management division has been established at each of the
holding company and the major subsidiaries. See “—Compliance” below.
Legal Risk Management
Legal risk refers to the risk of loss due to failure to identify or address legal issues relating to contracts and
other business operations or insufficient handling of lawsuits, as well as risks similar to these risks.
The legal division at each of the holding company and the major subsidiaries centrally and uniformly
evaluates legal issues prior to entering into contracts or commencing new business operations, deals with legal
disputes and manages other legal matters. With the aim of effectively managing our legal risk arising from our
globally expanding business operations, we have established a global and group-wide legal risk management
framework and promote sharing of experience, knowledge and practices relating to legal risk issues on a global
and group-wide basis.
Regulatory Capital Requirements for Operational Risk
(1) Adoption of the Advanced Measurement Approach (AMA)
We have employed the AMA since March 31, 2012, in place of the Standardized Approach that we had been
using previously, for calculation of the operational risk equivalent amount in connection with measuring capital
adequacy ratios based on the Basel Standards. On the other hand, we use the Basic Indicator Approach, or BIA,
for entities that are deemed to be less important in the calculation of the operational risk equivalent amount and
for entities that are still preparing to implement the AMA.
(2) Outline of AMA
We have established a measurement model designed to account for four data elements—internal loss data,
external loss data, scenario analysis, and business environment and internal control factors, or BEICFs—and
calculate the operational risk equivalent amount by estimating the maximum loss using a 99.9th percentile
one-tailed confidence interval and a one-year holding period.
In calculating the operational risk equivalent amount, we exclude expected losses relating to the amount of
allowance for repayment of excess interest associated with the consumer finance business of a subsidiary. We do
not exclude any other expected losses and do not reflect the risk mitigating impact of insurance. In addition, we
take into account credit risk-related events that are not reflected in the measurement of the credit risk equivalent
amount.
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(3) Outline of Measurement Model
Our operational risk equivalent amount measured under the AMA is a simple sum of the amounts calculated
separately for (1) MUFG Bank on a consolidated basis, (2) Mitsubishi UFJ Trust and Banking on a consolidated
basis, and (3) the holding company and other principal consolidated subsidiaries, in accordance with applicable
FSA rules. For each of MUFG Bank and Mitsubishi UFJ Trust and Banking on a consolidated basis, the
operational risk equivalent amount is a simple sum of the amounts calculated based on the seven loss event types
defined by the Basel Standards. For other Group companies, the operational risk equivalent amount is a simple
sum of the amounts calculated based on eight loss event types consisting of the seven loss event types defined by
the Basel Standards and an additional loss event type representing losses relating to repayment of excess interest
associated with the consumer finance business of a subsidiary. We do not reflect the correlation effects among
the loss event types in the calculation of our operational risk equivalent amount.
Outline of Measurement Model
Internal Loss Data
Litigation Data
External Loss Data
Business Environment and
Internal Control Factors
Scenario Analysis
Frequency Distribution
Internal Loss Data
Scenario Data
Occurrence
Frequency
Occurrence
Frequency
Loss Amount
Loss Amount
Loss Severity Distribution
n
o
i
t
Loss Distribution
l
i
a
u
m
S
o
l
r
a
C
e
t
n
o
M
Basel Loss Event Types
Internal Fraud
Risk Equivalent Amount
External Fraud
Risk Equivalent Amount
Employment Practices and Workplace Safety
Risk Equivalent Amount
Clients, Products, and Business Practices
Risk Equivalent Amount
Damage to Physical Assets
Risk Equivalent Amount
Business Disruption and System Failures
Risk Equivalent Amount
Execution, Delivery, and Process Management
Risk Equivalent Amount
Repayment of Excess Interest
Risk Equivalent Amount
The risk equivalent amount for each loss event type represents the amount of maximum loss estimated with
a 99.9th percentile one-tailed confidence interval and a one-year holding period based on the distribution of
losses arising from all relevant risk events for a one-year period (Loss Distribution). A Loss Distribution
combines a Frequency Distribution (through which the frequency of occurrence of risk events is expressed) and a
Loss Severity Distribution (through which the amounts of losses resulting from risk events are expressed)
through Monte Carlo simulations. The data used for this purpose include internal loss data and scenario data.
scenario data are generated through a scenario analysis. External data and BEICFs are taken into account in the
scenario analysis and reflected in scenario data. The Frequency Distribution is derived from the occurrence
frequency information in internal loss data and scenario data expressed through a Poisson Distribution. The Loss
Severity Distribution is derived from the amount information in internal loss data and scenario data expressed in
a non-parametric manner (where no underlying distribution is assumed).
With respect to the risk of losses relating to repayment of excess interest associated with the consumer
finance business of a subsidiary, the risk equivalent amount represents the amount of maximum loss estimated
with a 99.9th percentile one–tailed confidence interval and a one-year holding period based on a normal
distribution assumed by applying data on losses that arose in a given period, excluding any related expected
losses.
We confirm the appropriateness of the measurement models by periodic verification and back testing.
(4) Outline of Scenario Analysis
As an initial step of our scenario analysis, we identify potential severe loss events that we have not
experienced but may potentially experience in the future. In this identification process, we seek to ensure
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exhaustive coverage of potential severe loss events by comprehensively examining our experience relating to loss
events and legal proceedings, external loss data, the control self-assessment results and other relevant
information.
In the next step, we prepare scenario data for each identified severe loss event by quantifying the values
depending on its occurrence frequency and loss severity, taking into account relevant transaction amounts and
restructuring costs as well as BEICFs. In preparing scenario data, we apply an analysis method we deem
appropriate for the type and nature of the operational risk involved.
In order to obtain an operational risk equivalent amount that is commensurate with, and appropriate for, our
risk profile, we assess the need for an additional scenario or modification to our existing scenarios semi-annually.
We then reflect, as necessary, new risks arising as a result of changes in the business environment and the
results of the implementation of measures to enhance our internal controls in response to newly identified risks in
our scenario data.
Reputation Risk Management
Reputation risk refers to the risk of harm to our corporate value arising from perceptions of our customers,
shareholders, investors or other stakeholders and in the market or society that we deviate from their expectations
or confidence. We recognize that such risk, if materialized, can have a material negative impact on our business
and continue to work on enhancing our framework designed to appropriately manage the risk based on our
Corporate Vision, MUFG Group Code of Conduct, and other rules and codes of the Group.
Specifically, in order to manage our reputation risk effectively on a group-wide basis, we have established a
risk management system designed to ensure mutual consultation and reporting if a reputation risk-related event
occurs or is anticipated and, through this system, share relevant information within the Group.
Through the risk control framework and risk management system, we seek to prevent reputation risk-related
events and minimize damage to the corporate value of the Group by promptly obtaining an accurate
understanding of relevant facts relating to risk events and disclosing information concerning such events and the
measures we take in response to such events in an appropriate and timely manner.
Model Risk Management
Model risk refers to the risk of loss due to decision-making based on information provided by an inaccurate
model or the misuse of a model. We recognize the potentially significant impact model risk-related events can
have on the management and execution of the Group’s businesses, which in turn can result in economic losses to,
or diminished market confidence in, the Group. Models are used for increasingly wider and more important
purposes, including valuing exposures, instruments and positions, measuring risks, and determining capital
adequacy. Accordingly, we continue to work on improving our risk control framework.
Compliance
Basic Policy
We have clarified our mission, our vision and our values in the Corporate Vision and have expressed our
commitment to meeting the expectations of customers and society as a whole. Furthermore, we have established
MUFG Group Code of Conduct as the guidelines for how the Group’s directors and employees act to realize the
Corporate Vision, in which we have expressed our commitment to complying with laws and regulations, to
acting with honesty and integrity, and to behaving in a manner that supports and strengthens the trust and
confidence of society.
197
In addition, as we expand the geographic scope of our business globally, we are committed to keeping
abreast of developments in laws and regulations of the jurisdictions in which we operate including anti-money
laundering and anti-bribery, as well as paying attention to trends in financial crimes.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Legal and regulatory
changes could have a negative impact on our business, financial condition and results of operations.” and
“Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may become subject to
regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which
could result in significant financial losses, restrictions on our operations and damage to our reputation.” See also
“Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.”
MUFG Group Code of Conduct
The Code of Conduct encapsulates the standards that guide staff conduct and decision-making in our
day-to-day business activities under the MUFG Corporate Vision. It is designed to provide guidance in
times of doubt, or when we find it difficult to know if we are making the right choice.
Chapter 1 deals with the attitude we should adopt with our customers.
Acting with honesty and integrity and pursuing the best interests of our customers is a core component of
our business practices.
Chapter 2 presents a set of standards designed to help us fulfill our responsibilities as a good corporate
citizen.
MUFG’s reputation depends upon the trust and confidence of our customers and other stakeholders,
including local communities, and we are responsible to society on a global level.
Chapter 3 describes the actions and mindset that will create a stimulating and supportive working
environment as MUFG continues to grow.
Our success depends on building and maintaining a dynamic workplace where all staff can reach their full
potential in ways that support our customers and make a valuable contribution to society as a whole.
Chapter 1.Customer Focus
Our customers are at the center of everything we do, and should always be the focus of our thoughts. Our
aim should be to win the trust and confidence of our customers at all times. MUFG exists today because of the
trust and confidence that customers have placed in us over many years. Our role is to increase and strengthen this
bedrock of trust and confidence. Our activities are not driven by the prospect of short-term gains. Instead, we
look to build ongoing relationships with our customers to support their long-term growth.
1-1 Honesty and Integrity
Our customers are at the center of everything we do. We carry out fair and transparent corporate activities
with honesty and integrity. We treat customer assets with care and respect and strive always to ensure that
our actions do not unjustly damage our customers’ interests.
1-2 Ensuring Quality
To build lasting relationships of trust and confidence with our customers, we listen carefully to what our
customers are telling us, and maintain thoroughgoing quality control of all our products and services, from
planning and development to provision and subsequent revisions, with a view to further enhancing quality.
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1-3 Exceeding Customer Expectations
We aim to meet the diverse needs of our customers worldwide, and to provide services exceeding their
expectations through the highest standards of professionalism, by leveraging our global network and the
consolidated strengths of the entire Group.
Chapter 2 Responsibility as a Corporate Citizen
As we develop our business globally, we comply with all the domestic and international laws and rules that
may apply. We do all we can to maintain stability and confidence in the global financial system, and contribute
to the sound and healthy growth of society. Aware of the responsibility each of us has as a member of MUFG, we
carry out fair and transparent corporate activities with honesty and integrity, in a manner that supports and
strengthens the trust and confidence MUFG has earned from society over many years.
2-1 Adherence to Laws and Rules
In addition to adhering strictly to all domestic and international laws and rules, we strive to do the right
thing based on our strict code of ethics.
Violations of laws or rules damage the vital social infrastructure of the financial system and lead to a loss of
trust in MUFG. We strictly abide by all laws and rules relating to our business, including the prohibition of
insider trading, ban on unfair trading practices, anti-bribery and corruption and appropriate disclosure.
2-2 Prevention of Financial Crime
We have zero tolerance for financial crime or any attempt to circumvent the rules and procedures aimed at
preventing financial crime. We take all reasonable steps possible to prevent our products and services being
used by individuals or entities involved in illegal or improper activities such as money laundering and
terrorist financing.
2-3 Contributing to Society
We respect the history, cultures, and customs of different countries and regions around the world, and work
to contribute to the development of local and global communities and the protection of the environment
throughout our corporate activities and the social volunteer efforts of our staff.
Chapter 3 Attitudes and Behaviors in the Workplace
We strive to respond and adapt promptly to the diversifying and evolving needs of our customers and the
rapidly changing environment in which we work. The working environment at MUFG fosters mutual respect,
enables individuals to make the most of their abilities as professionals, and maximizes the power of teamwork
across regions and different areas of business, encouraging all staff to embrace new challenges. We work always
to protect and maintain the tangible and intangible assets and property that MUFG has accumulated.
3-1 Challenge Ourselves to Grow
We strive to enhance our knowledge, expertise, and potential and maximize the power of teamwork. We
believe that the changing business environment represents opportunity and are always ready to embrace new
challenges in new fields.
3-2 Collaborative and Professional Working Environment
We respect the human rights and diversity of all MUFG staff. We do not engage in or tolerate any form of
discrimination or harassment or any other behavior that infringes these beliefs.
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3-3 Protecting MUFG’s Assets and Property
We protect the tangible and intangible assets and property of MUFG and individual Group entities, and do
not tolerate any behavior that might damage these assets.
3-4 Reporting Problem Situations and Seeking Advice
If you become aware of conduct that contravenes the law, company regulations, or the provisions of this
Code of Conduct, or any other problem situations, you should promptly report the matter and seek advice
from a supervisor or issue a report via MUFG’s whistleblowing system.
Compliance Framework
Management and coordination of compliance-related matters are the responsibility of separate compliance
management divisions established at the holding company and the major subsidiaries. Each compliance
management division formulates compliance programs and organizes training courses to promote compliance,
and regularly reports to each company’s board of directors and Executive Committee on the status of compliance
activities.
The holding company has established a Group Compliance Committee and each major subsidiary has
established a Compliance Committee for deliberating key issues related to compliance. Additionally, the holding
company has a Group Chief Compliance Officer, or CCO, Committee, which consists of the CCO of the holding
company acting as committee chairman and the CCOs of the major subsidiaries. The Group CCO Committee
deliberates important matters related to compliance and compliance-related issues for which the Group should
share a common understanding.
200
The following diagram summarizes our compliance framework:
Compliance Framework
Holding Company (MUFG)
Board of Directors
Audit Committee
Executive Committee
Group Compliance Committee
CCO (Chief Compliance Officer)
Group CCO Committee
Global Compliance Division/Global Financial Crimes Division
(Coordinate compliance issues)
Consultation
and report
Guidance, advice
and instruction
MUFG Bank
Mitsubishi UFJ Trust and Banking
Mitsubishi UFJ Securities
Holdings
Other Subsidiaries
Group Companies
Internal Reporting System and Accounting Auditing Hotline
The major subsidiaries have established internal reporting systems that aim to identify compliance issues
early so that any problems can be quickly rectified. This system includes an independent external compliance
hotline. Furthermore, the holding company has set up an MUFG Group Compliance Helpline that acts in parallel
with group-company internal reporting systems and provides a reporting channel for directors and employees of
Group companies. In the holding company, the contents of the reported cases as well as the result of surveys is
reported to the audit committee on a regular basis or whenever necessary.
In addition to these internal reporting systems, the holding company has also established an accounting
auditing hotline that provides a means to report any problems related to MUFG accounting.
MUFG Accounting Auditing Hotline
MUFG has set up an accounting auditing hotline to be used to make reports related to instances of improper
practices (violations of laws and regulations) and inappropriate practices, or of practices raising questions about
such impropriety or inappropriateness, regarding accounting and internal control or audits related to accounting
in Group companies. The audit committee oversees the reporting process to ensure the appropriateness and
effectiveness of the reporting process and monitors the reports received through the hotline. The reporting
process works as follows, and may be carried out via letter or e-mail:
Hokusei Law Office, P.C.
Address: Kojimachi 4-3-4, Chiyoda-ku, Tokyo
e-mail: MUFG-accounting-audit-hotline@hokusei-law.com
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When reporting information please pay attention to the following:
‰ Matters subject to reporting are limited to instances regarding the Group companies.
‰
Please provide detailed information with respect to the matter. Without detailed factual information
there is a limit to how much our investigations can achieve.
‰ Anonymous information will be accepted.
‰ No information regarding the identity of the informant will be passed on to third parties without the
approval of the informant him- or herself. However, this excludes instances where disclosure is legally
mandated, or to the extent that the information is necessary for surveys or reports, when data may be
passed on following the removal of the informant’s name.
‰
‰
Please submit reports in either Japanese or English.
If the informant wishes, we will endeavor to report back to the informant on the response taken within a
reasonable period of time following the receipt of specific information, but cannot promise to do so in
all instances.
Internal Audit
Role of Internal Audit
Internal Audit aims to evaluate and assist in the improvement of the effectiveness of governance, risk
management and control processes with high proficiency and independence, thereby contributing to the
enhancement of the corporate value of the MUFG Group and to the achievement of the Group’s corporate vision.
Internal Audit covers all aspects of the Group’s business activities and discusses and evaluates the management
and operational frameworks and the implementation of business operations from legal compliance, rationality
and efficiency perspectives, beyond checking compliance with defined procedures.
In addition, Internal Audit provides instructions and recommendations for operational improvement to
audited divisions and reports to senior management on such instructions and recommendations, thereby
contributing to safeguarding and development of the Group’s assets.
Three Lines of Defense Framework
Risk management is conducted at multiple levels within a business organization, including front-office
divisions in charge of managing specific categories of risk, a compliance division, and an internal audit division.
As for financial institutions, including the MUFG Group, based on the experience of past financial crises,
the traditional risk management structure that was heavily dependent on front-office divisions has been under
close scrutiny. As a result, there is an increasing expectation for financial institutions to achieve more effective
risk management through, for example, appropriate allocation of risk management roles and responsibilities
among various divisions.
202
Cognizant of the importance of these developments, we have adopted the concept of “Three Lines of
Defense” where the roles and responsibilities of each division in risk management are defined, classifying
divisions within a financial institution into “the 1st Line of Defense”, “the 2nd Line of Defense” and “the 3rd
Line of Defense”.
Line
Divisions
Roles
The 1st Line of Defense
Business divisions and
client-facing divisions
• Undertake risks within the extent of risk exposure
assigned
The 2nd Line of Defense
Risk management
division, compliance
division, etc.
• Responsible
and
accountable
for
identifying,
evaluating and controlling business risks
• Ensure that risks are appropriately identified and
managed by the 1st Line of Defense
The 3rd Line of Defense
Internal audit division
•
Independently evaluate the effectiveness of
the
governance, risk management, and control processes
implemented by the 1st and 2nd Lines of Defense
Internal Audit plays an essential role in the Group’s risk management through ongoing communications
with the 1st and 2nd Lines of Defense, while maintaining independence.
Group Internal Audit Framework
The MUFG Group has internal audit functions at the holding company level as well as at the subsidiary
level, which are designed to ensure proficiency and independence through effective collaboration.
The internal audit division of the holding company receives reports from the internal audit divisions of
subsidiaries on the status and results of their internal audits and provides them with instructions and evaluations
as needed.
Reports to the Audit Committee
The holding company has an audit committee within its board of directors as required by the Companies Act
of Japan, and each of the major subsidiaries has established an audit and supervisory committee or an internal
audit and compliance committee. Within each of the holding company and the major subsidiaries, the internal
audit division reports to the committee on important matters, including governing principles for internal audit
plans and the status and results of internal audits.
MUFG Internal Audit Activity Charter
In April 2019, we adopted “MUFG Internal Audit Activity Charter”, which defines our basic policies for
Internal Audit, including its mission, purposes, responsibilities, and roles.
This charter is designed to encourage Internal Audit staff to conduct internal audits in accordance with the
global standards set by the Institute of Internal Auditors, an international organization established for, among
other purposes, formulating practical internal audit standards.
203
Item 12. Description of Securities Other than Equity Securities.
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
For a description of ADSs, each representing one share of our common stock, see Exhibit 2(c) to this
Annual Report.
Fees, charges and other payments relating to ADSs
As a holder of our ADSs, you will be required to pay to The Bank of New York Mellon, as depositary for
the ADRs, or the Depositary, either directly or indirectly, the following fees or charges. The Depositary collects
its fees for delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for
the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making
distributions to investors by deducting those fees from the amounts distributed or by selling a portion of
distributable property to pay the fees.
ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs (or portion thereof)
$0.02 (or less) per ADS
A fee equivalent to the fee that would be payable
if securities distributed to the ADS holder had
been shares and the shares had been deposited for
issuance of ADRs
Registration or transfer fees
Expenses of The Bank of New York Mellon
Taxes and other governmental charges The Bank
of New York Mellon or MUFG Bank, as
custodian, have to pay on any ADS or share
underlying an ADS, for example, stock transfer
taxes, stamp duty or withholding taxes
204
Each issuance of an ADR, including as a result of a
distribution of shares or rights or other property
Each cancellation of an ADR, including if the
agreement terminates
Any cash distribution, to the extent permitted by any
securities exchange on which the ADSs may be listed
for trading
Distribution of securities distributed to holders of
deposited securities which are distributed by the
Depositary to registered ADS holders
Transfer and registration of shares on the share
register from your name to the name of The Bank of
New York Mellon or its agent and vice versa when
you deposit or withdraw shares
Conversion of foreign currency to U.S. dollars, as
well as cable, telex and facsimile transmission
expenses
As necessary
Fees Waived or Paid by the Depositary
The Depositary has agreed to waive the standard out-of-pocket administrative, maintenance and other
expenses for providing services to the registered holders of our ADSs, which include the expenses relating to the
delivery of annual reports, dividend fund remittances, stationery, postage and photocopying. For the fiscal year
ended March 31, 2019, the Depositary waived $135,030.16 of standard out-of-pocket expenses.
The Depositary has also agreed to reimburse us for expenses related to the administration and maintenance
of the ADS program, including investor relations expenses, the annual New York Stock Exchange listing fees
and other program-related expenses. There is a limit on the amount of expenses for which the Depositary will
reimburse us based and conditioned on the number of outstanding ADSs and the amount of dividend fees
collected by the Depositary. For the fiscal year ended March 31, 2019, the Depositary reimbursed us $1.0 million
for such expenses.
205
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
PART II
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
None.
Item 15. Controls and Procedures.
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management,
including the Chief Executive Officer, or CEO, and the Chief Financial Officer, or CFO, of the effectiveness of
our disclosure controls and procedures, as defined in Rule 13a-15(e) under the U.S. Securities Exchange Act of
1934, as of the end of the period covered by this Annual Report.
Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were
effective as of March 31, 2019.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) under the U.S. Securities Exchange Act of 1934. Our internal control over
financial reporting is a process designed by, or under the supervision of, MUFG’s principal executive and
principal financial officers, and effected by MUFG’s board of directors, management, and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:
(i)
(ii)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of MUFG,
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of MUFG are being made only in accordance with authorizations of management and
directors of MUFG, and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of MUFG’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting, no matter how well designed, may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting as of March 31,
2019 based on the criteria established in “Internal Control—Integrated Framework (2013)” issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management
has concluded that MUFG maintained effective internal control over financial reporting as of March 31, 2019.
The effectiveness of our internal control over financial reporting as of March 31, 2019 has been audited by
Deloitte Touche Tohmatsu LLC, an independent registered public accounting firm, as stated in its report,
presented on page 208.
206
Changes in Internal Control Over Financial Reporting
During the period covered by this Annual Report, there has been no change in our internal control over
financial reporting that has materially affected or is reasonably likely to materially affect our internal control
over financial reporting.
207
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Shareholders of
Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group)
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group) (“MUFG”) and subsidiaries (together, the “MUFG Group”)
as of March 31, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the MUFG
Group maintained, in all material respects, effective internal control over financial reporting as of March 31,
2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated financial statements as of and for the year ended March 31, 2019,
of the MUFG Group and our report dated July 10, 2019, expressed an unqualified opinion on those financial
statements.
Basis for Opinion
The MUFG Group’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the MUFG Group’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the
MUFG Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 10, 2019
208
Item 16A. Audit Committee Financial Expert.
Our board of directors has determined that Mr. Akira Yamate, an outside director, is an “audit committee
financial expert” as defined in Item 16A of Form 20-F and is, and has remained since his assumption of office as
a member of our audit committee, “independent” as defined in the listing standards of the NYSE. Mr. Yamate
has spent most of his professional carrier as a certified public accountant in Japan, auditing Japanese
corporations, including those registered with the U.S. Securities and Exchange Commission. Mr. Yamate is also
the chair of our audit committee.
Item 16B. Code of Ethics.
We have adopted a code of ethics, which consists of internal rules named MUFG Group Code of Conduct
(formerly called Principles of Ethics and Conduct), compliance rules, compliance manual and rules of
employment. Each of these rules applies to our principal executive officer, principal financial officer, principal
accounting officer and persons performing similar functions. Our internal compliance rules were most recently
amended on August 2, 2018, reflecting the establishment of a new division within MUFG. A copy of the MUFG
Group Code of Conduct and the sections of our compliance rules, compliance manual and rules of employment
relating to the “code of ethics” (as defined in paragraph (b) of Item 16B of Form 20-F) is attached as Exhibit 11
to this Annual Report.
No waivers of the MUFG Group Code of Conduct or the relevant sections of our compliance rules,
compliance manual and rules of employment were granted to our principal executive officer, principal financial
officer, principal accounting officer, directors or corporate auditors during the fiscal year ended March 31, 2019.
Item 16C. Principal Accountant Fees and Services.
Fees and Services of Deloitte Touche Tohmatsu LLC
The aggregate fees billed by Deloitte Touche Tohmatsu LLC, our independent registered public accounting
firm and its affiliates, for the fiscal years ended March 31, 2018 and 2019 are presented in the following table:
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥8,032
199
307
97
¥8,079
119
172
119
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥8,635
¥8,489
2018
2019
(in millions)
The description of our fees billed for each category described above is as follows:
Audit fees—Audit fees are primarily for an annual audit of our financial statements, review of our semi-
annual condensed financial statements, statutory audit of our financial statements and audits of our subsidiary
financial statements and attestation services relating to the internal controls over financial reporting under
Section 404 of the U.S. Sarbanes-Oxley Act of 2002.
Audit-related fees—Audit-related fees primarily include accounting consultations, agreed upon procedures
on internal controls, employee benefit plan audit, and advisory services relating to internal control reviews.
Tax fees—Tax fees relate primarily to tax compliance, including assistance with preparation of tax return
filings, tax advisory and tax planning services.
All other fees—All other fees primarily include fees for risk management and compliance advisory services.
209
Pre-Approval Policies and Procedures for Services by Deloitte Touche Tohmatsu LLC
Our audit committee performs the pre-approval function required by applicable SEC rules and regulations.
Our audit committee has established pre-approval policies and procedures that MUFG and its subsidiaries must
follow before engaging Deloitte Touche Tohmatsu LLC to perform audit and permitted non-audit services.
When MUFG or a subsidiary intends to engage Deloitte Touche Tohmatsu LLC to perform audit and
permitted non-audit services, it must make an application for pre-approval on either a periodic or case-by-case
basis.
‰
Periodic application is an application for pre-approval made each fiscal year for services that are
expected to be provided by Deloitte Touche Tohmatsu LLC during the next fiscal year.
‰ Case-by-case application is an application for pre-approval made on a case-by-case basis for services to
be provided by Deloitte Touche Tohmatsu LLC that are not covered by the periodic application.
Pre-approval is resolved in principle by our audit committee prior to engagement, although if necessary a
full-time member of our audit committee may consider any case-by-case application for pre-approval on behalf
of the audit committee prior to the next scheduled audit committee meeting. Such decisions made individually by
a full-time member of our audit committee are reported to the audit committee as appropriate at the next
scheduled audit committee meeting.
Fees approved pursuant to the procedures described in paragraph 2-01(c)(7)(i)(C) of Regulation S-X, which
provides for an exception to the general requirement for pre-approval in certain circumstances, were less than
0.1% of the total fees paid to Deloitte Touche Tohmatsu LLC for the fiscal year ended March 31, 2018 and
approximately 0.3% of the total fees paid to Deloitte Touche Tohmatsu LLC for the fiscal year ended March 31,
2019.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Issuer Purchases of Common Stock
April 1 to April 30, 2018 . . . . . . . . . . . . . . . . . . . . . . .
May 1 to May 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . .
June 1 to June 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . .
July 1 to July 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . .
August 1 to August 31, 2018 . . . . . . . . . . . . . . . . . . . .
September 1 to September 30, 2018 . . . . . . . . . . . . . . .
October 1 to October 31, 2018 . . . . . . . . . . . . . . . . . . .
November 1 to November 30, 2018 . . . . . . . . . . . . . . .
December 1 to December 31, 2018 . . . . . . . . . . . . . . .
January 1 to January 31, 2019 . . . . . . . . . . . . . . . . . . .
February 1 to February 28, 2019 . . . . . . . . . . . . . . . . .
March 1 to March 31, 2019 . . . . . . . . . . . . . . . . . . . . .
Total
Number of
Shares
Purchased(1)
2,201
1,468,484
1,880
5,778
5,168
2,458
195,987
108,019
30,509
31,068
18,478
9,202
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,879,232
210
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs(2)
—
—
37,173,600
35,247,100
62,826,400
27,579,300
—
—
—
—
—
—
—
—
74,549,800
85,287,000
125,450,200
40,163,200
—
—
—
232,257,500
—
—
—
—
Average Price
Paid per Share
¥701.82
710.73
670.07
647.41
676.63
688.15
713.55
639.05
613.94
570.64
580.40
572.09
¥646.45
Notes:
(1) The shares purchased were shares constituting less than one unit (100 shares) purchased from registered holders of the shares and shares
purchased pursuant to applicable Japanese law from shareholders who have not responded to communications sent to their registered
addresses for five consecutive years or more and by whom dividend payments have not been received for five consecutive years, each at
the current market price.
(2) During May and June 2018, we repurchased 72,420,700 shares of our common stock for ¥49,999,969,714 under a share repurchase
program that was adopted on May 15, 2018 and completed in June 2018. Under the program, we were authorized by the Board of
Directors to repurchase up to the lesser of an aggregate of 100,000,000 shares of our common stock and an aggregate of ¥50.0 billion
between May 16, 2018 and June 30, 2018. All of the repurchased shares were cancelled on July 20, 2018.
During November and December 2018, we repurchased 159,836,800 shares of our common stock for ¥99,999,974,078 under a share
repurchase program that was adopted on November 13, 2018 and completed in December 2018. Under the program, we were authorized
by the Board of Directors to repurchase up to the lesser of an aggregate of 200,000,000 shares of our common stock and an aggregate of
¥100.0 billion between November 14, 2018 and December 31, 2018. All of the repurchased shares were cancelled on January 22, 2019.
We did not make any purchases of shares of our common stock other than as shown in the above table for
the fiscal year ended March 31, 2019.
In May 2018, 13,049,600 shares were purchased by the trustee of the trust for the first performance-based
stock compensation plan. In connection with the MUFG Americas Holdings Corporation Stock Bonus Plan,
8,149,808 ADSs were purchased by the trustee of the independent trust between April 1, 2018 and March 31,
2019. For descriptions of our stock compensation and bonus plans, see “Item 6.B. Directors, Senior Management
and Employees—Compensation.”
Item 16F. Change in Registrant’s Certifying Accountant.
None.
Item 16G. Corporate Governance.
The NYSE allows NYSE-listed companies that are foreign private issuers, such as MUFG, with certain
exceptions, to follow home-country practices in lieu of the corporate governance practices followed by
U.S. companies pursuant to the NYSE’s Listed Company Manual. The following is a summary of the significant
differences between MUFG’s corporate governance practices and those followed by U.S. listed companies under
the NYSE’s Listed Company Manual.
1. A NYSE-listed U.S. company must have a majority of directors that meet the independence
requirements under Section 303A of the NYSE’s Listed Company Manual.
As of the date of this Annual Report, we have nine outside directors as members of our board of directors,
which consists of a total of sixteen members. Under our governance system, we are required to have outside
directors on each of our nominating, audit and compensation committees, constituting a majority of its members.
For a description of an outside director, see “Item 6.C. Directors and Senior Management—Board Practices.”
The Tokyo Stock Exchange rules require listed companies, including us, to identify at least one individual
who the company believes is unlikely to have a conflict of interest with general shareholders and have such
individual serve as an independent director or outside corporate auditor.
Further, a listed company with fewer than two outside directors who are considered independent based on
such internal standards as the company establishes pursuant to the Tokyo Stock Exchange requirements must
publicly disclose the reason for not having at least two such directors on its board of directors. In addition, if a
listed company determines that at least one-third of the members of its board of directors should be independent
outside directors, the listed company must disclose its policy relating to the determination. We have adopted and
made public our corporate governance policy providing, among other things, that, in general, half of the members
of our board of directors will be independent outside directors.
211
2. A NYSE-listed U.S. company must have an audit committee composed entirely of independent
directors.
Under the Companies Act, we are required to have an audit committee consisting of at least three
non-executive directors, and the majority of its members must be outside directors. Currently, our audit
committee consists of three outside directors and two non-executive directors. Our audit committee satisfies the
requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, including the independence
requirements thereunder except as disclosed in “Item 6.C. Directors, Senior Management and Employees—Board
Practices—Audit Committee.”
3. A NYSE-listed U.S. company must have a compensation committee composed entirely of independent
directors.
Under the Companies Act, we are required to have a compensation committee consisting of at least three
directors, and the majority of its members must be outside directors. Currently, our compensation committee
consists of five directors, four of whom are outside directors.
4. A NYSE-listed U.S. company must have a nominating or corporate governance committee composed
entirely of independent directors.
Under the Companies Act, we are required to have a nominating committee consisting of at least three
directors, and the majority of its members must be outside directors. Currently, our nominating committee, which
we call the nominating and governance committee, consists of five directors, four of whom are outside directors.
5. A NYSE-listed U.S. company must obtain shareholder approval with respect to any equity
compensation plan.
Under the Companies Act, an equity compensation plan for directors and corporate executives is deemed to
be compensation for the services performed by the company’s directors and corporate executives. Our
compensation committee establishes the policy with respect to the determination of the individual compensation
of our directors and corporate executives, including equity compensation in the form of performance-based stock
compensation plan, and determines individual compensation in accordance with the policy. Under the Companies
Act, a public company with board audit, compensation and nominating committees seeking to introduce a
performance-based stock compensation plan must obtain the approval of its compensation committee, not its
shareholders.
6. A NYSE-listed U.S. company must adopt and disclose Corporate Governance Guidelines and a Code of
Business Conduct and Ethics, and it must also disclose any exemptions granted to directors or executives.
Our corporate governance policies, which are called the “MUFG Corporate Governance Policies,” are based
on applicable home-country rules, particularly the Tokyo Stock Exchange rules, which require listed companies,
such as us, to adopt a corporate governance code setting forth fundamental principles designed to establish an
effective corporate governance system or explain in their corporate governance reports the reasons for not
adopting such a code. We disclose these policies on our website.
We have adopted a code of conduct, compliance rules, compliance manual and rules of employment, which
meet the definition of “code of ethics” in “Item 16B. Code of Ethics.”
7. A NYSE-listed U.S. company must hold regularly scheduled executive sessions where participants are
limited to non-management directors.
Under the Companies Act, Japanese corporations are not obliged to hold executive sessions where
participants are limited to non-management directors. Such executive sessions are also not required under our
internal corporate governance rules.
212
Item 16H. Mine Safety Disclosure.
Not Applicable.
213
Item 17. Financial Statements.
In lieu of responding to this item, we have responded to Item 18 of this Annual Report.
PART III
Item 18. Financial Statements.
Our consolidated financial statements are included in this Annual Report, as required by this item, starting
on page F-1.
Pursuant to Rule 3-09 of Regulation S-X, the financial statements and supplementary data of Morgan
Stanley, our equity method investee, as of and for the fiscal year ended December 31, 2018, are incorporated in
this Annual Report as Exhibit 99(c) by reference to Morgan Stanley’s annual report on Form 10-K filed on
February 26, 2019.
Item 19. Exhibits.
Exhibit
Description
1(a)
1(b)
1(c)
1(d)
1(e)
1(f)
1(g)
1(h)
2(a)
2(b)
2(c)
8
11
12
Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on July 6, 2018
(English translation)*
Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015 (English translation)*
Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
July 1, 2018 (English translation)*
Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 25,
2015 (English Translation)**
Charter of the Audit Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)*
Charter of the Compensation Committee of Mitsubishi UFJ Financial Group, Inc., as amended
on July 1, 2018 (English translation)*
Charter of the Nominating and Governance Committee of Mitsubishi UFJ Financial Group,
Inc., as amended on July 1, 2018 (English translation)*
Charter of the Risk Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)*
Form of American Depositary Receipt*
Form of Deposit Agreement, amended and restated as of December 22, 2004, among Mitsubishi
Tokyo Financial Group, Inc. (subsequently renamed Mitsubishi UFJ Financial Group, Inc.), The
Bank of New York Mellon and the holders from time to time of American Depositary Receipts
issued thereunder*
Description of Securities
Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational
Structure.”
MUFG Group Code of Conduct, Compliance Rules, Compliance Manual, and Rules of
Employment of Mitsubishi UFJ Financial Group, Inc. applicable to its principal executive
officer, principal financial officer, principal accounting officer and persons performing similar
functions (English translation of relevant sections)
Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a)
(17 CFR 240.15d-14(a))
214
Exhibit
13
15(a)
15(b)
99(a)
99(b)
Description
Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b)
(17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code
(18 U.S.C. 1350)
Consent of independent registered public accounting firm (Deloitte Touche Tohmatsu LLC)
Consent of independent registered public accounting firm (Deloitte & Touche LLP)
Capitalization and Indebtedness of Mitsubishi UFJ Financial Group, Inc. as of March 31,
2019***
Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ
Financial Group, Inc. as of and for the fiscal year ended March 31, 2019****
99(c)
Financial Statements and Supplementary Data of Morgan Stanley*****
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
Notes:
*
**
***
****
*****
Incorporated by reference to our annual report on Form 20-F (File No. 000-54189) filed on July 12, 2018.
Incorporated by reference to our registration statement on Form S-8 (File No. 333-230590) filed on March 29, 2019.
Deemed to be incorporated by reference into the registration statement on Form F-3 (No. 333-229697) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Deemed to be incorporated as Annex A to the registration statement on Form F-3 (No. 333-229697) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Incorporated by reference to Morgan Stanley’s annual report on Form 10-K (File No. 001-11758) filed on February 26, 2019.
215
SELECTED STATISTICAL DATA
Due to close integration of our foreign and domestic activities, it is difficult to make a precise determination
of the assets, liabilities, income and expenses of our foreign operations. The foreign operations as presented
include the business conducted by overseas subsidiaries and branches, and the international business principally
conducted by the international banking-related divisions headquartered in Japan. Our management believes that
the results appropriately represent our domestic and foreign activities.
A-1
I. Distribution of Assets, Liabilities and Equity; Interest Rates and Interest Differential
Average Balance Sheets, Interest and Average Rates
The following table shows our average balances, interest and average interest rates for the fiscal years ended
March 31, 2017, 2018 and 2019. Average balances are generally based on a daily average while a month-end
average is used for certain average balances when it is not practicable to obtain applicable daily averages.
Fiscal years ended March 31,
2017
2018
2019
Average
balance
Interest
income
Average
rate
Average
balance
Interest
income
Average
rate
Average
balance
Interest
income
Average
rate
(in millions, except percentages)
Assets:
Interest-earning assets:
Interest-earning deposits in
other banks:
Domestic . . . . . . . . . . . . ¥ 31,322,995 ¥
Foreign . . . . . . . . . . . . .
7,118,443
28,975
49,760
0.09% ¥ 31,515,803 ¥
0.70
7,889,777
26,391
100,217
0.08% ¥ 32,727,743 ¥
1.27
9,025,391
31,287
152,040
0.10%
1.68
Total
. . . . . . . . . . .
38,441,438
78,735
0.20
39,405,580
126,608
0.32
41,753,134
183,327
0.44
Call loans, funds sold, and
receivables under resale
agreements and securities
borrowing transactions:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
5,825,863
8,259,160
Total
. . . . . . . . . . .
14,085,023
2,116
59,263
61,379
Trading account assets:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
3,818,370
23,111,674
24,262
431,598
Total
. . . . . . . . . . .
26,930,044
455,860
Investment securities(1):
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
35,863,993
6,583,759
219,443
151,701
Total
. . . . . . . . . . .
42,447,752
371,144
Loans(2):
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
68,348,115
743,683
48,940,077 1,279,966
Total
. . . . . . . . . . . 117,288,192 2,023,649
Total interest-earning assets:
Domestic . . . . . . . . . . . . 145,179,336 1,018,479
94,013,113 1,972,288
Foreign . . . . . . . . . . . . .
Total
. . . . . . . . . . . 239,192,449 2,990,767
0.04
0.72
0.44
0.64
1.87
1.69
0.61
2.30
0.87
1.09
2.62
1.73
0.70
2.10
1.25
7,703,606
7,873,112
15,576,718
7,246
77,447
84,693
4,737,292
20,012,444
27,126
405,469
24,749,736
432,595
34,659,859
6,891,939
183,622
160,279
41,551,798
343,901
65,985,440
757,623
51,779,709 1,513,596
117,765,149 2,271,219
144,602,000 1,002,008
94,446,981 2,257,008
239,048,981 3,259,016
0.09
0.98
0.54
0.57
2.03
1.75
0.53
2.33
0.83
1.15
2.92
1.93
0.69
2.39
1.36
6,429,788
7,594,119
5,920
149,788
14,023,907
155,708
5,204,308
19,467,632
31,284
468,440
24,671,940
499,724
35,073,801
7,782,349
202,755
195,448
42,856,150
398,203
65,843,445
777,306
52,258,780 1,799,111
118,102,225 2,576,417
145,279,085 1,048,552
96,128,271 2,764,827
241,407,356 3,813,379
0.09
1.97
1.11
0.60
2.41
2.03
0.58
2.51
0.93
1.18
3.44
2.18
0.72
2.88
1.58
Non-interest-earning assets:
Cash and due from banks . . .
Other non-interest-earning
21,989,856
assets . . . . . . . . . . . . . . . . .
47,775,376
Allowance for credit
losses . . . . . . . . . . . . . . . . .
(1,018,982)
Total non-interest-
earning assets . . .
68,746,250
Total assets . . . . . . . . . . . . . . . . . . ¥307,938,699
34,040,675
48,549,541
(1,049,265)
81,540,951
¥320,589,932
33,631,665
46,952,826
(699,000)
79,885,491
¥321,292,847
Notes:
(1) Tax-exempt income of tax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such
calculation would not be material.
(2) Average balances on loans outstanding include all nonaccrual and restructured loans. See “III. Loan Portfolio.” The amortized portion of
net loan origination fees (costs) is included in interest income on loans, which accounts for an insignificant amount of an adjustment to
the yields.
A-2
Fiscal years ended March 31,
2017
2018
2019
Average
balance
Interest
expense
Average
rate
Average
balance
Interest
expense
Average
rate
Average
balance
Interest
expense
Average
rate
(in millions, except percentages)
Liabilities and equity:
Interest-bearing liabilities:
Deposits:
Domestic . . . . . . . . . . . . ¥117,156,484 ¥
Foreign . . . . . . . . . . . . .
38,411,021
45,790
301,640
0.04% ¥123,141,060 ¥
0.79
41,421,717
58,779
456,089
0.05% ¥124,661,909 ¥
1.10
41,945,626
67,948
649,418
0.05%
1.55
Total
. . . . . . . . . . . 155,567,505
347,430
0.22
164,562,777
514,868
0.31
166,607,535
717,366
0.43
Call money, funds purchased,
and payables under
repurchase agreements and
securities lending
transactions:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
22,024,053
10,765,446
82,162
20,425
Total
. . . . . . . . . . .
32,789,499
102,587
0.37
0.19
0.31
17,913,277
10,138,998
113,805
56,955
28,052,275
170,760
0.64
0.56
0.61
17,201,589
9,204,904
188,009
149,536
26,406,493
337,545
1.09
1.62
1.28
Due to trust account—
Domestic . . . . . . . . . . . . . .
3,122,190
207
0.01
3,065,511
109
0.00
3,062,655
124
0.00
Other short-term borrowings
and trading account
liabilities:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
3,644,192
5,435,977
Total
. . . . . . . . . . .
9,080,169
11,679
49,458
61,137
Long-term debt:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
20,358,348
2,604,585
173,634
84,644
Total
. . . . . . . . . . .
22,962,933
258,278
Total interest-bearing
liabilities:
Domestic . . . . . . . . . . . . 166,305,267
57,217,029
Foreign . . . . . . . . . . . . .
313,472
456,167
Total
. . . . . . . . . . . 223,522,296
769,639
Non-interest-bearing
liabilities . . . . . . . . . . . . . . . . . .
69,405,574
Total equity . . . . . . . . . . . . . . . . .
15,010,829
Total liabilities and equity . . . . . ¥307,938,699
Net interest income and interest
rate spread . . . . . . . . . . . . . . . .
Net interest income as a
percentage of total interest-
earning assets . . . . . . . . . . . . . .
0.32
0.91
0.67
0.85
3.25
1.12
0.19
0.80
0.34
3,768,213
6,476,232
10,244,445
11,012
82,523
93,535
25,277,891
2,654,153
183,944
65,539
27,932,044
249,483
173,165,952
60,691,100
367,649
661,106
233,857,052 1,028,755
0.29
1.27
0.91
0.73
2.47
0.89
0.21
1.09
0.44
2,714,678
7,184,301
13,452
141,697
9,898,979
155,149
25,558,707
3,108,828
234,603
73,194
28,667,535
307,797
173,199,538
504,136
61,443,659 1,013,845
234,643,197 1,517,981
0.50
1.97
1.57
0.92
2.35
1.07
0.29
1.65
0.65
71,309,802
15,423,078
¥320,589,932
70,572,971
16,076,679
¥321,292,847
¥2,221,128
0.91%
¥2,230,261
0.92%
¥2,295,398
0.93%
0.93%
0.93%
0.95%
The percentage of total average assets attributable to foreign activities was 37.3%, 36.6% and 36.8%,
respectively, for the fiscal years ended March 31, 2017, 2018 and 2019.
The percentage of total average liabilities attributable to foreign activities was 38.1%, 36.9% and 37.0%,
respectively, for the fiscal years ended March 31, 2017, 2018 and 2019.
A-3
Analysis of Net Interest Income
The following table shows changes in our net interest income by changes in volume and by changes in
interest rate for the fiscal year ended March 31, 2018 compared to the fiscal year ended March 31, 2017, and the
fiscal year ended March 31, 2019 compared to the fiscal year ended March 31, 2018.
Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018
Fiscal year ended March 31, 2018
versus
fiscal year ended March 31, 2019
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Volume(1)
Rate(1)
Net change
Volume(1)
Rate(1)
Net change
(in millions)
Interest income:
Interest-earning deposits in other banks:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . ¥
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
177 ¥ (2,761) ¥ (2,584) ¥ 1,046 ¥
5,908
6,085
44,549
41,788
50,457
47,873
15,865
16,911
3,850 ¥
35,958
4,896
51,823
39,808
56,719
Call loans, funds sold, and receivables under
resale agreements and securities
borrowing transactions:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
865
(2,885)
4,265
21,069
Total . . . . . . . . . . . . . . . . . . . . . . . .
(2,020)
25,334
5,130
18,184
23,314
(1,176)
(2,838)
(4,014)
(150)
75,179
(1,326)
72,341
75,029
71,015
Trading account assets:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
5,430
(60,886)
(2,566)
34,757
2,864
(26,129)
2,763
(11,301)
Total . . . . . . . . . . . . . . . . . . . . . . . .
(55,456)
32,191
(23,265)
(8,538)
Investment securities(2):
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,170)
7,156
(28,651)
1,422
(35,821)
8,578
2,216
21,730
Total . . . . . . . . . . . . . . . . . . . . . . . .
(14)
(27,229)
(27,243)
23,946
1,395
74,272
75,667
16,917
13,439
30,356
4,158
62,971
67,129
19,133
35,169
54,302
Loans:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
(26,254)
77,153
40,194
156,477
13,940
233,630
(1,634)
14,127
21,317
271,388
19,683
285,515
Total . . . . . . . . . . . . . . . . . . . . . . . .
50,899
196,671
247,570
12,493
292,705
305,198
Total interest income:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
(26,952)
26,446
10,481
258,274
(16,471)
284,720
3,215
37,583
43,329
470,236
46,544
507,819
Total
. . . . . . . . . . . . . . . . . . . . . . . ¥
(506) ¥268,755 ¥268,249 ¥ 40,798 ¥ 513,565 ¥554,363
Notes:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net
change.”
(2) Tax-exempt income of tax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such
calculation would not be material.
A-4
Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018
Fiscal year ended March 31, 2018
versus
fiscal year ended March 31, 2019
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Volume(1)
Rate(1)
Net change
Volume(1)
Rate(1)
Net change
(in millions)
Interest expense:
Deposits:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 2,436 ¥ 10,553 ¥ 12,989 ¥
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
129,255
154,449
25,194
734 ¥
8,435 ¥
5,839
187,490
9,169
193,329
Total
. . . . . . . . . . . . . . . . . . . . . . . .
27,630
139,808
167,438
6,573
195,925
202,498
Call money, funds purchased, and payables
under repurchase agreements and securities
lending transactions:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
(17,597)
(1,256)
49,240
37,786
31,643
36,530
(4,692)
(5,708)
78,896
98,289
74,204
92,581
Total
. . . . . . . . . . . . . . . . . . . . . . . .
(18,853)
87,026
68,173
(10,400) 177,185
166,785
Due to trust account—Domestic . . . . . . . . . . .
(4)
(94)
(98)
—
15
15
Other short-term borrowings and trading
account liabilities:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
388
10,690
(1,055)
22,375
(667)
33,065
(3,693)
9,845
Total
. . . . . . . . . . . . . . . . . . . . . . . .
11,078
21,320
32,398
6,152
6,133
49,329
55,462
Long-term debt:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
38,127
1,582
(27,817)
(20,687)
10,310
(19,105)
2,065
10,816
48,594
(3,161)
Total
. . . . . . . . . . . . . . . . . . . . . . . .
39,709
(48,504)
(8,795)
12,881
45,433
2,440
59,174
61,614
50,659
7,655
58,314
Total interest expense:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
23,350
36,210
30,827
168,729
54,177
204,939
(5,586) 142,073
331,947
20,792
136,487
352,739
Total
. . . . . . . . . . . . . . . . . . . . . . . . ¥ 59,560 ¥199,556 ¥259,116 ¥ 15,206 ¥474,020 ¥489,226
Net interest income:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . ¥(50,302) ¥ (20,346) ¥ (70,648) ¥ 8,801 ¥ (98,744) ¥ (89,943)
155,080
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
138,289
(9,764)
79,781
16,791
89,545
Total
. . . . . . . . . . . . . . . . . . . . . . . . ¥(60,066) ¥ 69,199 ¥
9,133 ¥ 25,592 ¥ 39,545 ¥ 65,137
Note:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net
change.”
A-5
II.
Investment Portfolio
The following table shows information as to the value of our Available-for-sale debt securities,
Held-to-maturity debt securities, and Marketable equity securities at March 31, 2017, 2018 and 2019:
2017
Amortized
cost
Fair value
Net
unrealized
gains
(losses)
Amortized
cost
At March 31,
2018
Fair value
(in millions)
2019
Net
unrealized
gains
(losses)
Amortized
cost
Fair value
Net
unrealized
gains
(losses)
Available-for-sale debt
securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . . ¥25,435,570 ¥25,826,288 ¥390,718 ¥ 24,272,345 ¥ 24,567,904 ¥295,559 ¥ 23,748,558 ¥ 24,077,696 ¥329,138
11,570
25,430
Corporate bonds . . . . . . . . . .
Other securities . . . . . . . . . .
999,707
3,402,696
988,137
3,377,266
935,965
2,589,367
923,912
2,581,942
917,170
1,851,402
899,572
1,844,358
17,598
7,044
12,053
7,425
Total domestic . . . . . . . . 28,179,500
28,594,860
415,360
27,778,199 28,093,236
315,037
28,113,961 28,480,099
366,138
Foreign:
U.S. Treasury and other
U.S. government agencies
bonds . . . . . . . . . . . . . . . .
Other government and
official institution
bonds . . . . . . . . . . . . . . . .
Mortgage-backed
1,075,244
1,060,868
(14,376)
1,400,997
1,366,456
(34,541)
1,722,943
1,710,328
(12,615)
1,087,653
1,089,061
1,408
806,665
805,236
(1,429)
925,931
931,091
5,160
securities . . . . . . . . . . . . .
Other securities . . . . . . . . . .
913,118
1,303,443
898,301
1,308,595
(14,817)
5,152
1,229,111
1,341,697
1,214,211
1,353,975
(14,900)
12,278
1,138,101
1,273,551
1,115,714
1,281,271
(22,387)
7,720
Total foreign . . . . . . . . . .
4,379,458
4,356,825
(22,633)
4,778,470
4,739,878
(38,592)
5,060,526
5,038,404
(22,122)
Total
. . . . . . . . . . . . . . ¥32,558,958 ¥ 32,951,685 ¥392,727 ¥32,556,669 ¥32,833,114 ¥276,445 ¥33,174,487 ¥33,518,503 ¥344,016
Held-to-maturity debt
securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . . ¥1,100,955 ¥
Other securities . . . . . . . . . .
100
1,144,070 ¥ 43,115 ¥ 1,100,807 ¥ 1,141,019 ¥ 40,212 ¥ 1,100,701 ¥ 1,142,320 ¥ 41,619
—
100
—
—
—
—
—
—
Total domestic . . . . . . . .
1,101,055
1,144,170
43,115
1,100,807
1,141,019
40,212
1,100,701
1,142,320
41,619
Foreign:
U.S. Treasury and other
U.S. government agencies
bonds . . . . . . . . . . . . . . . .
Other government and
official institution
bonds . . . . . . . . . . . . . . . .
Mortgage-backed
60,910
62,023
1,113
59,330
59,610
280
138,731
138,712
(19)
225
225
—
—
—
—
—
—
—
securities . . . . . . . . . . . . .
Asset-backed securities . . . .
1,146,828
1,278,303
1,143,938
1,287,395
(2,890)
9,092
1,057,612
1,365,192
1,047,635
1,372,408
(9,977)
7,216
1,071,257
2,131,212
1,051,135
2,120,780
(20,122)
(10,432)
Total foreign . . . . . . . . . .
2,486,266
2,493,581
7,315
2,482,134
2,479,653
(2,481)
3,341,200
3,310,627
(30,573)
Total
. . . . . . . . . . . . . . ¥ 3,587,321 ¥ 3,637,751 ¥ 50,430 ¥ 3,582,941 ¥ 3,620,672 ¥ 37,731 ¥ 4,441,901 ¥ 4,452,947 ¥ 11,046
Marketable equity securities:
Domestic:
Marketable equity
securities . . . . . . . . . . . . .
Total domestic . . . . . . . .
— ¥
6,115,213
— 6,115,213
Foreign:
Marketable equity
securities . . . . . . . . . . . . .
Total foreign . . . . . . . . . .
—
—
23,201
23,201
Total
. . . . . . . . . . . . . .
— ¥ 6,138,414
—
—
—
—
—
— ¥ 6,544,938
— 6,544,938
—
—
126,646
126,646
— ¥ 6,671,584
—
—
—
—
—
— ¥ 6,331,815
— 6,331,815
—
—
26,728
26,728
— ¥ 6,358,543
—
—
—
—
—
A-6
Nonmarketable equity securities presented in Equity securities in the accompanying consolidated financial
statements were primarily carried at cost of ¥529,869 million, ¥538,251 million and ¥591,237 million, at
March 31, 2017, 2018 and 2019, respectively. The corresponding fair values at those dates were not readily
determinable. Investment securities held by certain subsidiaries subject to specialized industry accounting
principles for investment companies and brokers and dealers presented in Equity securities were carried at fair
value of ¥26,292 million, ¥28,359 million and ¥27,820 million, at March 31, 2017, 2018 and 2019, respectively.
The following table presents the book values, maturities and weighted average yields of Available-for-sale
debt securities and Held-to-maturity debt securities at March 31, 2019. Weighted average yields are calculated
based on amortized cost. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis
because the effect of such calculation would not be material:
Maturities within
one year
Maturities after
one year but
within five years
Maturities after
five years but
within ten years
Maturities after
ten years
Total
Amount Yield
Amount Yield Amount Yield Amount Yield
Amount Yield
(in millions, except percentages)
Available-for-sale debt
securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . ¥11,552,613 0.10% ¥ 7,382,959 0.27% ¥2,096,074 0.48% ¥3,046,050 0.98% ¥24,077,696 0.29%
Corporate bonds . . . . . . . . .
Other securities . . . . . . . . . .
138,369 0.26
119,015 0.34
688,730 0.17
623,929 0.20
131,541 0.45
2,050,169 0.23
41,067 0.68
609,583 0.27
999,707 0.24
3,402,696 0.23
Total domestic . . . . . .
11,809,997 0.11
8,695,618 0.26
4,277,784 0.36
3,696,700 0.85
28,480,099 0.28
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds . . . . . . . .
Other government and
official institution
bonds . . . . . . . . . . . . . . .
Mortgage-backed
149,312 1.40
794,520 1.93
766,496 2.23
— —
1,710,328 2.02
290,403 1.83
613,530 1.97
19,967 3.18
7,191 1.80
931,091 1.95
securities . . . . . . . . . . . . .
Other securities . . . . . . . . . .
34 —
290,000 1.30
26,283 1.50
718,039 2.21
149,751 2.25
102,286 3.30
939,646 2.97
170,946 3.15
1,115,714 2.83
1,281,271 2.22
Total foreign . . . . . . . .
729,749 1.53
2,152,372 2.03
1,038,500 2.36
1,117,783 2.99
5,038,404 2.24
Total . . . . . . . . . . . . ¥12,539,746 0.19% ¥10,847,990 0.61% ¥5,316,284 0.76% ¥4,814,483 1.37% ¥33,518,503 0.58%
Held-to-maturity debt
securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . ¥
— —% ¥
199,816 0.60% ¥ 900,885 0.49% ¥
— —% ¥ 1,100,701 0.51%
Total domestic . . . . . .
— —
199,816 0.60
900,885 0.49
— —
1,100,701 0.51
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds . . . . . . . .
Mortgage-backed
securities . . . . . . . . . . . . .
Asset-backed securities . . .
57,609 1.97
999 8.62
80,123 3.61
— —
138,731 2.97
5,106 1.65
11,458 1.65
87,340 2.27
44,336 1.68
111,888 2.35
312,244 3.72
866,923 2.61
1,763,174 2.41
1,071,257 2.55
2,131,212 2.58
Total foreign . . . . . . . .
74,173 1.90
132,675 2.12
504,255 3.40
2,630,097 2.48
3,341,200 2.59
Total . . . . . . . . . . . . ¥
74,173 1.90% ¥
332,491 1.21% ¥1,405,140 1.53% ¥2,630,097 2.48% ¥ 4,441,901 2.07%
Other than U.S. Treasury and other U.S. government agencies bonds and Japanese national government
bonds, none of the individual issuers held in our investment securities portfolio exceeded 10% of the
consolidated total Mitsubishi UFJ Financial Group shareholders’ equity at March 31, 2019.
A-7
III. Loan Portfolio
The following table shows our loans outstanding, before deduction of allowance for credit losses, by
domicile and industry of the borrower at March 31 for each of the five fiscal years ended March 31, 2019.
Classification of loans by industry is based on the industry segment loan classification as defined by the Bank of
Japan for regulatory reporting purposes and is not necessarily based on the use of proceeds:
2015
2016
At March 31,
2017
(in millions)
2018
2019
Domestic:
Manufacturing . . . . . . . . . .
Construction . . . . . . . . . . .
Real estate . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . .
Wholesale and retail
. . . . .
Banks and other financial
institutions(1)
Communication and
. . . . . . . . .
information services . . .
Other industries . . . . . . . . .
. . . . . . . . . . . . .
Consumer
¥ 11,703,428
977,892
10,911,240
2,684,355
8,345,481
¥ 12,158,642
913,180
11,175,130
2,503,446
7,891,364
¥ 11,796,803
819,262
11,622,372
2,549,300
7,970,579
¥ 10,876,625
781,262
11,763,769
2,689,086
7,989,080
¥ 11,153,996
717,664
11,706,419
2,653,191
7,643,397
4,329,964
5,146,932
5,223,906
4,818,364
5,213,020
1,527,811
12,674,004
16,720,590
1,509,858
14,739,826
16,397,560
1,634,584
8,898,712
16,491,010
1,551,533
8,939,291
16,287,332
1,510,596
8,756,483
15,802,024
Total domestic . . . . . .
69,874,765
72,435,938
67,006,528
65,696,342
65,156,790
Foreign:
Governments and official
institutions . . . . . . . . . . .
1,052,051
1,125,031
1,037,795
920,538
841,695
Banks and other financial
. . . . . . . . .
11,973,021
13,654,335
13,844,964
12,851,570
11,641,373
institutions(1)
Commercial and
industrial
. . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .
29,593,255
6,065,782
30,056,474
5,818,747
30,279,641
6,334,551
30,591,173
7,270,928
31,951,169
7,597,502
Total foreign . . . . . . .
48,684,109
50,654,587
51,496,951
51,634,209
52,031,739
Total
. . . . . . . . .
118,558,874
123,090,525
118,503,479
117,330,551
117,188,529
Unearned income, unamortized
premiums—net and deferred
loan fees—net . . . . . . . . . . . .
(293,672)
(299,567)
(288,507)
(294,656)
(304,588)
Total(2) . . . . . . . .
¥118,265,202
¥122,790,958
¥118,214,972
¥117,035,895
¥116,883,941
Notes:
(1) Loans to so-called “non-bank finance companies” are generally included in the “Banks and other financial institutions” category.
Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
(2) The above table includes loans held for sale of ¥88,927 million, ¥100,889 million, ¥185,940 million, ¥226,923 million and
¥291,794 million at March 31, 2015, 2016, 2017, 2018 and 2019, respectively, which are carried at the lower of cost or fair value.
A-8
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the maturities of our loan portfolio at March 31, 2019:
One year or less One to five years
Over five years
Total
(in millions)
Maturity
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,212,225
396,243
2,828,822
1,151,797
5,430,996
3,374,489
¥ 3,356,894
225,160
4,000,616
1,044,960
1,735,157
1,218,358
¥ 1,584,877
96,261
4,876,981
456,434
477,244
620,173
¥ 11,153,996
717,664
11,706,419
2,653,191
7,643,397
5,213,020
328,360
5,563,384
2,166,861
751,835
1,994,653
3,008,857
430,401
1,198,446
10,626,306
1,510,596
8,756,483
15,802,024
Total Domestic . . . . . . . . . . . . . . . . .
27,453,177
17,336,490
20,367,123
65,156,790
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,923,818
18,992,979
12,114,942
52,031,739
Total . . . . . . . . . . . . . . . . . . . . .
¥48,376,995
¥36,329,469
¥32,482,065
¥117,188,529
The above loans due after one year which had predetermined interest rates and floating or adjustable interest
rates at March 31, 2019 are shown below:
Predetermined rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating or adjustable rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥17,217,580
20,486,033
(in millions)
¥ 4,668,477
26,439,444
¥21,886,057
46,925,477
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥37,703,613
¥31,107,921
¥68,811,534
Domestic
Foreign
Total
Nonaccrual, Past Due and Restructured Loans
We generally discontinue the accrual of interest income on loans when substantial doubt exists as to the full
and timely collection of either principal or interest, when principal or interest is contractually past due one month
or more with respect to loans within all classes of the Commercial segment, three months or more with respect to
loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or more with respect
to loans within the Residential segment.
Generally, accruing loans that are modified in a troubled debt restructuring (“TDR”) remain as accruing
loans subsequent to the modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan
has been restructured as a TDR, the borrower is not delinquent under the restructured terms, and demonstrates
that its financial condition has improved, we may reclassify the loan to accrual status. This determination is
generally performed at least once a year through a detailed internal credit rating review process. Once a
nonaccrual loan is deemed to be a TDR, we will continue to designate the loan as a TDR even if the loan is
reclassified to accrual status.
A-9
The following table shows the distribution of our nonaccrual loans, restructured loans and accruing loans
which are contractually past due 90 days or more as to principal or interest payments at March 31 of each of the
five fiscal years ended March 31, 2019, based on the domicile and type of industry of the borrowers:
2015
2016
2017
2018
2019
At March 31,
(in millions)
Nonaccrual loans:
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 119,052 ¥ 372,875 ¥ 185,124 ¥
Construction . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . .
Communication and information services . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Total domestic . . . . . . . . . . . . . . . . . . . . .
20,150
85,625
54,801
158,454
5,715
23,204
19,094
199,665
685,760
15,256
66,210
41,056
132,858
675
20,270
29,715
174,106
853,021
15,248
50,142
38,977
131,545
2,432
18,711
10,352
161,680
614,211
77,188 ¥
10,922
37,853
31,733
108,639
1,145
13,815
37,677
149,491
468,463
65,921
9,877
26,513
27,115
94,990
898
11,955
26,110
143,668
407,047
Foreign:
Governments and official institutions . . . . . . .
Banks and other financial institutions . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign . . . . . . . . . . . . . . . . . . . . . .
Total
—
1,160
219,669
78,780
299,609
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 913,697 ¥1,200,167 ¥ 986,632 ¥ 753,649 ¥ 706,656
40
7,372
144,609
75,916
227,937
132
14,337
264,163
68,514
347,146
—
5,902
301,685
64,834
372,421
—
1,716
215,601
67,869
285,186
Restructured loans:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 735,348 ¥ 459,294 ¥ 682,041 ¥ 557,368 ¥ 511,151
127,931
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 879,437 ¥ 625,534 ¥ 840,825 ¥ 695,042 ¥ 639,082
166,240
144,089
158,784
137,674
Total
Accruing loans contractually past due 90 days or
more:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
Foreign(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,050 ¥
360
47,919 ¥
314
37,650 ¥
3,430
17,356 ¥
2,408
13,621
2,778
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
48,410 ¥
48,233 ¥
41,080 ¥
19,764 ¥
16,399
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,841,544 ¥1,873,934 ¥1,868,537 ¥1,468,455 ¥1,362,137
Notes:
(1) Foreign accruing loans contractually past due 90 days or more do not include ¥5,666 million, ¥1,930 million, ¥1,514 million,
¥549 million and ¥234 million of Federal Deposit Insurance Corporation (“FDIC”) covered loans held by MUFG Americas Holdings
which are subject to the guidance on loans and debt securities acquired with deteriorated credit quality at March 31, 2015, 2016, 2017,
2018 and 2019, respectively.
(2) The sum of nonaccrual loans, restructured loans and accruing loans contractually past due 90 days or more includes large groups of
smaller-balance homogenous loans that have not been modified and are collectively evaluated for impairment, and accruing loans
contractually past due 90 days or more. However, these loans are excluded from the impaired loan balances of ¥1,331,123 million and
¥1,209,791 million, at March 31, 2018 and 2019, respectively, disclosed in Note 4 to our consolidated financial statements included
elsewhere in this Annual Report.
Gross interest income which would have been accrued at the original terms on domestic nonaccrual and
restructured loans outstanding during the fiscal year ended March 31, 2019 was approximately ¥33.8 billion, of
which ¥16.3 billion was included in the results of operations for the fiscal year. Gross interest income which
would have been accrued at the original terms on foreign nonaccrual and restructured loans outstanding for the
fiscal year ended March 31, 2019 was approximately ¥29.9 billion, of which ¥15.9 billion was included in the
results of operations for the fiscal year.
A-10
Potential Problem Loans
We do not have potential problem loans where known information about possible credit problems of
borrowers causes management to have serious doubts as to the borrowers’ ability to comply with the present loan
repayment terms that are not disclosed as nonaccrual loans, restructured loans and accruing loans past due
90 days or more.
Foreign Loans Outstanding
We had no cross-border outstandings to borrowers domiciled in a foreign country which in total exceeded
0.75% of our consolidated total assets at March 31, 2017, 2018 and 2019. Cross-border outstandings are defined,
for this purpose, as loans (including accrued interest), acceptances, interest-earning deposits with other banks,
other interest-earning investments and any other monetary assets denominated in Japanese yen or other non-local
currencies. Material local currency loans outstanding which are neither hedged nor funded by local currency
borrowings are included in cross-border outstandings.
Guarantees of outstandings to borrowers domiciled in other countries are considered to be outstandings of
the guarantor. Loans made to, or deposits placed with, a branch of a foreign bank located outside the foreign
bank’s home country are considered to be loans to, or deposits with, the foreign bank. Outstandings of a country
do not include principal or interest amounts which are supported by written, legally enforceable guarantees by
guarantors of other countries or the amounts of outstandings to the extent that they are secured by tangible, liquid
collateral held and realizable by MUFG Bank, Mitsubishi UFJ Trust and Banking and their subsidiaries outside
the country in which they operate.
In addition to credit risk, cross-border outstandings are subject to country risk that as a result of political or
economic conditions in a country, borrowers may be unable or unwilling to pay principal and interest according
to contractual terms. Other risks related to cross-border outstandings include the possibility of insufficient
foreign exchange and restrictions on its availability.
In order to manage country risk, we establish various risk management measures internally. Among other
things, we regularly monitor economic conditions and other factors globally and assess country risk in each
country where we have cross-border exposure. For the purposes of monitoring and controlling the amount of
credit exposed to country risk, we set a country limit, the maximum amount of credit exposure for an individual
country, in consideration of the level of country risk and our ability to bear such potential risk. We also
determine our credit policy for each country in accordance with our country risk level and our business plan with
regard to the country. The assessment of country risk, establishment of country limits, and determination of
country credit policies are subject to review and approval by our senior management and are updated
periodically.
Loan Concentrations
At March 31, 2019, there were no concentrations of loans to a single industry group of borrowers, as defined
by the Bank of Japan industry segment loan classifications, which exceeded 10 % of our consolidated total loans,
except for loans in a category disclosed in the table of loans outstanding above.
Credit Risk Management
We have a credit rating system, under which borrowers and transactions are graded on a worldwide basis.
We calculate probability of default by statistical means and manage our credit portfolio based on this credit
rating system. For a detailed description of this system and other elements of our risk management structure, see
“Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk
Management.”
A-11
IV. Summary of Loan Loss Experience
The following table shows an analysis of our loan loss experience by industry of the borrower for each of
the five fiscal years ended March 31, 2019:
Allowance for credit losses at beginning of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . . . . .
Charge-offs:
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . .
Communication and information services . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended March 31,
2015
2016
2017
2018
2019
(in millions, except percentages)
¥1,094,420
86,998
¥1,055,479
231,862
¥1,111,130
253,688
¥1,182,188
(240,847)
¥764,124
34,330
28,413
2,066
8,571
9,447
37,477
745
3,668
3,158
27,148
120,693
56,468
177,161
22,083
4,412
26,495
150,666
24,727
50,813
1,617
1,857
5,102
32,910
35
1,173
953
15,847
110,307
88,464
198,771
22,357
19,455
41,812
30,549
647
2,318
5,225
17,402
—
2,903
767
22,877
82,688
131,070
213,758
21,954
21,995
43,949
156,959
(19,252)
169,809
(12,821)
10,621
789
1,305
1,867
20,979
650
1,254
29,839
26,786
94,090
138,019
10,525
992
619
4,207
20,901
2,523
11,309
2,758
24,795
78,629
95,412
232,109
174,041
22,261
28,849
51,110
180,999
3,782
15,467
28,650
44,117
129,924
(10,346)
Allowance for credit losses at end of fiscal year . . . . . . .
¥1,055,479
¥1,111,130
¥1,182,188
¥ 764,124
¥658,184
Allowance for credit losses applicable to foreign
activities:
Balance at beginning of fiscal year . . . . . . . . . . . . .
¥ 184,460
¥ 267,293
¥ 416,221
¥ 387,250
¥303,719
Balance at end of fiscal year . . . . . . . . . . . . . . . . . .
¥ 267,293
¥ 416,221
¥ 387,250
¥ 303,719
¥303,867
Provision for credit losses . . . . . . . . . . . . . . . . . . . .
¥ 110,494
¥ 237,189
¥
92,689
¥
21,889
¥ 77,338
Ratio of net charge-offs during the fiscal year to
average loans outstanding during the fiscal year . . . . .
0.13%
0.13%
0.14%
0.15%
0.11%
Note:
(1) Others principally include losses (gains) from foreign exchange translation.
A-12
The following table shows an allocation of our allowance for credit losses at March 31 for each of the
five fiscal years ended March 31, 2019:
2015
2016
At March 31,
2017
2018
2019
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
(in millions, except percentages)
Domestic:
Manufacturing . . . . . . . ¥ 240,013
17,318
Construction . . . . . . . .
70,423
Real estate . . . . . . . . . .
51,760
Services . . . . . . . . . . . .
Wholesale and
retail
. . . . . . . . . . . .
164,729
9.87% ¥ 321,412
9,813
0.82
31,960
9.20
34,430
2.26
9.88% ¥ 409,018
12,097
0.74
33,579
9.08
42,023
2.03
9.95% ¥179,799
7,934
0.69
21,062
9.81
29,518
2.15
9.27% ¥108,463
6,856
0.67
15,664
10.03
24,473
2.29
9.52%
0.61
9.99
2.26
7.04
116,450
6.41
138,119
6.73
99,985
6.81
93,112
6.52
Banks and other
financial
institutions . . . . . . . .
Communication and
information
services . . . . . . . . . .
Other industries . . . . . .
Consumer . . . . . . . . . .
Foreign:
Governments and
official
institutions . . . . . . . .
Banks and other
financial
institutions . . . . . . . .
Commercial and
30,597
3.65
12,840
4.18
14,732
4.41
7,636
4.11
6,198
4.45
20,130
64,443
126,362
1.29
10.69
14.11
14,371
48,870
102,351
1.23
11.97
13.33
13,902
25,156
106,312
1.38
7.50
13.92
17,300
13,543
80,238
1.32
7.62
13.88
8,327
15,398
75,271
1.29
7.47
13.49
25,136
0.89
22,950
0.91
25,098
0.88
751
0.78
367
0.72
18,325
10.10
24,471
11.09
20,717
11.68
10,452
10.95
6,970
9.93
industrial . . . . . . . . .
Other . . . . . . . . . . . . . .
Unallocated . . . . . . . . . . . . .
176,823
47,009
2,411
24.96
5.12
—
307,050
61,750
2,412
24.42
4.73
—
263,429
78,006
—
25.55
5.35
—
197,653
94,863
3,390
26.07
6.20
—
196,237
100,293
555
27.27
6.48
—
Total . . . . . . . . . . ¥1,055,479
100.00% ¥1,111,130
100.00% ¥1,182,188
100.00% ¥764,124
100.00% ¥658,184
100.00%
Allowance as a percentage
of loans . . . . . . . . . . . . . .
Allowance as a percentage
of nonaccrual loans,
restructured loans and
accruing loans
contractually past due
90 days or more . . . . . . .
0.89%
0.90%
1.00%
0.65%
0.56%
57.31%
59.29%
63.27%
52.04%
48.32%
While the allowance for credit losses contains amounts allocated to components of specifically identified
loans as well as a group on a portfolio of loans, the allowance for credit losses covers the credit losses of the
entire loan portfolio and the allocations shown above are not intended to be restricted to the specific loan
category. Accordingly, as the evaluation of credit risk changes, allocations of the allowance will be adjusted to
reflect current conditions and various other factors.
A-13
V. Deposits
The following table shows the average amount of, and the average rate paid on, the following deposit
categories for the fiscal years ended March 31, 2017, 2018 and 2019:
Fiscal years ended March 31,
2017
2018
2019
Average
amount
Average
rate
Average
amount
Average
rate
Average
amount
Average
rate
(in millions, except percentages)
Domestic offices:
Non-interest-bearing demand
deposits . . . . . . . . . . . . . . . . . .
¥ 20,034,315
—% ¥ 22,701,413
—% ¥ 24,429,358 —%
Interest-bearing demand
deposits . . . . . . . . . . . . . . . . . .
Deposits at notice . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . .
Foreign offices:
Non-interest-bearing demand
69,961,568
1,704,160
41,782,117
3,708,639
0.02
0.00
0.08
0.02
76,104,436
1,773,780
41,501,996
3,760,848
0.03
0.00
0.08
0.01
80,318,814 0.05
1,658,467 0.01
40,670,338 0.07
2,014,290 0.01
deposits . . . . . . . . . . . . . . . . . .
5,636,431
—
5,477,038
—
5,356,424 —
Interest-bearing deposits,
principally time deposits and
certificates of deposit
. . . . . . .
Total . . . . . . . . . . . . . . . . . .
38,411,021
0.79
41,421,717
1.10
41,945,626 1.55
¥181,238,251
¥192,741,228
¥196,393,317
Deposits at notice represent interest-bearing demand deposits which require the depositor to give two or
more days notice in advance of withdrawal.
The average amounts of total deposits by foreign depositors included in domestic offices for the fiscal years
ended March 31, 2017, 2018 and 2019 were ¥886,274 million, ¥882,772 million and ¥820,311 million,
respectively.
At March 31, 2019, the balances and remaining maturities of time deposits and certificates of deposit
(“CDs”) issued by domestic offices in amounts of ¥10 million (approximately U.S.$90 thousand at the Federal
Reserve Bank of New York’s noon buying rate on March 29, 2019) or more and total foreign deposits issued in
amounts of U.S.$100,000 or more are shown in the following table:
Time
deposits
Certificates of
deposit
(in millions)
Total
Domestic offices:
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 6,329,422
4,038,389
Over three months through six months . . . . . . . . . . . . . . . . . . . .
10,298,134
Over six months through twelve months . . . . . . . . . . . . . . . . . .
3,439,282
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,427,695
146,870
148,671
71,317
¥ 7,757,117
4,185,259
10,446,805
3,510,599
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 24,105,227
¥ 1,794,553
¥ 25,899,780
Foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 23,858,381
A-14
VI Short-Term Borrowings
The following table shows certain additional information with respect to our short-term borrowings for the
fiscal years ended March 31, 2017, 2018 and 2019:
Fiscal years ended March 31,
2017
2018
2019
(in millions, except percentages)
Call money, funds purchased, and payables under repurchase
agreements and securities lending transactions:
Average balance outstanding during the fiscal year . . . . . . . . ¥32,789,499
Maximum balance outstanding at any month-end during the
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,927,067
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . 25,217,396
Weighted average interest rate during the fiscal year . . . . . . .
Weighted average interest rate on balance at end of fiscal
0.31%
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.27%
¥28,052,275
¥ 26,406,493
28,757,355
28,757,355
31,395,497
28,588,039
0.61%
0.61%
1.28%
1.13%
Due to trust account:
Average balance outstanding during the fiscal year . . . . . . . . ¥ 3,122,190
Maximum balance outstanding at any month-end during the
¥ 3,065,511
¥ 3,062,655
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate during the fiscal year . . . . . . .
Weighted average interest rate on balance at end of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,099,102
3,335,155
3,386,158
3,386,158
3,531,717
2,735,952
0.01%
0.00%
0.00%
0.00%
0.00%
0.00%
Other short-term borrowings:
Average balance outstanding during the fiscal year . . . . . . . . ¥ 6,527,129
Maximum balance outstanding at any month-end during the
¥ 7,491,384
¥ 6,812,706
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate during the fiscal year . . . . . . .
Weighted average interest rate on balance at end of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,969,521
7,969,521
8,705,257
6,881,124
7,588,971
6,731,073
0.58%
0.66%
0.92%
1.29%
1.82%
1.97%
A-15
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of March 31, 2018 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the Fiscal Years ended March 31, 2017, 2018 and 2019 . . . . . . . .
Consolidated Statements of Comprehensive Income for the Fiscal Years ended March 31, 2017, 2018
and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for the Fiscal Years ended March 31, 2017, 2018 and 2019 . . . . . . . .
Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2017, 2018 and 2019 . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Basis of Financial Statements and Summary of Significant Accounting Policies . . . . . . . . . . . . . .
2. Business Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Loans and Allowance for Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Pledged Assets and Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Call Money and Funds Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Due to Trust Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Short-term Borrowings and Long-term Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Severance Indemnities and Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. Other Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. Offsetting of Derivatives, Repurchase Agreements, and Securities Lending Transactions . . . . . .
16. Repurchase Agreements, and Securities Lending Transactions Accounted for as Secured
Page
F-3
F-4
F-6
F-8
F-9
F-11
F-13
F-13
F-33
F-36
F-44
F-62
F-63
F-66
F-70
F-72
F-72
F-73
F-73
F-76
F-88
F-90
F-91
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-93
17. Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-93
18. Common Stock and Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-95
19. Retained Earnings, Legal Reserve and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20. Accumulated Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-97
21. Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-101
22. Regulatory Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-102
23. Earnings per Common Share Applicable to Common Shareholders of MUFG . . . . . . . . . . . . . . . F-109
24. Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-109
25. Obligations Under Guarantees and Other Off-balance Sheet Instruments . . . . . . . . . . . . . . . . . . . F-116
26. Variable Interest Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-120
27. Commitments and Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-131
28. Fees and Commissions Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-133
29. Trading Account Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-134
30. Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-135
31. Foreign Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-138
32. Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-140
33. Stock-based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-159
34. Parent Company Only Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-164
35. Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-167
F-1
(This page is intentionally left blank)
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Shareholders of
Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group) (“MUFG”) and subsidiaries (together, the “MUFG Group”)
as of March 31, 2018 and 2019, the related consolidated statements of income, comprehensive income, equity
and cash flows for each of the three years in the period ended March 31, 2019, and the related notes (collectively
referred to as the “financial statements”) (all expressed in Japanese yen). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the MUFG Group as of March 31, 2018 and 2019,
and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2019,
in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the MUFG Group’s internal control over financial reporting as of March 31, 2019,
based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated July 10, 2019, expressed an
unqualified opinion on the MUFG Group’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the MUFG Group has changed its method of accounting
for unrealized holding gains and losses on equity investment securities on April 1, 2018 due to the adoption of
Financial Accounting Standards Board Accounting Standards Update 2016-01, Financial Instruments—Overall
(Subtopic 825-10)—Recognition and Measurement of Financial Assets and Financial Liabilities.
Basis for Opinion
These financial statements are the responsibility of the MUFG Group’s management. Our responsibility is
to express an opinion on the MUFG Group’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the MUFG Group
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 10, 2019
We have served as the MUFG Group’s auditor since 1976.
F-3
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2018 AND 2019
(in millions)
ASSETS
Cash and due from banks (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2019
¥ 32,648,387
43,209,662
¥ 33,924,340
40,646,920
Cash, due from banks and interest-earning deposits in other banks . . . . . . . . . .
75,858,049
74,571,260
Call loans and funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables under securities borrowing transactions (Note 15) . . . . . . . . . . . . . . .
Trading account assets (including assets pledged that secured parties are
permitted to sell or repledge of ¥6,558,587 and ¥7,512,025 in 2018 and 2019)
(including ¥15,007,706 and ¥18,597,303 measured at fair value under the fair
value option in 2018 and 2019) (Notes 8, 15, 24 and 32) . . . . . . . . . . . . . . . . . .
Investment securities (Notes 3, 8 and 32):
Available-for-sale debt securities (including assets pledged that secured
parties are permitted to sell or repledge of ¥11,358,439 and ¥6,981,664 in
2018 and 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity debt securities (including assets pledged that secured parties
are permitted to sell or repledge of ¥414,857 and ¥160,828 in 2018 and
2019) (fair value of ¥3,620,672 and ¥4,452,947 in 2018 and 2019) . . . . . . . .
Equity securities (including assets pledged that secured parties are permitted
to sell or repledge of ¥1,650 and ¥1,364 in 2018 and 2019) (including
¥6,699,943 and ¥6,413,867 in 2018 and 2019 measured at fair value)
. . . . .
896,360
5,725,921
9,268,756
1,109,995
10,974,740
2,758,573
35,186,689
40,576,618
32,833,114
33,518,503
3,582,941
4,441,901
7,238,194
6,977,600
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,654,249
44,938,004
Loans, net of unearned income, unamortized premiums and deferred loan fees
(including assets pledged that secured parties are permitted to sell or repledge
of ¥898,186 and ¥802,185 in 2018 and 2019) (Notes 4 and 8) . . . . . . . . . . . . . .
Allowance for credit losses (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117,035,895
(764,124)
116,883,941
(658,184)
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,271,771
116,225,757
Premises and equipment—net (Note 5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers’ acceptance liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets—net (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (Notes 8, 13, 14 and 32) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,013,588
324,624
183,084
1,011,119
441,334
68,704
10,666,064
973,600
359,648
247,996
927,196
433,891
89,719
11,041,902
¥300,570,312
¥305,228,899
Assets of consolidated VIEs included in total assets above that can be used
only to settle obligations of consolidated VIEs (Note 26)
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
130
23,161
477,583
1,952,683
16,550,107
187,329
¥
7
23,655
528,690
1,828,194
15,545,328
294,212
¥ 19,190,993
¥ 18,220,086
F-4
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS—(Continued)
AS OF MARCH 31, 2018 AND 2019
(in millions, except shares)
LIABILITIES AND EQUITY
Deposits (Notes 8 and 9):
Domestic offices:
2018
2019
Non-interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 24,406,759
125,195,310
¥ 25,222,218
124,859,036
Overseas offices:
Non-interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased (Notes 8 and 10) . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements (Notes 8, 15 and 16) . . . . . . . . . . . . . . . . .
Payables under securities lending transactions (Notes 8, 15 and 16) . . . . . . . . . . .
Due to trust account (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings (including ¥264,783 and ¥289,755 measured at fair
value under the fair value option in 2018 and 2019) (Notes 8, 12 and 32) . . . . .
Trading account liabilities (Notes 15, 24 and 32) . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations to return securities received as collateral (Notes 15, 16 and 32) . . . . .
Bank acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (including ¥333,985 and ¥325,808 measured at fair value
under the fair value option in 2018 and 2019) (Notes 8, 12 and 32)
. . . . . . . . .
Other liabilities (Notes 1, 7, 8, 13, 14 and 27) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities (Notes 25 and 27)
Mitsubishi UFJ Financial Group shareholders’ equity:
Capital stock (Notes 17 and 18)—common stock authorized, 33,000,000,000
shares; common stock issued, 13,900,028,020 shares and 13,667,770,520
shares at March 31, 2018 and 2019, with no stated value . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus (Note 18)
Retained earnings (Notes 19 and 35):
Appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes (Note 20) . . . . . . . . . .
Treasury stock, at cost—737,772,882 common shares and 745,921,774
5,455,677
40,616,847
195,674,593
2,452,543
18,134,594
8,170,218
3,386,158
6,881,124
12,222,331
3,176,962
183,084
165,921
5,220,557
43,978,978
199,280,789
2,450,320
25,224,632
913,087
2,735,952
6,731,073
13,009,492
3,087,026
247,996
214,735
27,069,556
7,407,413
284,924,497
27,990,543
7,358,506
289,244,151
2,090,270
5,740,165
239,571
4,945,733
2,477,315
2,090,270
5,577,186
239,571
8,094,026
(284,269)
common shares at March 31, 2018 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . .
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . .
Noncontrolling interests (Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(522,872)
14,970,182
675,633
15,645,815
¥300,570,312
(517,236)
15,199,548
785,200
15,984,748
¥305,228,899
Liabilities of consolidated VIEs for which creditors or beneficial interest
holders do not have recourse to the general credit of Mitsubishi UFJ
Financial Group (Note 26)
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
¥
28,451
510,948
84,040
623,439
¥
¥
20,535
490,033
62,146
572,714
See the accompanying notes to Consolidated Financial Statements.
F-5
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions)
Interest income:
Loans, including fees (Note 4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements and securities borrowing
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements and securities lending
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to trust account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings and trading account liabilities . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses (Note 4) . . . . . . . . . . . . . . . .
Net interest income after provision for (reversal of) credit
2017
2018
2019
¥ 2,023,649
78,735
¥2,271,219
126,608
¥2,576,417
183,327
235,638
135,506
455,860
11,023
198,715
145,186
432,595
10,808
237,378
160,825
499,724
10,354
50,356
2,990,767
73,885
3,259,016
145,354
3,813,379
347,430
1,791
514,868
5,248
717,366
3,913
100,796
207
61,137
258,278
769,639
2,221,128
253,688
165,512
109
93,535
249,483
1,028,755
2,230,261
(240,847)
333,632
124
155,149
307,797
1,517,981
2,295,398
34,330
losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,967,440
2,471,108
2,261,068
Non-interest income:
Fees and commissions income (Note 28) . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange losses—net (Note 29) . . . . . . . . . . . . . . . . . . . . . . . .
Trading account profits (losses)—net (Notes 29 and 32) . . . . . . . . . . .
Investment securities gains (losses)—net (Note 3)(1)(2) . . . . . . . . . . . . .
. . . . . .
Equity in earnings of equity method investees—net (Note 14)
Gains on sales of loans (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income (Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense:
Salaries and employee benefits (Note 13) . . . . . . . . . . . . . . . . . . . . . . .
Occupancy expenses—net (Notes 5 and 27) . . . . . . . . . . . . . . . . . . . . .
Fees and commissions expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outsourcing expenses, including data processing . . . . . . . . . . . . . . . . .
Depreciation of premises and equipment (Note 5) . . . . . . . . . . . . . . . .
Amortization of intangible assets (Note 6) . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets (Note 6)
. . . . . . . . . . . . . . . . . . . . . . .
Insurance premiums, including deposit insurance . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes and public charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill (Note 6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) off-balance sheet credit instruments . . . . . .
Other non-interest expenses (Notes 5, 21 and 27) . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,414,893
(134,885)
(639,184)
281,158
197,821
13,286
63,617
1,196,706
1,139,677
176,819
273,675
258,345
99,774
227,942
5,803
91,881
55,274
94,047
6,638
106,556
355,172
2,891,603
1,462,792
(49,561)
(73,114)
286,903
227,984
16,109
63,978
1,935,091
1,165,357
179,100
297,847
276,236
96,180
234,376
21,900
91,847
58,067
90,210
—
(96,054)
329,314
2,744,380
1,438,578
(95,987)
168,900
(252,307)
209,732
22,663
103,665
1,595,244
1,175,405
179,780
313,745
275,052
98,867
235,083
118,108
93,756
59,166
95,358
—
38,463
302,687
2,985,470
F-6
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions, except per share amount)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income before attribution of noncontrolling interests . . . . . . . .
Net income (loss) attributable to noncontrolling interests (Note 21) . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . .
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share applicable to common shareholders
of Mitsubishi UFJ Financial Group (Notes 19 and 23):
Basic earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . .
Diluted earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . .
Cash dividend per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . .
Weighted average diluted common shares outstanding . . . . . . . . . . . . .
Notes:
(1) The following credit losses are included in Investment securities gains (losses)—net:
(in millions)
Decline in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income—net
Total credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
¥
¥
¥
¥
2017
2018
272,543
94,453
178,090
(24,590)
1,661,819
407,823
1,253,996
25,836
2019
870,842
133,237
737,605
18,960
202,680
¥ 1,228,160
¥ 718,645
202,680
¥ 1,228,160
¥ 718,645
14.93
¥
92.40
¥
55.03
14.68
18.00
13,574
13,585
92.10
18.00
13,292
13,293
54.74
21.00
13,059
13,059
2017
2018
2019
706
35
741
¥
¥
99
15
114
¥
¥
596
10
606
(2) New guidance on recognition and measurement of financial assets and financial liabilities requires equity investments to be measured at
fair value with changes in fair value recognized in net income for the fiscal year ended March 31, 2019. For additional information, refer
to Note 1.
See the accompanying notes to Consolidated Financial Statements.
F-7
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions)
Net income before attribution of noncontrolling interests . . . . . .
Other comprehensive income (loss), net of tax (Note 20):
Net unrealized gains on investment securities(1) . . . . . . . . . . . . .
Net debt valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses on derivatives qualifying for cash flow
hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . .
Other comprehensive income (loss) attributable to
2017
2018
2019
¥ 178,090
¥ 1,253,996
¥
737,605
12,961
(8,552)
230,308
(2,178)
88,180
9,729
(13,245)
103,572
(143,210)
(48,474)
129,616
(24,590)
(7,025)
109,838
(104,778)
226,165
1,480,161
25,836
(4,890)
(88,940)
(42,212)
(38,133)
699,472
18,960
noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(24,765)
1,320
21,209
Comprehensive income attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 178,971
¥ 1,453,005
¥
659,303
Note:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019.
See the accompanying notes to Consolidated Financial Statements.
F-8
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions, except per share amount)
2017
2018
2019
Capital stock (Notes 17 and 18):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,090,270
¥ 2,090,270
¥ 2,090,270
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,090,270
¥ 2,090,270
¥ 2,090,270
Capital surplus (Note 18):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation (Note 33) . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,958,929
(1,856)
¥ 5,956,644
315
¥ 5,740,165
(180)
—
—
(429)
(34,751)
(190,054)
8,011
—
(162,720)
(79)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,956,644
¥ 5,740,165
¥ 5,577,186
Retained earnings appropriated for legal reserve (Note 19):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings (Note 19):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . .
Cash dividends:
Common stock—¥18.00 per share in 2017 and 2018, and
¥21.00 per share in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses on sales of shares of treasury stock . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . .
Effect of adopting new guidance on consolidation of certain variable
interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification of certain tax
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on recognition and measurement of
. . . . . . . . . . . . . .
financial assets and financial liabilities (Note 1)
Effect of adopting new guidance on recognition of breakage for
certain prepaid stored-value products (Note 1) . . . . . . . . . . . . . . . .
¥
¥
239,571
239,571
¥
¥
239,571
239,571
¥
¥
239,571
239,571
¥ 3,980,257
202,680
¥ 3,931,612
1,228,160
¥ 4,945,733
718,645
(246,338)
(1,114)
—
(240,497)
(8)
(2,605)(1)
(275,551)
—
1,173(2)
(3,873)
—
29,071
—
—
—
—
—
—
—
2,702,242
1,784
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,931,612
¥ 4,945,733
¥ 8,094,026
F-9
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions)
Accumulated other comprehensive income (loss), net of taxes:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . .
Effect of adopting new guidance on consolidation of certain variable
interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification of certain tax
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on recognition and measurement of
. . . . . . . . . . . . . .
financial assets and financial liabilities (Note 1)
2017
2018
2019
¥ 2,301,259
(23,709)
—
¥ 2,281,423
224,845
118
¥ 2,477,315
(59,342)
—
3,873
—
(29,071)
—
—
— (2,702,242)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,281,423
¥ 2,477,315
¥ (284,269)
Treasury stock, at cost:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of shares of treasury stock (Note 18) . . . . . . . . . . . . . . . . .
Sales of shares of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) resulting from changes in interests in
consolidated subsidiaries, consolidated variable interest entities,
and affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (299,661) ¥ (513,988) ¥ (522,872)
(161,043)
3,775
162,720
(201,102)
2,098
190,054
(217,803)
3,491
—
(15)
66
184
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (513,988) ¥ (522,872) ¥ (517,236)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . .
¥13,985,532
¥14,970,182
¥15,199,548
Noncontrolling interests:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial subscriptions of noncontrolling interests . . . . . . . . . . . . . . . . .
Transactions between the consolidated subsidiaries and the related
¥
577,642
112,644
¥
779,176
48,828
¥
675,633
108,235
noncontrolling interest shareholders . . . . . . . . . . . . . . . . . . . . . . . .
113,878
(120,216)
(2,830)
Decrease in noncontrolling interests related to deconsolidation of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(563,918)
(22,556)
(20,497)
Decrease in noncontrolling interests related to disposition of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,026)
—
—
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes . . . . . . . . . . . . . . . .
Effect of adopting new guidance on consolidation of certain variable
interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(24,590)
(6,842)
(24,765)
(15,390)
25,836
(21,675)
1,320
—
18,960
(15,853)
21,209
595,982
171
779,176
¥
—
310
675,633
¥
—
343
785,200
¥
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,764,708
¥15,645,815
¥15,984,748
Notes:
(1) The effect mainly resulted from the adoption of new accounting guidance on “Targeted Improvements to Accounting for Hedging
Activities”. See Note 14 for more information.
(2) The effect resulted from the adoption of new accounting guidance on “Leases”.
See the accompanying notes to Consolidated Financial Statements.
F-10
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions)
Cash flows from operating activities:
Net income before attribution of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income before attribution of noncontrolling interests to net
cash provided by operating activities:
Depreciation and amortization (Notes 5 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefit cost (income) for severance indemnities and pension plans
(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities (gains) losses—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premiums on investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in financial instruments measured at fair value under fair value option,
excluding trading account securities—net (Note 32) . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange (gains) losses—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in trading account assets, excluding foreign exchange contracts . .
Increase (decrease) in trading account liabilities, excluding foreign exchange
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in unearned income, unamortized premiums and deferred loan fees . . . . .
Decrease (increase) in accrued interest receivable and other receivables . . . . . . . . .
Increase in accrued interest payable and other payables . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in accrued income taxes and decrease (increase) in income
tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in allowance for repayment of excess interest . . . . . . . . . . . . . .
Net decrease (increase) in collateral for derivative transactions . . . . . . . . . . . . . . . .
Increase in cash collateral for the use of Bank of Japan’s settlement
infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
2017(1)
2018(1)
2019
¥
178,090
¥ 1,253,996
¥
737,605
327,716
6,638
5,803
253,688
20,274
(281,158)
95,091
103,845
(136,976)
(197,821)
(212,368)
42,609
521,093
(20,476)
49,783
66,419
(81,083)
(7,790)
(276,476)
(207,498)
441,026
690,429
330,556
—
21,900
(240,847)
(7,955)
(286,903)
118,863
(13,456)
(208,398)
(227,984)
120,595
5,653,904
(6,433,948)
(35,857)
(172,599)
153,365
1,212
(15,658)
259,287
(643,568)
(190,341)
(563,836)
333,950
—
118,108
34,330
(19,839)
252,307
78,509
13,880
565,304
(209,732)
(47,796)
(2,695,035)
1,370,846
(7,054)
(135,656)
92,334
(136,047)
1,258
(79,338)
(60,462)
20,862
228,334
Proceeds from sales of Available-for-sale debt securities (including proceeds from
debt securities under the fair value option) (Note 3) . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of Available-for-sale debt securities (including proceeds
from debt securities under the fair value option) (Note 3) . . . . . . . . . . . . . . . . . . .
Purchases of Available-for-sale debt securities (including purchases of debt
securities under the fair value option) (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of Held-to-maturity debt securities . . . . . . . . . . . . . . . . . .
Purchases of Held-to-maturity debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and redemption of Equity securities (including proceeds from
equity securities under the fair value option) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of Equity securities (including purchases of equity securities under the
fair value option) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Capital Analytics LLC (formerly Capital Analytics II LLC),
a subsidiary of TB, net of cash acquired (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock and preferred stock investment in Security Bank
Corporation, an equity method investee of BK (Note 2) . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Investor Services (US) (formerly Rydex Fund Services,
LLC), a subsidiary of TB, net of cash acquired (Note 2) . . . . . . . . . . . . . . . . . . . .
Purchase of common stock in Hitachi Capital Corporation, an equity method
investee of MUFG (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Hattha Kaksekar Limited, a subsidiary of Krungsri, net of cash
acquired (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock in Bank Danamon, an equity method investee of BK
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in call loans, funds sold, and receivables under resale
agreements and securities borrowing transactions . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures for premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and dispositions of investments in equity method investees . . .
Proceeds from sales of consolidated VIEs and subsidiaries—net . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,348,721
30,995,426
31,283,601
26,684,497
40,011,298
26,448,801
(54,588,932)
810,838
(632,116)
(71,593,326)
1,085,603
(1,156,122)
(62,309,072)
560,646
(1,192,989)
1,768,580
2,377,333
2,722,948
(1,727,841)
(2,197,171)
(2,770,356)
(4,154)
(91,993)
(17,175)
(91,877)
(556)
—
2,514,824
(6,971,016)
32,512
(116,786)
(237,253)
66,729
244,476
(151,078)
—
—
—
—
—
—
—
—
—
—
—
(169,478)
4,187,093
12,211
(159,003)
(239,755)
39,710
122,962
(72,765)
(132,335)
330,198
627,327
26,191
(126,479)
(276,880)
161,566
64,395
(49,590)
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . .
4,840,400
3,244,016
(4,632,028)
F-11
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019
(in millions)
Cash flows from financing activities:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in call money, funds purchased, and payables under repurchase
agreements and securities lending transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in due to trust account
Net decrease in other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of treasury stock (Note 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of shares of certain subsidiaries from noncontrolling interest
2017(1)
2018(1)
2019
10,902,923
5,720,011
3,602,674
(2,790,342)
(3,002,999)
(1,221,838)
12,265,629
(6,641,722)
256
(217,803)
3,963,120
51,003
(957,705)
6,671,031
(5,485,894)
1,316
(201,102)
(303,042)
(650,206)
(118,443)
5,020,636
(4,236,887)
2,322
(159,962)
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,612)
(318)
—
Payments for acquisition of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholders (Note 2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid by subsidiaries to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(246,345)
(6,842)
105,995
(50,000)
(240,514)
(21,675)
(87,067)
—
(275,581)
(15,853)
197,673
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,145,300
9,362,206
3,063,331
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
(334,793)
(188,149)
43,975
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,341,336
11,854,237
(1,296,388)
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents:
49,677,883
64,019,219
75,873,456
Cash, due from banks and interest-earning deposits in other banks . . . . . . . . . . . . . . . . .
Restricted cash included in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,009,770
9,449
75,858,049
15,407
74,571,260
5,808
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 64,019,219
¥ 75,873,456
¥ 74,577,068
Supplemental disclosure of cash flow information:
Cash paid during the fiscal year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investing and financing activities:
Assets acquired under capital lease arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adoption of new guidance on consolidation of certain variable interest entities (Note 26):
Increase in total assets, excluding cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Increase in total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Capital Analytics LLC, a subsidiary of TB (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Investor Services (US), LLC, a subsidiary of TB (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Hattha Kaksekar Limited, a subsidiary of Krungsri (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable Equity Securities issued by Bank Danamon transferred to investments in
subsidiaries and affiliates (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale debt securities transferred to Held-to-maturity debt securities . . . . . . . . . .
¥
779,239
373,887
¥ 1,040,337
265,225
¥ 1,488,136
302,019
7,065
7,111
11,280
598,236
32,254
595,982
5,038
884
17,847
672
54,186
53,630
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
98,934
221,537
Note:
(1) The reclassification of certain items on the consolidated balance sheets resulted in reclassification of the consolidated statements of cash
flows for the fiscal years ended March 31, 2017 and 2018, respectively. See Note 1 Reclassifications for further information.
See the accompanying notes to Consolidated Financial Statements.
F-12
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of Business
Mitsubishi UFJ Financial Group, Inc. (“MUFG”) is a holding company for MUFG Bank, Ltd. (formerly,
The Bank of Tokyo-Mitsubishi UFJ, Ltd., “MUFG Bank” or “BK”), Mitsubishi UFJ Trust and Banking
Corporation (“Mitsubishi UFJ Trust and Banking” or “TB”), Mitsubishi UFJ Securities Holdings Co., Ltd.
(“Mitsubishi UFJ Securities Holdings” or “SCHD”), Mitsubishi UFJ NICOS Co., Ltd. (“Mitsubishi UFJ
NICOS”), and other subsidiaries. Mitsubishi UFJ Securities Holdings is an intermediate holding company for
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“Mitsubishi UFJ Morgan Stanley Securities”). Through its
subsidiaries and affiliated companies, MUFG engages in a broad range of financial operations, including
commercial banking, investment banking, trust banking and asset management services, securities businesses,
and credit card businesses, and it provides related services to individual and corporate customers. See Note 30 for
more information by business segment.
Basis of Financial Statements
The accompanying consolidated financial statements are presented in Japanese yen, the currency of the
country in which MUFG is incorporated and principally operates. The accompanying consolidated financial
statements have been prepared on the basis of accounting principles generally accepted in the United States of
America (“U.S. GAAP”). In certain respects, the accompanying consolidated financial statements reflect
adjustments which are not included in the consolidated financial statements issued by MUFG and certain of its
subsidiaries in accordance with applicable statutory requirements and accounting practices in their respective
countries of incorporation. The major adjustments include those relating to (1) investment securities,
(2) derivative financial instruments, (3) allowance for credit losses, (4) income taxes, (5) consolidation,
(6) premises and equipment, (7) transfer of financial assets, (8) accrued severance indemnities and pension
liabilities, (9) goodwill and other intangible assets and (10) lease transactions.
Fiscal years of certain subsidiaries, which end on December 31, and MUFG’s fiscal year, which ends on
March 31, have been treated as coterminous. For the fiscal years ended March 31, 2017, 2018 and 2019, the
effect of recording intervening events for the three-month periods ended March 31 on MUFG’s proportionate
equity in net income of subsidiaries with fiscal years ended on December 31, would have resulted in an increase
of ¥10.22 billion, a decrease of ¥10.76 billion, and an increase of ¥19.97 billion to net income attributable to
Mitsubishi UFJ Financial Group, respectively. No intervening events occurred during each of the three-month
periods ended March 31, 2017, 2018 and 2019 which, if recorded, would have had material effects on
consolidated total assets, loans, total liabilities, deposits or total equity as of March 31, 2017, 2018 and 2019.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to management judgment primarily relate to the allowance for credit
losses, the valuation of deferred tax assets, the valuation of financial instruments, the accounting for goodwill
and intangible assets, impairment of investment securities, the allowances for repayment of excess interest and
accrued severance indemnities and pension liabilities.
F-13
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summary of Significant Accounting Policies
Significant accounting policies applied in the accompanying consolidated financial statements are
summarized below:
Consolidation—The accompanying consolidated financial statements include the accounts of MUFG, its
subsidiaries and certain variable interest entities (“VIE”s) (together, the “MUFG Group”). In situations in which
the MUFG Group has a controlling financial interest in other entities, including certain VIEs, such entities are
consolidated and noncontrolling interests, if any, are recorded in Total equity. Intercompany transactions and
balances have been eliminated. Investments in affiliated companies (companies over which the MUFG Group has
the ability to exercise significant influence) are accounted for by the equity method of accounting and are
reported in Other assets. The MUFG Group’s equity interest in the earnings of these equity investees and other-
than-temporary impairment (“OTTI”) are reported in Equity in earnings of equity method investees-net. The
MUFG Group recognizes an impairment loss on investments in equity method investees that is other-than-
temporary. The MUFG Group determines whether loss on investments is other-than-temporary, through
consideration of various factors, such as inability to recover the carrying amount of the investment, the inability
of the investee to sustain an earnings capacity that would justify the carrying amount of the investment, the
length of time and the extent to which the fair value has been less than cost, the financial condition and near-term
prospects of the investees, and the intent and ability to retain its investment in the investees for a period of time
sufficient to allow for any anticipated recovery in the fair value. The MUFG Group also evaluates additional
factors, such as the condition and trend of the economic cycle, and trends in the general market.
The MUFG Group consolidates VIEs if it has the power to direct the activities of a VIE which most
significantly impact the VIE’s economic performance and has the obligation to absorb losses or the right to
receive benefits that could potentially be significant to the VIE. To assess whether a VIE should be consolidated
or not, the MUFG Group considers all factors, such as the purpose and design of the VIE, contractual
arrangements, and the MUFG Group’s involvement in both the establishment of the VIE and day-to-day
activities of the VIE. The MUFG Group considers a right to make the most significant decisions affecting a VIE
to determine whether it is deemed to have the power to direct the activities of the VIE. Furthermore, the MUFG
Group considers its economic interests in the VIE, including investments in debt or equity instruments issued by
the VIE, liquidity and credit enhancement, and guarantees to determine whether such interests are potentially
significant to the VIE or not.
Assets that the MUFG Group holds in an agency, fiduciary or trust capacity are not assets of the MUFG
Group and, accordingly, are not included in the accompanying consolidated balance sheets.
Cash Flows—For the purposes of reporting cash flows, cash and cash equivalents consist of Cash and due
from banks, Interest-earning deposits in other banks, and certain restricted cash included in Other assets.
Restricted cash included in cash and cash equivalents represents cash or deposits subject to withdrawal or usage
restrictions, and mainly consist of reserves on deposits with the Bank of Japan and similar reserves required for
foreign offices and subsidiaries engaged in banking businesses in foreign countries. Cash flows from qualified
hedging activities are classified in the same category as the items being hedged.
Translation of Foreign Currency Financial Statements and Foreign Currency Transactions—Financial
statements of overseas entities are translated into Japanese yen using the respective fiscal year-end exchange
rates for assets and liabilities. Income and expense items are translated at average rates of exchange for the
respective fiscal years.
Foreign currency translation gains and losses related to the financial statements of overseas entities of the
MUFG Group, net of related income tax effects, are credited or charged directly to Foreign currency translation
F-14
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
adjustments, a component of Accumulated other comprehensive income (“Accumulated OCI”). Tax effects of
gains and losses on foreign currency translation of the financial statements of overseas entities are not recognized
unless it is apparent that the temporary differences will reverse in the foreseeable future.
Foreign currency-denominated assets and liabilities are translated into the functional currencies of the
individual entities included in consolidation at the respective fiscal year-end foreign exchange rates. Foreign
currency-denominated income and expenses are translated using average rates of exchange for the respective
fiscal years. Gains and losses from such translation are included in Foreign exchange gains (losses)—net, as
appropriate.
Repurchase Agreements, Securities Lending and Other Secured Financing Transactions—Securities sold
with agreements to repurchase (“repurchase agreements”), securities purchased with agreements to resell (“resale
agreements”) and securities lending and borrowing transactions are accounted for as secured financing or lending
transactions, if the transferor has not surrendered control over the securities. Repurchase agreements and resale
agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased,
and securities lending and borrowing transactions are generally carried at the amount of cash collateral advanced
or received. If they meet the relevant conditions for the surrender of control, they are accounted for as sales of
securities with related off-balance sheet forward repurchase commitments or purchases of securities with related
off-balance sheet forward resale commitments. For the fiscal years ended March 31, 2017, 2018 and 2019, there
were no such transactions accounted for as sales or purchases.
Collateral—For secured lending transactions, including resale agreements, securities borrowing
transactions, commercial lending and derivative transactions, the MUFG Group, as a secured party, generally has
the right to require the counterparties to provide collateral, including letters of credit, cash, securities and other
financial assets. For most secured lending transactions, the MUFG Group maintains strict levels of
collateralization governed by a daily mark-to-market analysis. Financial assets pledged as collateral are generally
negotiable financial instruments and are permitted to be sold or repledged by secured parties. If the
MUFG Group sells these financial assets received as collateral, it recognizes the proceeds from the sale and its
obligation to return the collateral. For secured borrowing transactions, principally repurchase agreements and
securities lending transactions and derivative transactions, where the secured party has the right to sell or
repledge financial assets pledged as collateral, the MUFG Group separately discloses those financial assets
pledged as collateral in the accompanying consolidated balance sheets.
Trading Account Securities—Securities and money market instruments held in anticipation of short-term
market movements and for resale to customers are included in Trading account assets, and short trading positions
of these instruments are included in Trading account liabilities. Trading positions are carried at fair value in the
accompanying consolidated balance sheets and recorded on a trade date basis. Changes in the fair value of
trading positions are recognized in Trading account profits (losses). The MUFG Group has elected the fair value
option for certain foreign securities. See Note 32 for a further discussion of fair value option.
Investment Securities—Debt securities for which the MUFG Group has both the ability and positive intent to
hold to maturity are classified as Held-to-maturity debt securities and are carried at amortized cost. Debt
securities that the MUFG Group may not hold to maturity other than those classified as Trading account
securities, are classified as Available-for-sale debt securities, and are carried at their fair values, with unrealized
gains and losses reported on a net-of-tax basis within Accumulated OCI, net of taxes, which is a component of
equity. For debt securities, an OTTI is recognized in earnings for a security if the MUFG Group has intent to sell
such a debt security or if it is more likely than not the MUFG Group will be required to sell such a debt security
before recovery of its amortized cost basis. If not, the credit component of an OTTI is recognized in earnings, but
F-15
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the noncredit component is recognized in Accumulated OCI. In determining other-than-temporary declines in fair
value to be recognized as an impairment loss on debt securities, the MUFG Group generally considers factors
such as the ability and positive intent to hold the investments for a period of time sufficient to allow for
anticipated recovery in fair value, the financial condition of the issuer, the extent of decline in fair value, and the
length of time that the decline in fair value below cost has existed.
Equity securities include marketable equity investment securities and nonmarketable equity investment
securities. Marketable equity investment securities are measured at fair value with unrealized gains or losses
reflected in net income. Nonmarketable equity investment securities are primarily measured at cost minus
impairment, if any, plus or minus changes resulting from observable price changes. Nonmarketable equity
investment securities held by subsidiaries that are investment companies or brokers and dealers, are subject to the
specialized industry accounting principles for investment companies and brokers and dealers. Securities of those
subsidiaries are carried at their fair values.
Interest and dividends on investment securities are reported in Interest income. Dividends are recognized
when the shareholder right to receive the dividend is established. Gains and losses on disposition of investment
securities are computed using the average cost method and are recognized on the trade date.
Derivative Financial Instruments—The MUFG Group engages in derivative activities involving swaps,
forwards, futures, options, and other types of derivative contracts. Derivatives are used in trading activities to
generate trading revenues and fee income for its own account and to respond to customers’ financial needs.
Derivatives are also used to manage counterparty credit risk and market risk exposures to fluctuations in interest
and foreign exchange rates, equity and commodity prices.
Derivatives entered into for trading purposes are carried at fair value and are reported as Trading account
assets or Trading account liabilities, as appropriate. The fair values of derivative contracts executed with the
same counterparty under legally enforceable master netting agreements are presented on a gross basis. Changes
in the fair value of such contracts are recognized currently in Foreign exchange gains (losses)—net with respect
to foreign exchange contracts and in Trading account profits (losses)—net with respect to interest rate contracts
and other types of contracts.
Embedded features that are not clearly and closely related to the host contracts and meet the definition of
derivatives are separated from the host contracts and measured at fair value unless the contracts embedding the
derivatives are measured at fair value in their entirety.
Derivatives are also used to manage exposures to fluctuations in interest and foreign exchange rates arising
from mismatches of asset and liability positions. Certain of those derivatives are designated as hedging
instruments and qualify for hedge accounting. The MUFG Group designates a derivative as a hedging instrument
at the inception of each such hedge relationship, and it documents, for such individual hedging relationships, the
risk management objective and strategy, including the item being hedged, the specific risk being hedged and the
method used to assess the hedge effectiveness. In order for a hedging relationship to qualify for hedge
accounting, the changes in the fair value of the derivative instruments must be highly effective in achieving
offsetting changes in fair values or variable cash flows of the hedged items attributable to the risk being hedged.
Any ineffectiveness, which arises during the hedging relationship, is recognized in Non-interest income or
expense in the period in which it arises. All qualifying hedging derivatives are valued at fair value and included
in Other assets or Other liabilities, as appropriate. For cash flow hedges, the unrealized changes in fair value to
the extent effective are recognized in Accumulated OCI. Amounts realized on cash flow hedges related to
variable rate loans are recognized in Net interest income in the period when the cash flow from the hedged item
F-16
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
is realized. The fair value of cash flow hedges related to forecasted transactions, if any, is recognized in
Non-interest income or expense in the period when the forecasted transaction occurs. Any difference that arises
from gains or losses on hedging derivatives offsetting corresponding gains or losses on the hedged items, and
gains and losses on derivatives attributable to the risks excluded from the assessment of hedge effectiveness are
recognized in Non-interest income or expense.
Loans—Loans originated by the MUFG Group (“originated loans”) are carried at the principal amount
outstanding, adjusted for unearned income and deferred net nonrefundable loan fees and costs. Originated loans
held and intended for dispositions or sale in secondary markets are transferred to the held-for-sale classification
and carried at the lower of cost or estimated fair value generally on an individual loan basis. Loan origination
fees, net of certain direct origination costs, are deferred and recognized over the contractual life of the loan as an
adjustment to yield using a method that approximates the interest method. Interest income on loans that are not
impaired is accrued and credited to interest income as it is earned. Unearned income and discounts or premiums
on purchased loans are deferred and recognized over the remaining contractual terms of the loans using a method
that approximates the interest method when such purchased loans are outside the scope of the guidance on loans
and debt securities acquired with deteriorated credit quality as described below.
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial,
Residential, Card, MUFG Americas Holdings Corporation (“MUFG Americas Holdings ” or “MUAH”), and
Bank of Ayudhya Public Company Limited (“Krungsri”) based on the grouping used by the MUFG Group to
determine the allowance for credit losses. The MUFG Group further classifies the Commercial segment into
classes based on initial measurement attributes, risk characteristics, and its method of monitoring and assessing
credit risk.
Originated loans are considered impaired when, based on current information and events, it is probable that
the MUFG Group will be unable to collect all the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Past due status is determined based on the contractual
terms of the loan and the actual number of days since the last payment date, and is considered in determining
impairment. Originated loans that experience insignificant payment delays and payment shortfalls generally are
not classified as impaired. Management determines the significance of payment delays and payment shortfalls on
a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount
of the shortfall in relation to the principal and interest owed. Impairment is generally evaluated on a loan-by-loan
basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the
loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and
timely collection of either principal or interest, specifically when principal or interest is contractually past due
one month or more with respect to loans within all classes of the Commercial segment, three months or more
with respect to loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or
more with respect to loans within the Residential segment. A nonaccrual loan may be restored to an accrual
status when interest and principal payments become current and management expects that the borrower will
make future contractual payments as scheduled. When a loan is placed on nonaccrual status, interest accrued but
not received is generally reversed against interest income. Cash receipts on nonaccrual loans, for which the
ultimate collectibility of principal is uncertain, are applied as principal reductions; otherwise, such collections are
credited to income.
The MUFG Group modifies certain loans in conjunction with its loss-mitigation activities. Through these
modifications, concessions are granted to a borrower who is experiencing financial difficulty, generally in order
F-17
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
to minimize economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize
payments received from the borrower. The concessions granted vary by portfolio segment, by program, and by
borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals,
and partial principal forgiveness. Loan modifications that represent concessions made to borrowers who are
experiencing financial difficulties are identified as troubled debt restructurings (“TDRs”).
Generally, accruing loans that are modified in a TDR remain as accruing loans subsequent to the
modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been modified as a
TDR, the borrower is not delinquent under the modified terms, and demonstrates that its financial condition has
improved, the MUFG Group may reclassify the loan to accrual status. This determination is generally performed
at least once a year through a detailed internal credit rating review process. Once a nonaccrual loan is deemed to
be a TDR, the MUFG Group will continue to designate the loan as a TDR even if the loan is reclassified to
accrual status.
A loan that has been modified into a TDR is considered to be impaired until it matures, is repaid, or is
otherwise liquidated, regardless of whether the borrower performs under the modified terms. Because loans
modified in TDRs are considered to be impaired, these loans are measured for impairment using the MUFG
Group’s established asset-specific allowance methodology, which considers the expected default rates for the
modified loans. See “Allowance for Credit Losses” for a discussion for each portfolio segment.
In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality,
impaired loans acquired for which it is probable that the MUFG Group will be unable to collect all contractual
receivables are initially recorded at the present value of amounts expected to be received. For these impaired
loans, the related valuation allowances are not carried over or created initially. Accretable yield is limited to the
excess of the investor’s estimate of undiscounted cash flows over the investor’s initial investment in the loan.
Subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of
the loan’s yield over its remaining life after reduction of any remaining allowance for credit losses for the loan
established after its acquisition, if any, while any decrease in such cash flows below those initially expected at
acquisition plus additional cash flows expected to be collected arising from changes in estimate after acquisition
is recognized as an impairment.
Loan Securitization—The MUFG Group securitizes and services commercial, industrial, and residential
loans in the normal course of business. The MUFG Group accounts for a transfer of loans in a securitization
transaction as a sale if it meets relevant conditions for the surrender of control. Otherwise, the transfer is
accounted for as a collateralized borrowing transaction. When a securitization is accounted for as a sale, the
proceeds from a sale of financial assets consist of the cash and any other assets obtained, including beneficial
interests and separately recognized servicing assets, in the transfer less any liabilities incurred, including
separately recognized servicing liabilities. All proceeds and reductions of proceeds from a sale shall be initially
measured at fair value.
Allowance for Credit Losses—The MUFG Group maintains an allowance for credit losses to absorb
probable losses inherent in the loan portfolio. Actual credit losses (amounts deemed uncollectible, in whole or in
part), net of recoveries, are generally determined based on detailed loan reviews and a credit assessment by
management at each balance sheet date, and are deducted from the allowance for credit losses as net charge-offs.
The MUFG Group generally applies its charge-off policy to all loans in its portfolio regardless of the type of
borrower. Management believes that the provision for credit losses is adequate and the allowance is at the
appropriate amount to absorb probable losses inherent in the loan portfolio. During the fiscal year ended
March 31, 2019, the MUFG Group did not make any significant changes to the methodologies or policies used to
determine its allowance for credit losses.
F-18
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Key elements relating to the policies and discipline used in determining the allowance for credit losses are
credit classification and the related borrower categorization process. The categorization is based on conditions
that may affect the ability of borrowers to service their debt, taking into consideration current financial
information, historical payment experience, credit documentation, public information, analyses of relevant
industry segments or existing economic conditions. In determining the appropriate level of the allowance, the
MUFG Group evaluates the probable loss by collateral value, historical loss experience, probability of insolvency
and category of loan based on its type and characteristics. The MUFG Group calculates the allowance for credit
losses over the loss emergence period that is a time between a loss occurring event and the subsequent
confirmation of a loss. The MUFG Group updates these conditions and probable loss on a regular basis and upon
the occurrence of unexpected change in the economic environment.
The methodologies used to estimate the allowance and the charge-off policy for each portfolio segment are
as follows:
Commercial segment
In the Commercial segment, the methodology for assessing the appropriateness of the allowance consists of
several key elements, which include the allocated allowance for loans individually evaluated for impairment, the
formula allowance, and the allocated allowance for large groups of smaller-balance homogeneous loans.
The allocated allowance for loans individually evaluated for impairment represents the impairment
allowance determined in accordance with the guidance on accounting by creditors for the impairment of a loan.
The factors considered by management in determining impairment are the internal credit rating assigned to each
borrower which represents the borrower’s creditworthiness determined based on payment status, the number of
delinquencies, and the probability of collecting principal and interest payments when due. The impairment of a
loan is measured based on the present value of expected future cash flows discounted at the loan’s original
effective interest rate, or the loan’s observable market price, or the fair value of the collateral if the loan is
collateral dependent.
The formula allowance is applied to loans that are categorized as Normal or Close Watch, excluding loans
identified as a TDR, based on the internal credit rating and historical loss factors which are based on the loss
experience. See Note 4 for the information on loans to borrowers categorized based on the internal borrower
rating. Estimated losses inherent in the loans at the balance sheet date are calculated by multiplying the default
ratio by the nonrecoverable ratio (determined as a complement of the recovery ratio). The default ratio is
determined by each internal credit rating, taking into account the historical number of defaults of borrowers
within each internal credit rating divided by the total number of borrowers. The recovery ratio is mainly
determined by the historical experience of collections against loans in default. The default ratio, the recovery
ratio and other indicators are continually reviewed to determine the appropriate level of the allowance. Because
the evaluation of inherent loss for these loans involves an uncertainty, subjectivity and judgment, the estimation
of the formula allowance is back-tested by comparing the allowance with the actual results subsequent to the
balance sheet date. The results of such back-testing are evaluated by management to determine whether the
manner and level of the formula allowance needs to be changed in subsequent years.
The allocated allowance for large groups of smaller-balance homogeneous loans is established through a
process that begins with estimates of probable losses inherent in the portfolio. These estimates are based upon
various analyses, including historical delinquency and historical loss experience.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
F-19
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by discounting the estimated future cash flows using the original effective interest rate of the loans prior to
modification.
In relation to loans categorized as Legally/Virtually Bankrupt, the carrying amount of loans less estimated
value of the collateral and guaranteed amount is generally considered uncollectible, and is charged off.
Residential segment
In the Residential segment, the loans are comprised of smaller-balance homogeneous loans that are pooled
by their internal credit ratings-based on the number of delinquencies. The loans in this segment are generally
secured by collateral. Collateral values are based on internal valuation sources, and the allowance is determined
for unsecured amounts. The allowance for the nondelinquent group of loans is determined based on historical
loss experience. For delinquent groups of loans, the MUFG Group determines the allowance based on the
probability of insolvency by the number of actual delinquencies and historical loss experience.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by discounting the estimated future cash flows using the original effective interest rate of the loans prior to
modification.
In relation to loans that are in past due status over a certain period of time and deemed uncollectible, the
carrying amount of loans less estimated value of the collateral and guaranteed amount is generally considered
uncollectible and charged off.
Card segment
In the Card segment, the loans are smaller-balance homogeneous loans that are pooled by their internal
credit rating based on the number of delinquencies. The allowance for loans in this segment is generally
determined based on the probability of insolvency by the number of actual delinquencies and historical loss
experience. For calculating the allocated allowance for loans specifically identified for evaluation, impaired loans
are aggregated for the purpose of measuring impairment using historical loss factors.
Loans that have been modified into a TDR are treated as impaired loans, and the allowance for credit losses
is determined using the discounted cash flow method whereby the estimated future cash flows are discounted
using the original effective interest rate of the loans prior to modification.
In relation to loans that are in past due status over a certain period of time and deemed uncollectible, the
amount of loans is generally fully charged off.
MUFG Americas Holdings segment
In the MUFG Americas Holdings segment, the methodology for assessing the appropriateness of the
allowance consists of several key elements, which include the allocated allowance for loans individually
evaluated for impairment, the formula allowance, the allocated allowance for large groups of smaller-balance
homogeneous loans, and the unallocated allowance.
F-20
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The allocated allowance for loans individually evaluated for impairment is established for loans when
management determines that the MUFG Group will be unable to collect all amounts due according to the
contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of
the recorded investment in the loan, the present value of expected future cash flows discounted at the loan’s
effective rate, the loan’s observable market price, or the fair value of the collateral, if the loan is collateral
dependent.
The formula allowance is calculated by applying historical loss factors to outstanding loans. Historical loss
factors are based on the historical loss experience and may be adjusted for significant factors that, in
management’s judgment, affect the collectibility of the portfolio as of the balance sheet date.
The allocated allowance for large groups of smaller-balance homogeneous loans is established for consumer
loans as well as for smaller balance commercial loans. These loans are managed on a pool basis, and loss factors
are based on expected net charge-off ranges.
The unallocated allowance represents an estimate of additional losses inherent in the loan portfolio and is
composed of attribution factors, which are based upon management’s evaluation of various conditions that are
not directly measured in the determination of the allocated allowance. The conditions used for consideration of
the unallocated allowance at each balance sheet date include factors, such as existing general economic and
business conditions affecting the key lending areas and products of the MUFG Group, credit quality trends and
risk identification, collateral values, loan volumes, underwriting standards and concentrations, specific industry
conditions, recent loss experience and the duration of the current business cycle. The MUFG Group reviews
these conditions and has an internal discussion with senior credit officers on a quarterly basis.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by using the discounted cash flow method whereby the estimated future cash flows are discounted using the
original effective interest rate of the loans prior to modification.
Commercial loans are generally considered uncollectible based on an evaluation of the financial condition
of a borrower as well as the value of any collateral and, when considered to be uncollectible, loans are charged
off in whole or in part. Consumer loans are generally considered uncollectible based on past due status and the
value of any collateral and, when considered to be uncollectible, loans are charged off in whole or in part.
Krungsri segment
In the Krungsri segment, the methodology for assessing the appropriateness of the allowance consists of
several key elements, which include the allocated allowance for loans individually evaluated for impairment, the
formula allowance, and the allocated allowance for large groups of smaller-balance homogeneous loans.
The allocated allowance for loans individually evaluated for impairment is established for loans when
management determines that the MUFG Group will be unable to collect all amounts due according to the
contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of
the recorded investment in the loan, the present value of expected future cash flows discounted at the loan’s
effective rate, the loan’s observable market price, or the fair value of the collateral, if the loan is collateral
dependent.
F-21
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The formula allowance is calculated by applying historical loss factors to outstanding loans. Historical loss
factors are based on the historical loss experience and may be adjusted for significant factors that, in
management’s judgment, affect the collectibility of the portfolio as of the balance sheet date.
The allocated allowance for large groups of smaller-balance homogeneous loans is established for smaller
balance loans such as housing loans, credit card loans, and personal loans. These loans are managed on a pool
basis, and loss factors are based on expected net charge-off ranges.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by using the discounted cash flow method whereby the estimated future cash flows are discounted using the
original effective interest rate of the loans prior to modification.
Loans to customers are charged off when they are determined to be uncollectible considering the financial
condition of a borrower.
Allowance for Off-Balance Sheet Credit Instruments—The MUFG Group maintains an allowance for credit
losses on off-balance sheet credit instruments, including commitments to extend credit, guarantees, standby
letters of credit and other financial instruments. The allowance is recorded as a liability in Other liabilities. The
MUFG Group adopts the same methodology used in determining the allowance for credit losses on loans.
Potential credit losses related to derivatives are considered in the fair value of the derivatives.
Premises and Equipment—Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is charged to operations over the estimated useful lives of the related assets.
Leasehold improvements are depreciated over the terms of the respective leases or the estimated useful lives of
the improvements, whichever is shorter. MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking apply the
declining-balance method in depreciating their premises and equipment, while other subsidiaries mainly apply
the straight-line method, at rates principally based on the following estimated useful lives:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years
15 to 50
2 to 20
5 to 39
Maintenance, repairs and minor improvements are charged to operations as incurred. Major improvements
are capitalized. Net gains or losses on dispositions of premises and equipment are included in Other non-interest
income or expense, as appropriate.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is
measured by a comparison of the carrying amount to future undiscounted net cash flows expected to be generated
by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the asset exceeds the fair value. For purposes of recognition and measurement
of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level
with independent and identifiable cash flows. Assets to be disposed of by sale are reported at the lower of the
carrying amount or fair value less estimated cost to sell.
F-22
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Asset retirement obligations related to restoration of certain leased properties upon lease termination are
recorded in Other liabilities with a corresponding increase in leasehold improvements. The amounts represent the
present value of expected future cash flows associated with returning such leased properties to their original
condition. The difference between the gross and present value of expected future cash flows is accreted over the
life of the related leases as a non-interest expense.
Goodwill—The MUFG Group recognizes goodwill, as of the acquisition date, measured as the excess of the
purchase price over the fair value of the net assets acquired. Goodwill related to investments in equity method
investees is included in Other assets as a part of the carrying amount of investments in equity method investees.
Goodwill arising from a business combination is not amortized but is tested at least annually for
impairment. Goodwill is recorded at a designated reporting unit level for the purpose of assessing impairment.
A reporting unit is an operating segment, or an identified business unit one level below an operating
segment. An impairment loss is recognized to the extent that the carrying amount of goodwill exceeds its implied
fair value.
Intangible assets—Intangible assets consist of software, core deposit intangibles, customer relationships,
trade names and other intangible assets. These are amortized over their estimated useful lives unless they have
indefinite useful lives. Amortization of intangible assets is computed in a manner that best reflects the economic
benefits of the intangible assets as follows:
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Useful lives
(years)
2 to 10
10 to 16
7 to 27
7 to 40
Amortization method
Straight-line
Straight-line
Straight-line, Declining-balance
Straight-line
Intangible assets having indefinite useful lives are not amortized but are subject to annual impairment tests.
An impairment exists if the carrying value of an indefinite-lived intangible asset exceeds its fair value. For other
intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable
and the carrying amount exceeds the fair value of the intangible asset.
The MUFG Group capitalizes certain costs associated with the acquisition or development of internal-use
software. Costs subject to capitalization are salaries and employee benefits for employees who are directly
associated with and who devote time to the internal-use computer software project, to the extent of time spent
directly on the project. Once the software is ready for its intended use, the MUFG Group begins to amortize
capitalized costs on a straight-line basis.
Accrued Severance and Pension Liabilities—The MUFG Group has defined benefit pension plans and other
postretirement benefit plans, including severance indemnities plans (“SIPs”). The liabilities related to these plans
are computed and recognized based on actuarial computations. Net actuarial gains and losses that arise from
differences between actual experience and assumptions are generally amortized over the average remaining
service period of participating employees if it exceeds the corridor, which is defined as the greater of 10% of plan
assets or the projected benefit obligation. Under the guidance related to employers’ accounting for defined
benefit pension and other postretirement plans, the MUFG Group recognizes a net liability or asset to report the
funded status of its defined benefit pension and other postretirement plans in the accompanying consolidated
balance sheets and mainly recognizes changes in the funded status of defined benefit pension and other
postretirement plans in the year in which the changes occur in Accumulated OCI. Based on actuarial
computations of current and future employee benefits, the service cost component is charged to Salaries and
F-23
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
employee benefits while other components of net pension benefit/cost are charged to Other non-interest
expenses. The MUFG Group measures plan assets and benefit obligations as of the date of the consolidated
balance sheets.
Long-Term Debt—Premiums, discounts and issuance costs of long-term debt are amortized based on the
method that approximates the interest method over the term of the long-term debt.
Obligations under Guarantees—The MUFG Group provides customers with a variety of guarantees and
similar arrangements, including standby letters of credit, financial and performance guarantees, credit protection,
and liquidity facilities. The MUFG Group recognizes guarantee fee income over the guarantee period based on
the contractual terms of the guarantee contracts. It is the MUFG Group’s business practice to receive a guarantee
fee at the inception of the guarantee, which approximates market value of the guarantee and is initially recorded
as a liability, which is then recognized as guarantee fee income over the guarantee period.
Allowance for Repayment of Excess Interest—The MUFG Group maintains an allowance for repayment of
excess interest based on an analysis of past experience of reimbursement of excess interest, borrowers’ profile,
recent trend of borrowers’ claims for reimbursement, and management’s future forecasts. The allowance is
recorded as a liability in Other liabilities.
Fees and Commissions—The MUFG Group recognizes revenue from contracts with customers in the
amount of consideration it expects to receive upon the transfer of control of a good or service. The timing of
recognition is dependent on whether the MUFG Group satisfies a performance obligation by transferring control
of the product or service to a customer over time or at a point in time.
The following is an explanation of the MUFG Group’s key revenue from contracts with customers and the
timing of its recognition.
Fees and commissions on deposits consist of fees and commissions charged for transaction-based services
such as usage of automated teller machines and withdrawal services, and for periodic account maintenance
services. The MUFG Group’s performance obligation for transaction-based services is satisfied and the fees and
commissions are recognized at the point in time when the MUFG Group’s performance under the terms of a
contractual arrangement is completed, which is at the settlement of a transaction, while the MUFG Group’s
performance obligation for maintenance services is satisfied and the fees and commissions are recognized over
the course of each month.
Fees and commissions on remittances and transfers consist of fees and commissions charged for settlement
transactions such as domestic fund remittances, including electronic banking transactions, and are recognized at
the point in time when the MUFG Group’s performance under the terms of a contractual arrangement is
completed, which is at the settlement of a transaction.
Fees and commissions on foreign trading business consist of fees and commissions charged for fund
collection and trade-related financing services related to foreign trading business, and are recognized in the
period in which the related service is provided. If they arise from foreign trading business activities under which
the customer consumes the related services at a point in time (e.g. foreign exchange fees), such fees are
recognized at the same point in time. If they arise from foreign trading business activities under which the
customer consumes the related services equally over the period of service (e.g. commercial letters of credit), such
fees are recognized over the same period.
F-24
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fees and commissions on credit card business consist of fees and commissions such as interchange income,
royalty and other service charges from franchisees. Interchange income from the credit card business is
recognized as processed transactions are settled through the associated payment networks, while royalty and
other service charges related to the credit card business are recognized on a straight-line basis over the period of
service.
Fees and commissions on security-related services primarily consist of fees and commissions for sales and
transfers of securities including investment funds, underwriting, brokerage and advisory services, arrangement
fees on securitizations, and agency services for the calculation and payment of dividends. Fees and commissions
on security-related services are recognized in the period in which the related service is provided. If they arise
from security-related services under which the customer consumes the related services at a point in time
(e.g. sales and transfers of securities are executed at the customer’s direction; underwritings of debt and equity
securities or securitizations are completed at the trade date; advice is provided to the clients; and dividends are
calculated and then paid to investors), such fees are recognized at the same point in time. If they arise from
security-related services under which the customer consumes the related services equally over the period of
service (e.g. retainer fees on M&A advisory fees), such fees are recognized over the same period. The advisory
fees which are paid upon meeting certain performance goals (e.g. success fees on M&A advisory fees) are
recognized at the point in time when the performance goals are met.
Fees and commissions on administration and management services for investment funds primarily consist of
fees and commissions earned from administrating and managing investment funds, including assets under
management on behalf of clients. Such fees and commissions are recognized equally over the period of service at
the amount calculated primarily based on the outstanding amount of each entrusted asset, the percentage of fees,
and the extent of the service provided to administer the investment funds.
Trust fees consist primarily of fees earned by fiduciary asset management and administration services for
corporate pension plans and investment funds, and are recognized on an accrual basis, generally based on the
volume of trust assets under management and/or the operating performance for the accounting period of each
trust account. With respect to the trust accounts with a guarantee of trust principal, trust fees are determined
based on the profits earned by individual trust accounts during the trust accounting period, less deductions,
including provision for reserves, impairment for individual investments and dividends paid to beneficiary
certificate holders. The trust fees for these trust accounts are accrued based on the amounts expected to be earned
during the accounting period of each trust account.
Guarantee fees consist of fees related to the guarantee business such as providing guarantees on residential
mortgage loans and other loans, and are recognized over the contractual periods of the respective guarantees.
Insurance commissions consist of commissions earned from third-party insurance companies for marketing
and selling insurance products and for the maintenance of insurance contracts. The former is recognized at the
point in time which the associated service is fulfilled as the insurance contract is established by the insurance
company, while the latter is recognized over the insurance period.
Fees and commissions on real estate business primarily consist of fees from real estate agent services, and
are recognized in the period in which the related service is provided when assisting customers in the sales or
purchase of real estate property.
Other fees and commissions include various fees and commissions earned on services to customers which
have performance obligations that the MUFG Group completes in order to recognize revenue. The primary
portion includes non-refundable financing related fees such as arrangement fees that are recognized when the
service is provided.
F-25
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income Taxes—The MUFG Group accounts for income taxes under the asset and liability method, which
requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences
of events that have been included in the accompanying consolidated financial statements. Under this method,
deferred tax assets and deferred tax liabilities are determined based on the differences between the financial
statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and deferred tax
liabilities is recognized in income in the period that includes the enactment date.
The MUFG Group records net deferred tax assets to the extent these assets will more likely than not be
realized. In making such determination, all available positive and negative evidence is considered, including
future reversals of existing taxable temporary differences, projected future taxable income, tax planning
strategies and recent financial operations. In the event the MUFG Group were to determine that it would be able
to realize deferred tax assets in the future in excess of their net recorded amount, the MUFG Group would make
an adjustment to the valuation allowance, which would reduce the provision for income taxes.
Uncertain tax positions are recorded on the basis of a two-step process whereby (1) it is determined whether
it is more likely than not that the tax position will be sustained on the basis of its technical merits, and (2) for
those tax positions that meet the more-likely-than-not recognition threshold, the MUFG Group recognizes the
largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related
tax authority. The MUFG Group recognizes interest and penalties related to unrecognized tax benefits within
income tax expense. Accrued interest and penalties are included within Other liabilities.
Free Distributions of Common Shares—As permitted by the Companies Act of Japan (the “Companies
Act”), Japanese companies, upon approval by the Board of Directors, may make a free distribution of shares, in
the form of a “stock split” as defined, to shareholders. In accordance with generally accepted accounting practice
in Japan, such distribution does not give rise to any change in capital stock or capital surplus accounts. Common
shares distributed are recorded as shares issued on the distribution date. See Note 18 for further information.
Earnings per Common Share—Basic earnings per share (“EPS”) excludes dilutive effects of potential
common shares and is computed by dividing earnings applicable to common stock shareholders by the weighted
average number of common shares outstanding for the period, while diluted EPS gives effect to all dilutive
potential common shares that were outstanding during the period. See Note 23 for the computation of basic and
diluted EPS.
Treasury Stock—The MUFG Group presents its treasury stock, including shares of MUFG owned by its
subsidiaries and affiliated companies, as a reduction of equity on the accompanying consolidated balance sheets
at cost and accounts for treasury stock transactions under an average cost method. Gains (losses) on sales of
treasury stock are charged to capital surplus and unappropriated retained earnings.
Comprehensive Income—Comprehensive income includes net income before attribution to noncontrolling
interests and other comprehensive income (“OCI”). All changes in unrealized gains and losses on investment
securities, unrealized gains and losses on derivatives qualifying for cash flow hedges, defined benefit plans and
foreign currency translation adjustments constitute OCI and are presented, with related income tax effects, in the
accompanying consolidated statements of comprehensive income. OCI also includes changes in the instrument-
specific credit risk on financial liabilities (“debt valuation adjustments” or “DVA”) accounted for under the fair
value option.
Stock-Based Compensation—MUFG and certain of its subsidiaries have a stock compensation-type stock
option plan (“Stock Option Plan”) for directors (excluding outside directors and directors serving as audit
F-26
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
committee members), corporate executives, executive officers and senior fellows (collectively, “officers”).
Compensation costs under the Stock Option Plan are recognized based on the grant date fair value of the stock
option (“Stock Acquisition Rights”) over the period during officers are required to provide service in accordance
with the terms of the plan. MUFG and certain of its subsidiaries also have performance-based stock
compensation plan (“the Board Incentive Plan”). The awards granted under the Board Incentive Plan are
classified as either liability for the part of award which are provided to officers in cash or equity for the part of
award which are provided to officers in the common shares of MUFG. Compensation costs are recognized over
the requisite service period for the entire awards. For awards classified as liability, compensation costs are
measured based on the fair value calculated by the quoted price of common shares of MUFG at the date of fiscal
year-end and remeasured at the end of each reporting period. Changes in quoted prices of common shares of
MUFG between the date of grant and the settlement of awards are recognized in the period which the changes
occur. For awards classified as equity, compensation costs are measured based on the grant date fair value by the
quoted price of the common shares of MUFG for employees or the fair value as of earlier of the date the
performance commitment is reached or the date of completion of officers’ performance for nonemployees. See
Note 33 for further discussion of stock-based compensation plans.
Reclassifications
Certain reclassifications and format changes have been made to the consolidated financial statements for the
fiscal years ended March 31, 2017 and 2018 to conform to the presentation for the fiscal year ended March 31,
2019. These reclassifications and format changes include reclassifications of equity investment securities from
“Available-for-sale securities” and “Other investment securities” to a new line labeled as “Equity securities”
within Investment securities in the consolidated balance sheet to report all marketable and nonmarketable equity
investment securities separately from Available-for-sale debt securities and Held-to-maturity debt securities. The
related cash flows were also reclassified from “Proceeds from sales and maturities of Available-for-sale
securities” and “Proceeds from sales and redemption of Other investment securities” to “Proceeds from sales and
redemption of Equity securities”, and from “Purchases of Available-for-sale securities” and “Purchases of Other
investment securities” to “Purchases of Equity securities” in cash flows from investing activities in the
consolidated statements of cash flows. These reclassifications and format changes did not result in a change to
previously reported financial condition, results of operations, and cash flows.
Accounting Changes
Revenue from Contracts with Customers—In May 2014, the FASB issued new guidance which supersedes
the then-current revenue recognition requirements, including most industry-specific guidance. The core principle
of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The guidance also requires additional disclosures about the nature, amount, timing and
uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and
changes in judgments, and assets recognized from the costs incurred to obtain or fulfill a contract. In
March 2016, the FASB issued further guidance related to the principal-versus-agent assessment which requires
an entity to determine the nature of the promise to the customer by identifying each specified good or service to
be provided and assessing whether an entity controls each specified good or service before that good or service is
transferred to the customer. In addition, in April 2016, the FASB issued guidance clarifying certain aspects of
identification of promised goods or services and provides implementation guidance on licensing of intellectual
property. Furthermore, in May 2016, the FASB issued guidance which amends the guidance on assessing
collectibility, presentation of sales taxes, noncash consideration, and contract modifications and completed
contracts at transition, and on disclosure around transition. In December 2016, the FASB issued additional
F-27
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
guidance which amends the new revenue standard to clarify certain aspects, including the scope and disclosure
requirements. This guidance is effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. The MUFG Group adopted the guidance on April 1, 2018
on a modified retrospective method, and there was no material impact on its financial position and results of
operations. For additional information, see Note 28.
Recognition and Measurement of Financial Assets and Financial Liabilities—In January 2016, the FASB
issued new guidance which requires equity investments, except those accounted for under the equity method of
accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair
value recognized in net income. However, for equity investments that do not have readily determinable fair
values, the fair value may be measured at cost minus impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for the identical or a similar investment of the same issuer(“the
measurement alternative”), and the impairment assessment is simplified by performing a qualitative assessment
to identify impairments. For financial liabilities which were elected to measure at fair value in accordance with
the fair value option, this guidance also requires an entity to present separately in other comprehensive income
the portion of the changes in the fair value of financial liabilities resulting from a change in the instrument-
specific credit risk. In addition, this guidance eliminates the requirement to disclose the methods and significant
assumptions used to estimate the fair value for financial instruments measured at amortized cost, and clarifies,
for disclosure purposes, the requirement for the use of an exit price notion in the determination of the fair value
of financial instruments measured at amortized cost. This guidance also clarifies that an entity must evaluate the
need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with
the entity’s other deferred tax assets. This guidance is effective for annual reporting periods beginning after
December 15, 2017, including interim periods within that reporting period. Early adoption is not permitted
except for the amendments related to the accounting for financial liabilities under the fair value option. In
February 2018, the FASB issued additional guidance to improve certain aspects of the new guidance. The MUFG
Group adopted the guidance on April 1, 2018. Upon adoption, the MUFG Group recorded an increase in the
beginning balance of retained earnings as of April 1, 2018 of ¥2,702 billion, with a corresponding decrease in
Accumulated OCI, net of taxes. Other amendments required under the new guidance did not have a material
impact on the MUFG Group’s financial position and results of operations. As a result of adopting this guidance,
marketable equity investment securities are measured at fair value with unrealized gains or losses reflected in net
income. Prior to adoption, such unrealized gains and losses were reflected in other comprehensive income.
Nonmarketable equity investment securities previously accounted for under the cost method of accounting are
now measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes.
Recognition of Breakage for Certain Prepaid Stored-Value Products—In March 2016, the FASB issued new
guidance which clarifies that liabilities related to the sale of certain prepaid stored-value products are financial
liabilities. The guidance also provides a narrow scope exception to the guidance on extinguishments of liabilities
to require that breakage for those liabilities be accounted for consistent with the breakage model required by the
guidance on revenue from contracts with customers for non-financial liabilities. This guidance is effective for
fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early
application is permitted, including adoption in an interim period. The MUFG Group adopted this guidance on
April 1, 2018. Upon adoption, the MUFG Group recorded an increase in the beginning balance of retained
earnings as of April 1, 2018 of ¥1,784 million, net of taxes.
Classification of Certain Cash Receipts and Cash Payments—In August 2016, the FASB issued new
guidance which provides specific guidance on eight cash flow classification issues to reduce diversity in practice.
This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years. Early adoption is permitted. Since this guidance only impacts classification in the statement of
F-28
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
cash flows, adoption will not affect the MUFG Group’s consolidated statements of income or consolidated
balance sheets. The MUFG Group adopted this guidance on April 1, 2018, and there was no material impact on
its consolidated statements of cash flows.
Intra-Entity Transfers of Assets Other Than Inventory—In October 2016, the FASB issued new guidance
which simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than
inventory. Under current U.S. GAAP, the recognition of current and deferred income taxes for an intra-entity
asset transfer is prohibited until the asset has been sold to an outside party. This guidance eliminates this
exception for all intra-entity sales of assets other than inventory. This guidance is effective for annual reporting
periods beginning after December 15, 2017, including interim periods within those annual reporting periods.
Early adoption is permitted. The MUFG Group adopted this guidance on April 1, 2018, and there was no material
impact on its financial position and results of operations.
Clarifying the Definition of a Business—In January 2017, the FASB issued new guidance which clarifies the
definition of a business with the objective of adding guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance requires
that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single
identifiable asset or a group of similar identifiable assets, an integrated set of assets and activities is not a
business. This guidance also requires that to be considered a business, an integrated set of assets and activities
must include, at a minimum, an input and a substantive process that together significantly contribute to the ability
to create outputs, provides a framework to evaluate whether both an input and a substantive process are present,
and removes the current requirement to assess if a market participant could replace any missing elements.
Furthermore, this guidance narrows the definition of outputs so that the term is consistent with how outputs are
described in the new revenue standard. This guidance is effective for annual periods beginning after
December 15, 2017, including interim periods within those periods. Early application is permitted for
transactions that occur in a period for which financial statements have not been issued. The MUFG Group
adopted this guidance on April 1, 2018, and there was no material impact on its financial position and results of
operations.
Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial
Assets—In February 2017, the FASB issued new guidance which clarifies the scope of the guidance on
derecognition of nonfinancial assets and provides guidance on the accounting for partial sales of nonfinancial
assets. This guidance defines an in substance nonfinancial asset, unifies guidance related to partial sales of
nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the
financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint
venture. The effective date and early adoption of this guidance will be the same as the effective date and early
adoption of the new revenue standard. The MUFG Group adopted this guidance on April 1, 2018, and there was
no material impact on its financial position and results of operations.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost—In
March 2017, the FASB issued new guidance which requires that an employer report the service cost component
in the same line item or items as other compensation costs arising from services rendered by the pertinent
employees during the period. The other components of net benefit cost are required to be presented in the income
statement separately from the service cost component and outside a subtotal of income from operations, if one is
presented. This guidance also allows only the service cost component to be eligible for capitalization when
applicable. This guidance is effective for annual periods beginning after December 15, 2017, including interim
periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for
which financial statements (interim or annual) have not been issued. The MUFG Group retrospectively adopted
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
this guidance on April 1, 2018 using the practical expedient permitted by this guidance and reclassified the
non-service cost components of net pension benefit/cost to Other non-interest expenses, and there was no
material impact on its financial position and results of operation. See Note 13 for further information.
Scope of Modification Accounting—In May 2017, the FASB issued new guidance which clarifies when to
account for a change to the terms or conditions of a share-based payment award as a modification. Under this
guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of
the award changes as a result of the change in terms or conditions. This guidance is effective for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted,
including adoption in any interim period, for which financial statements have not yet been issued. The MUFG
Group adopted this guidance on April 1, 2018, and there was no material impact on its financial position and
results of operations.
Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement—In August
2018, the FASB issued new guidance which modifies the disclosure requirements on fair value measurements.
This guidance removes disclosure requirements for the amount of and reasons for transfers between Level 1 and
Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and valuation processes for
Level 3 fair value measurements. In addition, the guidance modifies disclosure requirements for investments in
certain entities that calculate net asset value and modifies disclosure requirements related to measurement
uncertainty. Lastly, the guidance adds disclosure requirements for changes in unrealized gains and losses for the
period that are included in other comprehensive income for recurring Level 3 fair value measurements held at the
end of the reporting period, and the guidance adds disclosure requirements related to the range and weighted
average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early
adoption is permitted upon issuance of this guidance. An entity is permitted to early adopt any removed or
modified disclosures upon issuance of this guidance and delay adoption of the additional disclosures until their
effective date. The MUFG Group early adopted removal disclosure requirements as of March 31, 2019 and will
adopt other requirements of this guidance on or prior to the effective date. The guidance affected disclosures in
the notes to the consolidated financial statements and did not affect its financial position and results of
operations. See Note 32 for further information.
Recently Issued Accounting Pronouncements
Leases—In February 2016, the FASB issued new guidance which requires that lessees recognize in the
statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease term. The accounting applied by lessors is largely
unchanged, but the accounting model for leveraged leases is not retained for leases that commence after the
effective date of this guidance. This guidance also requires entities to provide qualitative and quantitative
disclosures about the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early
application is permitted.
The MUFG Group adopted this guidance on April 1, 2019 under a modified retrospective approach, and
recorded approximately ¥0.4 trillion of right-of-use assets and ¥0.5 trillion of lease liabilities on the MUFG
Group’s consolidated balance sheet. The adoption of this guidance was not material to the MUFG Group’s results
of operations.
Measurement of Credit Losses on Financial Instruments—In June 2016, the FASB issued new guidance
which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
expected credit losses and requires consideration of a broader range of reasonable and supportable information to
estimate credit losses. Under this guidance, the measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions, and reasonable and
supportable forecasts that affect the collectibility of the reported amount of the financial asset (or a group of
financial assets) measured at amortized cost basis. For available-for-sale debt securities, a credit loss is recorded
through an allowance for credit losses and the amount of the allowance is limited to the amount by which fair
value is below amortized cost. For purchased financial assets with a more-than-insignificant amount of credit
deterioration since origination that are measured at amortized cost basis, the initial allowance for credit losses is
added to the purchase price rather than being reported as a credit loss expense, only subsequent changes in the
allowance are recorded as a credit loss expense, and interest income is recognized based on the effective interest
rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of
credit losses at acquisition. This guidance also expands the disclosure requirements regarding an entity’s
assumptions, models, and methods for estimating the allowance, and requires the entity to disclose the amortized
cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.
In April 2019, the FASB issued additional guidance to improve certain aspects of this guidance. This guidance is
effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years. The MUFG Group is currently evaluating what effect the guidance above will have on its
consolidated financial statements and related disclosures. The MUFG Group’s implementation efforts include
identifying key interpretive issues, assessing the impact and developing credit forecasting models and processes.
Simplifying the Test for Goodwill Impairment—In January 2017, the FASB issued new guidance which
simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill
impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment
testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that
would be required in determining the fair value of assets acquired and liabilities assumed in a business
combination. This guidance eliminates Step 2 and instead requires an entity to perform its goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount. This guidance also eliminates the
requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment
and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test, and instead requires the
disclosure of the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of
net assets. This guidance is effective for its annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests
performed on testing dates after January 1, 2017. The MUFG Group is currently evaluating what effect the
guidance will have on its consolidated financial statements and related disclosures.
Premium Amortization on Purchased Callable Debt Securities—In March 2017, the FASB issued new
guidance which shortens the amortization period for certain callable debt securities held at a premium,
specifically requiring the premium to be amortized to the earliest call date. This guidance does not require an
accounting change for securities held at a discount, and the discount continues to be amortized to maturity. This
guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2018. Early adoption is permitted, including adoption in an interim period. The MUFG Group is currently
evaluating what effect the guidance will have on its consolidated financial statements and related disclosures.
Targeted Improvements to Accounting for Hedging Activities—In August 2017, the FASB issued new
guidance which better aligns an entity’s risk management activities and financial reporting for hedging
relationships through changes to both the designation and measurement guidance for qualifying hedging
relationships and the presentation of hedge results. To meet that objective, this guidance expands and refines
F-31
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation
of the effects of the hedging instrument and the hedged item in the financial statements. In addition, this guidance
includes certain targeted improvements to ease the application of current guidance related to the assessment of
hedge effectiveness. This guidance also modifies the requirement to disclose the effect on the income statement
of fair value and cash flow hedges, eliminates the requirement to disclose the ineffective portion of the change in
fair value of hedging instruments, and requires new tabular disclosures related to cumulative basis adjustments
for fair value hedges. This guidance is effective for fiscal years beginning after December 15, 2018, and interim
periods within those fiscal years. Early application is permitted in any interim period after issuance of this
guidance. The MUFG Group does not expect that the adoption of this guidance will have a material impact on its
consolidated financial statements and related disclosures.
Improvements to Nonemployee Share-Based Payment Accounting—In June 2018, the FASB issued new
guidance which largely aligns the accounting for share-based payment awards issued to employees and
nonemployees. Under this guidance, equity-classified share-based payment awards issued to nonemployees are
measured at the grant date, instead of the previous requirement to measure the awards at the earlier of the date at
which the performance commitment is reached or the date of performance completion. For awards issued to
nonemployees with performance conditions, compensation cost associated with the awards is recognized when
achievement of the performance condition is probable, instead of the previous requirement to recognize the costs
based on the lowest aggregate fair value. This guidance also eliminates the previous requirement to reassess the
classification for certain nonemployee awards upon vesting. This guidance is effective for fiscal years beginning
after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no
earlier than an entity’s adoption date of the new revenue standard. The MUFG Group is currently evaluating
what effect the guidance will have on its consolidated financial statements and related disclosures.
Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans—In August
2018, the FASB issued new guidance which modifies the disclosure requirements for employers that sponsor
defined benefit pension or other postretirement plans. This guidance removes certain disclosure requirements,
including amounts in Accumulated OCI expected to be recognized as components of net periodic benefit cost
over the next fiscal year and the amount and timing of plan assets expected to be returned to the employer,
clarifies disclosure requirements for defined benefit plans with projected or accumulated benefit obligations in
excess of plan assets, and adds disclosure requirements for weighted-average interest crediting rates for cash
balance plans and other plans with promised interest crediting rates as well as an explanation of the reasons for
significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective
for fiscal years ending after December 15, 2020. Early adoption is permitted. The MUFG Group is currently
evaluating what effect the guidance will have on its disclosures.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a
Service Contract—In August 2018, the FASB issued new guidance which aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance requires an
entity (customer) in a hosting arrangement that is a service contract to follow the guidance on internal-use
software to determine which implementation costs to capitalize as an asset related to the service contract and
which costs to expense. This guidance also requires the entity (customer) to expense the capitalized
implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement,
apply the existing impairment guidance on internal-use software to the capitalized implementation costs as if the
costs were long-lived assets, and present the capitalized-implementation-cost-related items in the same line items
in the financial statements as those relating to fees associated with the hosting element (service) of the
arrangement. This guidance is effective for fiscal years beginning after December 15, 2019, and interim periods
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
within those fiscal years. Early adoption is permitted, including adoption in any interim period. The MUFG
Group is currently evaluating what effect the guidance will have on its consolidated financial statements and
related disclosures.
Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a
Benchmark Interest Rate for Hedge Accounting Purposes—In October 2018, the FASB issued new guidance
which permits use of the Overnight Index Swap (“OIS”) rate based on Secured Overnight Financing Rate as a
U.S. benchmark interest rate for hedge accounting purposes in addition to the interest rates on direct Treasury
obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”), the OIS rate based on the
Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate.
This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those
fiscal years. Early adoption is permitted in any interim period upon issuance of this guidance if an entity already
has adopted the new hedge accounting standard. The MUFG Group is currently evaluating what effect the
guidance will have on its consolidated financial statements and related disclosure.
2. BUSINESS DEVELOPMENTS
MUFG Bank’s Acquisition of Security Bank Corporation’s shares
On April 1, 2016, MUFG Bank acquired newly issued common shares and preferred shares with voting
rights of Security Bank Corporation (“Security Bank”), representing in the aggregate approximately 20.0% of
Security Bank’s equity interest for ¥91,993 million. Security Bank is listed on the Philippines Stock Exchange
and is not part of any local conglomerate in the Philippines. Considering both MUFG Bank’s ownership of the
common stock and preferred stock and representation on the board of directors, the MUFG Group has determined
that MUFG Bank has the ability to exercise significant influence over the operating and financial policies of
Security Bank and applied the equity method of accounting for its investment.
Mitsubishi UFJ Trust and Banking’s Acquisition of Capital Analytics II LLC
On April 30, 2016, Mitsubishi UFJ Trust and Banking acquired 100% ownership of Capital Analytics II
LLC for ¥4,494 million in cash, and thereby recorded goodwill of ¥2,858 million and intangible assets of
¥1,388 million. Capital Analytics II LLC is an overseas fund management company that mainly provides fund
administration services for private equity funds. The purpose of this acquisition is to meet the diversified global
fund administration needs of its Japanese and overseas customers through the utilization of Capital Analytics II
LLC’s unparalleled operational expertise and the MUFG Group’s extensive network. Upon conclusion of the
acquisition, Capital Analytics II LLC was renamed MUFG Capital Analytics LLC. During the fiscal year ended
March 31, 2017, measurement period adjustments were applied to the acquisition date fair values, which
decreased goodwill by ¥115 million.
Krungsri’s Acquisition of Hattha Kaksekar Limited
On September 12, 2016, Krungsri acquired 100% ownership of Hattha Kaksekar Limited for
¥15,703 million in cash, and thereby recorded goodwill of ¥8,280 million and intangible assets of ¥476 million.
Hattha Kaksekar Limited is a financial institution in Cambodia providing financial services primarily to sole
proprietors. The purpose of this acquisition is to enable the MUFG Group to tap into the growth of the
Cambodian market by leveraging the knowhow of Ngern Tid Lor Co., Ltd., a subsidiary of Krungsri engaged in
microfinance in Thailand, with an aim to promote and develop the microfinance business.
F-33
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG’s Acquisition of Hitachi Capital Corporation’s shares
On October 3, 2016, MUFG acquired 23.0% of the common shares of Hitachi Capital Corporation (“Hitachi
Capital”) for ¥91,877 million from Hitachi, Ltd. Considering both MUFG’s ownership of the common stock and
representation on the board of directors, the MUFG Group has determined that MUFG has the ability to exercise
significant influence over the operating and financial policies of Hitachi Capital and applied the equity method of
accounting for its investment.
Mitsubishi UFJ Trust and Banking’s Acquisition of Rydex Fund Services, LLC
On October 4, 2016, Mitsubishi UFJ Trust and Banking acquired 100% ownership of Rydex Fund Services,
LLC for ¥17,431 million in cash, and thereby recorded goodwill of ¥5,232 million and intangible assets of
¥11,507 million. Rydex Fund Services, LLC is an overseas fund management company that mainly provides
fund administration services for funds established under the 1940 Investment Companies Act of the United
States. The purpose of this acquisition is to meet the diversified global fund administration needs of its Japanese
and overseas customers through the utilization of Rydex Fund Services, LLC’s unparalleled operational expertise
and the MUFG Group’s extensive network. Upon conclusion of the acquisition, Rydex Fund Services, LLC was
renamed MUFG Investor Services (US), LLC.
Mitsubishi UFJ NICOS Became a Wholly-Owned Subsidiary
On May 15, 2017, MUFG and its subsidiary Mitsubishi UFJ NICOS entered into a share exchange
agreement for MUFG to acquire the remaining 15.02% ownership of Mitsubishi UFJ NICOS by agreeing, on
October 2, 2017, to pay ¥50,000 million cash to the only holder of Mitsubishi UFJ NICOS common stock other
than MUFG. The transaction was accounted for as a non-cancellable forward purchase contract. Accordingly, a
liability of ¥50,000 million was recognized in Other liabilities on the accompanying consolidated balance sheet
with a corresponding reduction in Noncontrolling interests of ¥15,390 million and Capital surplus of
¥34,751 million, and an increase in Accumulated OCI, net of taxes of ¥141 million. On October 2, 2017, MUFG
settled Other liabilities of ¥50,000 million. The purpose of making a wholly-owned subsidiary is to effect a shift
in posture enabling a more flexible response to changes in the business environment and the swift pursuit of
group synergies.
Acquisition of shares in Bank Danamon in Indonesia
On December 26, 2017, MUFG Bank entered into conditional share purchase agreements with Asia
Financial (Indonesia) Pte. Ltd. (“AFI”) and other affiliated entities (the “Sellers”) to acquire their 73.8% equity
interests in an Indonesian bank, PT Bank Danamon Indonesia, Tbk. (“Danamon”), subject to applicable
regulatory approvals.
Danamon, which was established in 1956, is the fifth most profitable Indonesian commercial bank in terms
of net income. Danamon provides banking and financial products and services to consumer, micro-finance, small
and medium enterprise (“SME”) and corporate customers, with a network of around 1,800 offices in Indonesia.
MUFG Bank intends to establish an integrated and comprehensive services platform that serves as a
gateway for clients wishing to make inroads into Indonesia’s growing economy as well as local companies
seeking to expand into the region. This investment is also expected to strategically allow MUFG Bank to benefit
from Danamon’s foothold in the developing local retail and SME segments to deepen its banking franchise in
Indonesia.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
This strategic investment by MUFG Bank will be executed through three steps (the “Proposed
Transaction”), and the completion of the Proposed Transaction will result in MUFG Bank becoming the largest
shareholder in Danamon and Danamon becoming a consolidated subsidiary of MUFG Bank.
In Step 1, MUFG Bank acquired an initial 19.9% equity interest in Danamon from the Sellers on
December 29, 2017, based on a price of IDR 8,323 (approximately ¥70(1)) per share, for an investment amount of
IDR 15,875 billion (approximately ¥133 billion(1)). The price was based on a price book-value ratio of 2.0
calculated on the basis of Danamon’s net assets as of September 30, 2017 with certain adjustments applied. AFI
continues to be the majority shareholder in Danamon after closing of Step 1. MUFG Bank classified Danamon’s
equity securities as Available-for-sale securities on the acquisition date.
In Step 2, MUFG Bank acquired an additional 20.1% equity interest in Danamon from the Sellers on
August 3, 2018, based on a price of IDR 8,921 (approximately ¥69(2)) per share, for an investment amount of
IDR 17,187 billion (approximately ¥132.3 billion(2)). The price was based on a price book-value ratio of 2.0
calculated on the basis of Danamon’s net assets as of June 30, 2018 with certain adjustments applied. As a result,
equity interest in Danamon increased to 40%, and MUFG Bank started to apply the equity method of accounting
for its investment in Danamon during the six months ended September 30, 2018.
In Step 3, MUFG Bank intends to seek the necessary approvals to increase its equity interest in Danamon
beyond the 40%, and this will provide an opportunity for all other existing Danamon shareholders to either remain
as shareholders or receive cash from MUFG Bank. With the closing of Step 3, MUFG Bank’s final equity interest in
Danamon is expected to be above 73.8%. The prices for Danamon’s shares in Step 3 will be based on a similar
approach as Step 1 and Step 2. See Note 35 for further developments on acquisition of shares in Danamon.
Notes:
(1) Calculated based on the exchange rate of IDR1 = ¥0.0084
(2) Calculated based on the exchange rate of IDR1 = ¥0.0077
Acquisition of Colonial First State Global Asset Management
On October 31, 2018, Mitsubishi UFJ Trust and Banking entered into a Share Sale Deed with
Commonwealth Bank of Australia (“CBA”), and its wholly-owned subsidiary, Colonial First State Group
Limited (the “Seller”) to acquire 100% of the shares in each of nine subsidiaries of the Seller, which collectively
represent CBA’s global asset management business known as Colonial First State Global Asset Management
(“CFSGAM”), for approximately ¥328 billion or approximately AUD 4.0 billion, subject to applicable regulatory
and other approvals and certain conditions.
CFSGAM is the third largest asset management group by assets under management in Asian markets
excluding Japan, offers a wide range of products including equities, fixed income and alternatives, and has
specialist capabilities in Asian and emerging equity markets, alternatives (property and infrastructure), as well as
passive and other products. The investment in CFSGAM aims to meet various client needs by expanding product
lineup and enhancing presence as the largest asset management firm in the Asia and Oceania region.
Acquisition of DVB Bank SE’s Aviation Finance Division
On March 1, 2019, MUFG Bank and its consolidated subsidiary, BOT Lease Co., Ltd. (“BOT Lease”),
entered into an agreement with DVB Bank SE (“DVB”) to transfer DVB’s aviation finance division to MUFG
Bank and BOT Lease, subject to applicable regulatory and other approvals and certain conditions. Under the
agreement, the entire aviation finance client lending portfolio of approximately ¥716.3 billion or approximately
€5.6 billion, employees, and other parts of the operating infrastructure will be transferred to MUFG Bank. In
addition, DVB’s aviation investment management and asset management businesses will be transferred to a
newly established subsidiary of BOT Lease.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The purpose of the transaction is to improve the MUFG Group’s ability to offer bespoke solutions to its
clients by enhancing its global corporate investment banking business platform in terms of higher returns,
diversifying its portfolio, broadening its customer base, and securing experienced professionals.
3.
INVESTMENT SECURITIES
The following tables present the amortized cost, gross unrealized gains and losses, and fair value of
Available-for-sale debt securities, Held-to-maturity debt securities, and Marketable equity securities included in
Available-for-sale securities at March 31, 2018, and Available-for-sale debt securities and Held-to-maturity debt
securities at March 31, 2019:
At March 31, 2018:
Available-for-sale debt securities:
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
(in millions)
Fair value
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . .
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other debt securities(1)
¥24,272,345
1,532,143
¥ 299,402
7,808
¥ 3,843
2,520
¥24,567,904
1,537,431
2,207,662
1,104,799
1,632,346
95,383
1,546,989
165,002
8,938
15,589
752
473
12,775
3,635
44,908
1,028
15,563
620
1,415
3,030
2,171,692
1,119,360
1,617,535
95,236
1,558,349
165,607
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥32,556,669
¥ 349,372
¥72,927
¥32,833,114
Held-to-maturity debt securities:
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
¥ 1,100,807
¥
40,212
¥ — ¥ 1,141,019
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
59,330
885,965
171,647
1,365,192
383
1,660
4,107
8,438
103
14,726(2)
1,018(2)
1,222
59,610
872,899
174,736
1,372,408
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,582,941
¥
54,800
¥17,069
¥ 3,620,672
Equity securities:
Marketable equity securities . . . . . . . . . . . . . . .
¥ 2,789,392
¥3,925,680
¥43,488
¥ 6,671,584
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,789,392
¥3,925,680
¥43,488
¥ 6,671,584
Notes:
(1) Other debt securities in the table above include ¥152,374 million of private placement debt conduit bonds.
(2) MUFG Americas Holdings reclassified residential mortgage-backed securities and commercial mortgage-backed securities from
Available-for-sale debt securities to Held-to-maturity debt securities during the fiscal year ended March 31, 2014. As a result of the
reclassification of residential mortgage-backed securities and commercial mortgage-backed securities, the unrealized losses before taxes
at the date of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥3,457 million and
¥5,932 million, respectively, at March 31, 2018 and are not included in the table above.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019:
Available-for-sale debt securities:
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
(in millions)
Fair value
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . .
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other debt securities(1)
¥23,748,558
2,203,978
¥ 330,115
22,593
¥
977
5
¥24,077,696
2,226,566
2,648,874
1,117,302
1,635,220
132,996
1,494,629
192,930
18,099
14,251
1,469
310
10,846
2,851
25,554
822
21,338
2,351
2,553
2,918
2,641,419
1,130,731
1,615,351
130,955
1,502,922
192,863
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥33,174,487
¥ 400,534
¥56,518
¥33,518,503
Held-to-maturity debt securities:
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
¥ 1,100,701
¥
41,619
¥ — ¥ 1,142,320
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
138,731
910,990
160,267
2,131,212
193
1,209
1,903
1,415
212
21,202(2)
2,032(2)
11,847
138,712
890,997
160,138
2,120,780
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,441,901
¥
46,339
¥35,293
¥ 4,452,947
Notes:
(1) Other debt securities in the table above mainly include ¥112,822 million of private placement debt conduit bonds.
(2) MUFG Americas Holdings reclassified residential mortgage-backed securities and commercial mortgage-backed securities from
Available-for-sale debt securities to Held-to-maturity debt securities. As a result of the reclassification of residential mortgage-backed
securities and commercial mortgage-backed securities, the unrealized losses before taxes at the date of reclassification remaining in
Accumulated OCI in the accompanying consolidated balance sheets were ¥10,591 million and ¥4,667 million, respectively, at March 31,
2019 and are not included in the table above.
F-37
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Contractual Maturities
The amortized cost and fair values of Held-to-maturity debt securities and the fair values of
Available-for-sale debt securities at March 31, 2019 by contractual maturity are shown below. Expected
maturities may be shorter than contractual maturities because issuers of debt securities may have the right to call
or prepay obligations with or without penalties. Debt securities not due at a single maturity date and securities
embedded with call or prepayment options, such as mortgage-backed securities, are included in the table below
based on their contractual maturities.
Held-to-maturity debt
securities
Available-for-sale
debt securities
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from one year to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from five years to ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
74,173
332,491
1,405,140
2,630,097
Amortized
cost
Fair value
Fair value
¥
(in millions)
74,059
341,814
1,434,699
2,602,375
¥12,539,746
10,847,990
5,316,284
4,814,483
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,441,901
¥4,452,947
¥33,518,503
Realized Gains and Losses and Transfers of Investment Securities
For the fiscal years ended March 31, 2017 and 2018, gross realized gains on sales of Available-for-sale debt
securities and marketable equity securities were ¥367,548 million and ¥330,508 million, respectively, and gross
realized losses on sales of Available-for-sale debt securities and marketable equity securities were
¥63,031 million and ¥49,290 million, respectively.
For the fiscal year ended March 31, 2019, gross realized gains on sales of Available-for-sale debt securities
were ¥45,244 million and gross realized losses on sales of Available-for-sale debt securities were
¥16,541 million.
For the fiscal year ended March 31, 2017, the MUFG Group transferred certain securities which had a
carrying value of ¥14,142 million from Held-to-maturity securities to Available-for-sale securities in response to
the Volcker Rule of the Dodd-Frank Act. These securities were sold and the MUFG Group recorded a profit of
¥669 million for the fiscal year ended March 31, 2017. The transfer was in accordance with the circumstances
consistent with a Held-to-maturity classification, therefore, management has determined the transfer out of
Held-to-maturity is consistent with the original designation and does not taint the remaining portfolio.
Other-than-temporary Impairments of Investment Securities
For the fiscal years ended March 31, 2017 and 2018, losses resulting from impairment of investment
securities to reflect the decline in value considered to be other-than-temporary were ¥33,823 million and
¥8,196 million, respectively, which were included in Investment securities gains (losses)—net in the
accompanying consolidated statements of income. The losses of ¥33,823 million for the fiscal year ended
March 31, 2017 included losses of ¥32,038 million from marketable equity securities, ¥741 million from
Available-for-sale debt securities which mainly comprised of corporate bonds, and ¥1,044 million from
nonmarketable equity securities. The losses of ¥8,196 million for the fiscal year ended March 31, 2018 included
losses of ¥6,660 million from marketable equity securities, ¥114 million from Available-for-sale debt securities
which mainly comprised of corporate bonds, and ¥1,422 million from nonmarketable equity securities.
F-38
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the fiscal year ended March 31, 2019, losses resulting from impairment of investment securities to
reflect the decline in value considered to be other-than-temporary were ¥606 million, which were included in
Investment securities gains (losses)—net in the accompanying consolidated statements of income. The losses of
¥606 million for the fiscal year ended March 31, 2019 was recorded substantially from Available-for-sale debt
securities which mainly comprised of corporate bonds. Impairment of marketable equity securities is eliminated
according to new guidance on recognition and measurement of financial assets and financial liabilities. The
Available-for-sale securities (AFS category) is eliminated for equity securities and, therefore, OTTI review is not
required for those securities.
Gross Unrealized Losses and Fair Value
The following tables show the gross unrealized losses and fair value of Available-for-sale debt securities,
Held-to-maturity debt securities and Equity securities at March 31, 2018, and Available-for-sale debt securities,
Held-to-maturity debt securities at March 31, 2019, by length of time that individual securities in each category
have been in a continuous loss position:
Less than 12 months
12 months or more
Gross
unrealized
losses
Fair value
Gross
unrealized
losses
Fair value
(in millions, except number of securities)
Total
Gross
unrealized
losses
Number of
securities
At March 31, 2018:
Fair value
Available-for-sale debt securities:
Japanese national government
and Japanese government
agency bonds . . . . . . . . . . . ¥4,767,893
Japanese prefectural and
¥ 2,701
¥ 187,000
¥ 1,142
¥ 4,954,893
¥ 3,843
municipal bonds . . . . . . . . .
400,705
453
353,047
2,067
753,752
2,520
Foreign government and
official institution bonds . .
Corporate bonds . . . . . . . . . . .
Residential mortgage-backed
securities . . . . . . . . . . . . . .
Commercial mortgage-backed
securities . . . . . . . . . . . . . .
Asset-backed securities . . . . .
Other debt securities . . . . . . .
846,818
312,993
16,955
856
818,937
74,717
27,953
172
1,665,755
387,710
44,908
1,028
438,545
2,644
623,285
12,919
1,061,830
15,563
50,898
144,073
12,341
386
1,403
367
9,067
5,345
56,117
234
12
2,663
59,965
149,418
68,458
620
1,415
3,030
140
193
157
150
503
60
29
23
Total . . . . . . . . . . . . . . . . . . . . . . . . ¥6,974,266
¥25,765
¥2,127,515
¥47,162
¥ 9,101,781
¥72,927
1,255
Held-to-maturity debt securities:
Foreign government and
official institution bonds . . ¥
55,837
¥
103
¥
— ¥ — ¥
55,837
¥
103
Residential mortgage-backed
securities . . . . . . . . . . . . . .
Commercial mortgage-backed
securities . . . . . . . . . . . . . .
Asset-backed securities . . . . .
299,286
3,487
451,968
11,239
751,254
14,726
2,150
275,814
2
1,222
169,065
—
1,016
—
171,215
275,814
1,018
1,222
Total . . . . . . . . . . . . . . . . . . . . . . . . ¥ 633,087
¥ 4,814
¥ 621,033
¥12,255
¥ 1,254,120
¥17,069
Equity securities:
Marketable equity
securities . . . . . . . . . . . . . . ¥ 448,489
¥43,482
Total . . . . . . . . . . . . . . . . . . . . . . . . ¥ 448,489
¥43,482
¥
¥
28
28
¥
¥
6
6
¥
¥
448,517
¥43,488
448,517
¥43,488
10
332
32
11
385
116
116
F-39
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Less than 12 months
12 months or more
Gross
unrealized
losses
Fair value
Gross
unrealized
losses
Fair value
(in millions, except number of securities)
Total
Gross
unrealized
losses
Number of
securities
At March 31, 2019:
Fair value
Available-for-sale debt securities:
Japanese national government
and Japanese government
agency bonds . . . . . . . . . . . ¥4,149,302
Japanese prefectural and
¥
976
¥
5,599
¥
1
¥ 4,154,901
¥
977
municipal bonds . . . . . . . . .
12,772
5
—
—
12,772
5
Foreign government and
official institution bonds . .
Corporate bonds . . . . . . . . . . .
Residential mortgage-backed
securities . . . . . . . . . . . . . .
Commercial mortgage-backed
securities . . . . . . . . . . . . . .
Asset-backed securities . . . . .
Other debt securities . . . . . . .
397,718
163,615
1,125
776
1,160,671
79,758
24,429
46
1,558,389
243,373
25,554
822
316,942
1,757
648,353
19,581
965,295
21,338
42,126
164,738
77,660
678
2,553
549
57,167
—
37,027
1,673
—
2,369
99,293
164,738
114,687
2,351
2,553
2,918
39
4
179
92
536
104
87
38
Total . . . . . . . . . . . . . . . . . . . . . . . . ¥5,324,873
¥ 8,419
¥1,988,575
¥48,099
¥ 7,313,448
¥56,518
1,079
Held-to-maturity debt securities:
Foreign government and
official institution bonds . . ¥
— ¥ — ¥
55,084
¥
212
¥
55,084
¥
212
Residential mortgage-backed
securities . . . . . . . . . . . . . .
Commercial mortgage-backed
securities . . . . . . . . . . . . . .
Asset-backed securities . . . . .
74,180
1,199
798,165
20,003
872,345
21,202
3,154
1,423,048
37
10,196
155,011
241,233
1,995
1,651
158,165
1,664,281
2,032
11,847
Total . . . . . . . . . . . . . . . . . . . . . . . . ¥1,500,382
¥11,432
¥1,249,493
¥23,861
¥ 2,749,875
¥35,293
10
457
32
102
601
Evaluating Investment Securities for Other-than-temporary Impairments
The following describes the nature of the MUFG Group’s investments and the conclusions reached in
determining whether the unrealized losses were temporary or other-than-temporary.
Corporate bonds
As of March 31, 2019, unrealized losses associated with corporate bonds were primarily related to private
placement bonds issued by Japanese non-public companies. The credit loss component recognized in earnings is
identified as the amount of principal cash flows not expected to be received over the remaining terms of the
bonds as estimated using the MUFG Group’s cash flow projections. The key assumptions include probability of
default based on credit ratings of the bond issuers and loss given default.
F-40
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents a roll-forward of the credit loss component recognized in earnings. The balance
at the beginning of each fiscal year represents the credit loss component for which OTTI occurred on debt
securities in prior periods. The additions represent the first time a debt security was credit impaired or when
subsequent credit impairment has occurred. The credit loss component is reduced when the corporate bonds
mature or are sold.
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,691
(in millions)
¥4,125
¥ 3,499
2017
2018
2019
Additions:
Initial credit impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsequent credit impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
645
96
111
3
555
51
Reductions:
Securities sold or matured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,307)
(740)
(2,344)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,125
¥3,499
¥ 1,761
The cumulative declines in fair value of the credit impaired debt securities, which were mainly corporate
bonds, held at March 31, 2018 and 2019 were ¥2,992 million and ¥1,069 million, respectively. Of which, the
credit loss components recognized in earnings were ¥3,499 million and ¥1,761 million, and the remaining
amounts related to all other factors recognized in Accumulated OCI before taxes were ¥507 million and
¥692 million at March 31, 2018 and 2019, respectively.
Residential mortgage-backed securities
As of March 31, 2019, unrealized losses on these securities were primarily driven by securities guaranteed
by a U.S. government agency or a government-sponsored agency which are collateralized by residential
mortgage loans. Unrealized losses mainly resulted from changes in interest rates and not from changes in credit
quality. The MUFG Group analyzed that no OTTI was identified on such securities as of March 31, 2019 and no
impairment loss has been recorded because the strength of the issuers’ guarantees through direct obligations or
support from the U.S. government is expected to be sufficient to recover the entire amortized cost basis of these
securities.
Asset-backed securities
As of March 31, 2019, unrealized losses on these securities were primarily driven by certain collateralized
loan obligations (“CLOs”), highly illiquid securities for which fair values are difficult to determine. Unrealized
losses arise from widening credit spreads, deterioration of the credit quality of the underlying collateral,
uncertainty regarding the valuation of such securities and the market’s view of the performance of the fund
managers. When the fair value of a security is lower than its amortized cost or when any security is subject to a
deterioration in credit rating, the MUFG Group undertakes a cash flow analysis of the underlying collateral to
estimate the OTTI and confirms the intent and ability to hold these securities until recovery. Based on the
analysis performed, no OTTI was identified as of March 31, 2019 and no impairment loss has been recorded.
Other debt securities
As of March 31, 2019, other debt securities primarily consist of private placement debt conduit bonds,
which are not rated by external credit rating agencies. The unrealized losses on these bonds result from a higher
return on capital expected by the secondary market compared with the return on capital required at the time of
F-41
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
origination when the bonds were purchased. The MUFG Group estimates loss projections for each security by
assessing the underlying collateral of each security. The MUFG Group estimates the portion of loss attributable
to credit based on the expected cash flows of the underlying collateral using estimates of current key assumptions
such as probability of default and loss severity. Cash flow analysis of the underlying collateral provides an
estimate of OTTI, which is performed when the fair value of a security is lower than its amortized cost and
potential impairment is identified. Based on the analysis, no OTTI losses were recorded in the accompanying
consolidated statements of income.
Marketable equity securities included in Equity Securities
The MUFG Group determines whether unrealized losses on marketable equity securities are temporary
based on its ability and positive intent to hold the investments for a period of time sufficient to allow for any
anticipated recovery and the results of its review conducted to identify and evaluate investments that have
indications of possible impairment. Impairment is evaluated considering various factors, and their relative
significance varies from case to case. The MUFG Group’s review includes, but is not limited to, consideration of
the following factors:
The length of time that the fair value of the investment has been below cost—The MUFG Group generally
deems a continued decline of fair value below cost for six months or more to be other-than-temporary.
The extent to which the fair value of investments has been below cost as of the end of the reporting period—
The MUFG Group’s investment portfolio is exposed to volatile equity prices affected by many factors including
investors’ perspectives as to future economic prospects and the issuers’ performance. The MUFG Group
generally deems the decline in fair value below cost of 20% or more as an indicator of an other-than-temporary
decline in fair value.
The financial condition and near-term prospects of the issuer—The MUFG Group considers the financial
condition and near-term prospects of the issuer primarily based on the credit standing of the issuers as
determined by its credit rating system.
At March 31, 2018, unrealized losses on marketable equity securities which have been in a continuous loss
position are considered temporary based on the evaluation as described above.
OTTI of marketable equity securities is eliminated according to new guidance on recognition and
measurement of financial assets and financial liabilities.
Equity Securities
The following table presents net realized losses on sales of equity securities, and net unrealized losses on
equity securities still held at March 31, 2019.
Net losses recognized during the period(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
Fiscal year ended
March 31,
2019
(in millions)
¥(278,746)
Net losses recognized during the period on equity securities sold during the period . . . . . . .
(3,303)
Net unrealized losses recognized during the reporting period still held at the reporting date . . . .
¥(275,443)
Note:
(1)
Included in Investment securities gains (losses)—net.
F-42
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Nonmarketable Equity Securities
Nonmarketable equity securities included in Equity securities were primarily carried at cost of
¥538,251 million at March 31, 2018, because their fair values were not readily determinable.
The remaining balances were nonmarketable equity securities included in Equity securities held by certain
subsidiaries subject to specialized industry accounting principles for investment companies and broker-dealers
and carried at fair value of ¥28,359 million at March 31, 2018. See Note 32 for the valuation techniques and
inputs used to estimate the fair values.
With respect to cost-method investments of ¥97,586 million at March 31, 2018, the MUFG Group estimated
a fair value using commonly accepted valuation techniques to determine whether the investments were impaired
in each reporting period. See Note 32 for the details of these commonly accepted valuation techniques. If the fair
value of the investment is less than the cost of the investment, the MUFG Group proceeds to evaluate whether
the impairment is other-than-temporary.
With respect to cost-method investments of ¥440,665 million at March 31, 2018, the MUFG Group
performed a test to determine whether any impairment indicators existed for each investment in each reporting
period. If an impairment indicator exists, the MUFG Group estimates the fair value of the cost-method
investment. If the fair value of the investment is less than the cost of the investment, the MUFG Group performs
an evaluation of whether the impairment is other-than-temporary. The primary method the MUFG Group uses to
identify impairment indicators is a comparison of the MUFG Group’s share of an investee’s net assets to the cost
of the MUFG Group’s investment in the investee. The MUFG Group also considers whether significant adverse
changes in the regulatory, economic or technological environment have occurred with respect to the investee.
The MUFG Group periodically monitors the status of each investee including the credit rating, which is generally
updated once a year based on the annual financial statements of the issuer. In addition, if an event that could
impact the credit rating of an investee occurs, the MUFG Group reassesses the appropriateness of the credit
rating assigned to the issuer in order to maintain an updated credit rating. The MUFG Group did not estimate the
fair value of cost-method investments, which had aggregated costs of ¥437,486 million at March 31, 2018, since
it was not practical and the MUFG Group identified no impairment indicators.
Based on the procedures described above, the MUFG Group recognized OTTI losses on the cost-method
investments of ¥1,044 million and ¥1,422 million for the fiscal years ended March 31, 2017 and 2018,
respectively. Each impairment loss was recognized based on the specific circumstances of each individual
company. No impairment loss was individually material.
F-43
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Measurement Alternative of Equity Securities
The following table presents the carrying value of nonmarketable equity securities held at March 31, 2019,
that were measured under the measurement alternative, and the related adjustments for these securities for the
fiscal year ended March 31, 2019.
Fiscal year ended
March 31,
2019
(in millions)
Measurement alternative balance at March 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Measurement alternative impairment losses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Measurement alternative downward changes for observable prices(1)(2)
. . . . . . . . . . . . . . . . . . . . .
Measurement alternative upward changes for observable prices(1)(2)(3)
¥
¥
¥
¥
563,733
(2,292)
—
53,077
Notes:
(1)
(2) Under the measurement alternative, nonmarketable equity securities are carried at cost plus or minus changes resulting from observable
Included in Investment securities gains (losses)—net.
prices in orderly transactions for the identical or a similar investment of the same issuer.
(3) The MUFG Group applied measurement alternative upward changes to certain nonmarketable equity securities, resulting from
observable prices in orderly transactions, such as partial repurchase and transactions by other entities.
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans at March 31, 2018 and 2019 by domicile and industry of the borrower are summarized below.
Classification of loans by industry is based on the industry segment loan classifications as defined by the Bank of
Japan.
2018
2019
(in millions)
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
¥ 10,876,625
781,262
11,763,769
2,689,086
7,989,080
4,818,364
1,551,533
8,939,291
16,287,332
¥ 11,153,996
717,664
11,706,419
2,653,191
7,643,397
5,213,020
1,510,596
8,756,483
15,802,024
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,696,342
65,156,790
Foreign:
Governments and official institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
920,538
12,851,570
30,591,173
7,270,928
841,695
11,641,373
31,951,169
7,597,502
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,634,209
52,031,739
Unearned income, unamortized premiums—net and deferred loan fees—net . . . .
(294,656)
(304,588)
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥117,035,895
¥116,883,941
F-44
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notes:
(1) Loans to so-called “non-bank finance companies” are generally included in the “Banks and other financial institutions” category.
Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
(2) The above table includes loans held for sale of ¥226,923 million and ¥291,794 million at March 31, 2018 and 2019, respectively.
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial,
Residential, Card, MUFG Americas Holdings, and Krungsri based on the grouping used by the MUFG Group to
determine the allowance for credit losses. See Note 1 for further information.
Nonaccrual Loans
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and
timely collection of either principal or interest, when principal or interest is contractually past due one month or
more with respect to loans within all classes of the Commercial segment, three months or more with respect to
loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or more with respect
to loans within the Residential segment. See Note 1 for further information.
The nonaccrual loans by class at March 31, 2018 and 2019 is shown below:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2019
(in millions)
¥332,994
77,163
10,791
33,317
30,717
108,175
1,145
13,815
37,549
20,322
109,516
69,464
61,387
52,282
121,286
¥746,929
¥272,777
65,896
9,813
23,152
26,188
94,531
898
11,955
25,406
14,938
111,002
68,499
61,419
46,549
127,424
¥687,670
Note:
(1) The above table does not include loans held for sale of ¥61 million and ¥12,702 million at March 31, 2018 and 2019, respectively, and
loans acquired with deteriorated credit quality of ¥6,659 million and ¥6,284 million at March 31, 2018 and 2019, respectively.
F-45
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impaired Loans
The MUFG Group’s impaired loans primarily include nonaccrual loans and TDRs. The following table
shows information about impaired loans by class at March 31, 2018 and 2019:
At March 31, 2018:
Commercial
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Wholesale and retail
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and
¥ 626,469
361,268
10,936
43,553
38,097
128,661
1,125
18,782
12,978
11,069
Krungsri . . . . . . . . . . . . . . . . . . . . .
122,243
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential(4) . . . . . . . . . . . . . . . . . . . . . . .
Card(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(4) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total(3)
7,837
105,089
66,964
48,895
58,529
¥188,984
36,566
7,172
23,053
16,600
49,628
¥ 815,453
397,834
18,108
66,606
54,697
178,289
¥ 875,795
408,124
18,490
71,809
59,335
189,404
¥331,851
166,098
7,921
10,665
25,890
94,832
26
7,852
34,282
13,805
40,249
—
6,261
388
33,650
25,565
1,151
1,151
972
26,634
47,260
24,874
28,082
67,525
31,875
16,041
5,350
4,082
162,492
190,518
82,855
7,837
111,350
67,352
82,545
84,094
15,470
134,777
74,840
94,565
90,957
4,324
16,928
21,223
7,743
29,402
¥1,036,026
¥295,097
¥1,331,123
¥1,476,922
¥494,326
F-46
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
At March 31, 2019:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Wholesale and retail
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
¥560,474
349,597
8,366
20,848
30,239
118,253
1,012
8,794
13,772
9,593
Foreign-excluding MUAH and
Krungsri . . . . . . . . . . . . . . . . . . . . .
127,521
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential(4) . . . . . . . . . . . . . . . . . . . . . . .
Card(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(4) . . . . . . . . . . . . . . . . . . . . . . . . .
8,136
97,176
64,691
46,552
57,066
¥227,004
92,919
6,574
5,704
20,059
84,503
830
6,817
6,874
2,724
(in millions)
¥157,465
28,189
5,975
29,961
13,020
45,620
¥ 717,939
377,786
14,341
50,809
43,259
163,873
¥ 759,399
384,306
14,779
55,943
46,838
175,714
21
1,033
1,033
6,929
17,989
9,761
34,484
—
6,495
330
23,208
26,193
15,723
31,761
19,354
16,587
38,342
25,857
162,005
183,133
85,966
8,136
103,671
65,021
69,760
83,259
14,990
120,526
72,226
83,300
90,377
5,450
14,357
21,829
8,294
28,254
Total(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥961,616
¥248,175
¥1,209,791
¥1,323,951
¥391,154
(2)
Notes:
(1) These loans do not require an allowance for credit losses because the recorded loan balance equals, or does not exceed, the present value
of expected future cash flows discounted at the loans’ original effective interest rate, loans’ observable market price, or the fair value of
the collateral if the loan is a collateral-dependent loan.
Included in impaired loans at March 31, 2018 and 2019 are accrual TDRs as follows: ¥536,748 million and ¥497,013 million—
Commercial; ¥40,734 million and ¥34,449 million—Residential; ¥28,541 million and ¥26,183 million—Card; ¥39,333 million and
¥33,155 million—MUFG Americas Holdings; and ¥24,899 million and ¥26,851 million—Krungsri, respectively.
In addition to impaired loans presented in the above table, there were impaired loans held for sale of ¥61 million and ¥12,702 million at
March 31, 2018 and 2019, respectively.
Impaired Loans for Residential, Card, MUAH and Krungsri segments in the above table include loans acquired with deteriorated credit
quality.
(3)
(4)
F-47
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows information regarding the average recorded loan balance and recognized interest
income on impaired loans for the fiscal years ended March 31, 2017, 2018 and 2019:
2017
2018
2019
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
(in millions)
¥1,137,501
601,256
26,684
96,229
81,967
238,798
¥14,116
5,845
434
1,593
1,236
3,466
¥ 918,093
472,081
19,465
74,087
59,916
186,356
¥ 9,441
3,787
281
1,146
794
2,347
¥ 766,847
387,725
15,721
57,850
48,945
171,687
¥12,383
6,057
291
1,069
1,044
2,848
Commercial
Domestic . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . .
2,272
Communication and
information services . . . . .
Other industries . . . . . . . . . . .
. . . . . . . . . . . . . . .
Consumer
27,531
24,709
38,055
Foreign-excluding MUAH and
Krungsri . . . . . . . . . . . . . . . . . . .
291,612
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
9,974
133,876
75,809
91,690
51,597
11
570
397
564
5,132
432
1,883
2,483
1,664
2,201
1,729
25,461
50,377
28,621
209,297
8,591
119,409
69,831
83,504
75,370
8
388
215
475
4,244
492
1,563
1,993
1,993
3,899
1,330
22,478
39,178
21,933
159,999
7,814
107,165
66,187
71,162
83,165
8
491
234
341
3,127
182
1,620
1,614
2,292
4,995
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,792,059
¥27,911
¥1,484,095
¥23,625
¥1,262,339
¥26,213
Interest income on nonaccrual loans for all classes was recognized on a cash basis when ultimate
collectibility of principal was certain. Otherwise, cash receipts were applied as principal reductions. Interest
income on accruing impaired loans, including TDRs, was recognized on an accrual basis to the extent that the
collectibility of interest income was reasonably certain based on management’s assessment.
F-48
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows a roll-forward of accrual TDRs and other impaired loans (including nonaccrual
TDRs) for the fiscal years ended March 31, 2017, 2018 and 2019:
2017
2018
2019
(in millions)
Accrual TDRs:
Balance at beginning of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (new accrual TDR status)(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to other impaired loans (including nonaccrual TDRs) . . . . .
Loans sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 613,844
492,269
(40,182)
(1,637)
(244,475)
¥ 819,819
144,368
(25,122)
(39,378)
(229,432)
¥ 670,255
71,033
(19,053)
(26)
(104,558)
Balance at end of fiscal year(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 819,819
¥ 670,255
¥ 617,651
Other impaired loans (including nonaccrual TDRs):
Balance at beginning of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,111,306
¥ 896,031
¥ 660,868
Additions (new other impaired loans (including nonaccrual TDRs)
status)(1)(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to accrual TDRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
541,789
(106,097)
(333,478)
(44,984)
(272,505)
281,275
(98,355)
(43,858)
(31,581)
(342,644)
222,003
(55,309)
(22,110)
(26,022)
(187,290)
Balance at end of fiscal year(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 896,031
¥ 660,868
¥ 592,140
Notes:
(1) For the fiscal year ended March 31, 2017, lease receivables of ¥875 million and ¥74 million in the Krungsri segment, which were accrual
TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other impaired loans, respectively, and
the related ending balances of such TDRs amounting to ¥4,065 million and ¥389 million, are also excluded from the balance of accrual
TDRs and other impaired loans, respectively, as of March 31, 2017. For the fiscal year ended March 31, 2018, lease receivables of
¥1,809 million and ¥113 million in the Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded
from the additions of accrual TDRs and other impaired loans, respectively, and the related ending balances of such TDRs amounting to
¥4,282 million and ¥1,286 million, are also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of
March 31, 2018. For the fiscal year ended March 31, 2019, lease receivables of ¥2,947 million and ¥2,088 million in the Krungsri
segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other
impaired loans, respectively, and the related ending balances of such TDRs amounting to ¥5,060 million and ¥3,361 million, are also
excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2019.
Included in the additions of other impaired loans for the fiscal years ended March 31, 2017, 2018 and 2019 are nonaccrual TDRs as
follows: ¥11,699 million, ¥12,002 million and ¥13,493 million—Card; ¥25,023 million, ¥12,799 million and ¥12,738 million—MUFG
Americas Holdings; and ¥7,471 million, ¥12,280 million and ¥10,519 million—Krungsri, respectively.
(2)
F-49
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Troubled Debt Restructurings
The following table summarizes the MUFG Group’s TDRs by class for the fiscal years ended March 31,
2017, 2018 and 2019:
2017
2018
2019
Troubled Debt Restructurings
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
(in millions)
¥377,563
335,347
1,377
7,457
5,268
¥377,563
335,347
1,377
7,457
5,268
¥ 70,380
35,954
1,020
1,269
4,139
¥ 69,021
35,954
1,020
1,269
4,139
¥ 36,693
11,654
703
948
2,141
¥ 36,693
11,654
703
948
2,141
Commercial(1)(3)
Domestic . . . . . . . . . . . .
Manufacturing . . . .
Construction . . . . .
Real estate . . . . . . .
Services . . . . . . . . .
Wholesale and
retail
. . . . . . . . .
22,868
22,868
16,280
14,921
19,315
19,315
Banks and other
financial
institutions . . . . .
Communication
and information
services . . . . . . .
Other industries . . .
. . . . . . .
Consumer
Foreign-excluding
MUAH and
Krungsri . . . . . . . . . . .
Loans acquired with
deteriorated credit
quality . . . . . . . . . . . .
Residential(1)(3)
. . . . . . . . . . .
Card(2)(3)
. . . . . . . . . . . . . . . .
MUAH(2)(3)
. . . . . . . . . . . . . .
Krungsri(2)(3) . . . . . . . . . . . . .
—
—
246
246
—
—
2,405
1,493
1,348
2,405
1,493
1,348
9,643
761
1,068
9,643
761
1,068
268
472
1,192
268
472
1,192
58,178
58,178
25,522
25,522
5,692
5,692
1,030
13,092
17,256
38,558
32,340
1,030
13,092
16,759
38,449
32,340
—
9,763
17,436
40,578
24,015
—
9,763
16,912
38,224
23,929
50
7,379
19,685
19,837
24,392
50
7,379
18,837
19,837
24,330
Total
. . . . . . . . . . . . . . . . . . .
¥538,017
¥537,411
¥187,694
¥183,371
¥113,728
¥112,818
F-50
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2017
2018
2019
Troubled Debt Restructurings
That Subsequently defaulted
Recorded Investment
(in millions)
Commercial(1)(3)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,587
1,373
11
38
217
2,530
—
385
—
33
11,268
—
231
3,661
6,624
3,984
¥ 4,067
839
—
10
822
2,231
—
140
—
25
—
—
159
4,191
2,565
4,789
¥11,002
312
89
—
473
1,713
—
8,365
50
—
—
—
362
3,442
349
7,926
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥30,355
¥15,771
¥23,081
Notes:
(1) TDRs for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans.
(2) TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans.
(3) For the fiscal year ended March 31, 2017, extension of the stated maturity date of loans was the primary concession type in the
Residential segment, reduction in the stated rate was the primary concession type in the Commercial and Card segments and payment
deferrals were the primary concession type in the MUFG Americas Holdings and Krungsri segments. For the fiscal year ended March 31,
2018, extension of the stated maturity date of loans was the primary concession type in the Commercial, Residential and Krungsri
segments, reduction in the stated rate was the primary concession type in the Card segment and payment deferrals were the primary
concession type in the MUFG Americas Holdings segment. For the fiscal year ended March 31, 2019, extension of the stated maturity
date of loans was the primary concession type in the Commercial, Residential and Krungsri segments, reduction in the stated rate was the
primary concession type in the Card segment and forbearance was the primary concession type in the MUFG Americas Holdings
segment.
F-51
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes outstanding recorded investment balances of TDRs by class at
March 31, 2018 and 2019:
Commercial(1)
2018
2019
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri
¥482,566
320,702
7,362
33,289
23,987
70,119
6
12,837
9,712
4,552
54,182
40,734
67,352
65,373
54,036
¥445,312
311,890
4,591
27,657
17,135
69,350
135
3,780
6,357
4,417
51,701
34,449
65,021
48,128
62,980
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥764,243
¥707,591
Notes:
(1) TDRs for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans.
(2) TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding
recorded investment balances as of March 31, 2018 and 2019 are nonaccrual TDRs as follows: ¥38,811 million and ¥38,838 million—
Card; ¥26,040 million and ¥14,973 million—MUFG Americas Holdings; and ¥24,855 million and ¥31,069 million—Krungsri,
respectively.
A modification of terms of a loan under a TDR mainly involves: (i) a reduction in the stated interest rate
applicable to the loan, (ii) an extension of the stated maturity date of the loan, (iii) a partial forgiveness of the
principal of the loan, or (iv) a combination of all of these. Those loans are also considered impaired loans, and
hence the allowance for credit losses is separately established for each loan. As a result, the amount of allowance
for credit losses increases in many cases upon classification as a TDR loan. The amount of pre-modification
outstanding recorded investment and post-modification outstanding recorded investment may differ due to write-
offs made as part of the concession. The impact of write-offs associated with TDRs on the MUFG Group’s
results of operations for the fiscal years ended March 31, 2017, 2018 and 2019 was not material.
TDRs for the Commercial and Residential segments in the above tables include accruing loans, and do not
include nonaccrual loans. Once a loan is classified as a nonaccrual loan, a modification would have little
likelihood of resulting in the recovery of the loan in view of the severity of the financial difficulty of the
borrower. Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual
loan. The vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates,
typically for periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan
at the extended maturity. Accordingly, the impact of such TDRs on the outstanding recorded investment is
immaterial, and the vast majority of nonaccrual TDRs have subsequently defaulted.
TDRs that subsequently defaulted in the Commercial and Residential segments in the above tables include
those accruing loans that became past due one month or more within the Commercial segment and six months or
F-52
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
more within the Residential segment, and those accruing loans reclassified to nonaccrual loans due to financial
difficulties even without delinquencies. This is because classification as a nonaccrual loan is regarded as default
under the MUFG Group’s credit policy. Also, the MUFG Group defines default as payment default for the
purpose of the disclosure.
In regards to the Card, MUFG Americas Holdings and Krungsri segments, the TDRs in the above tables
represent nonaccrual and accruing loans, and the defaulted loans in the above table represent nonaccruing and
accruing loans that became past due one month or more within the Card segment, 60 days or more within the
MUFG Americas Holdings segment, and six months or more within the Krungsri segment.
Historical payment defaults are one of the factors considered when projecting future cash flows in
determining the allowance for credit losses for each segment.
The MUFG Group provided commitments to extend credit to customers with TDRs. The amounts of such
commitments were ¥172,159 million and ¥169,819 million at March 31, 2018 and 2019, respectively. See
Note 25 for further discussion of commitments to extend credit.
Credit Quality Indicator
Credit quality indicators of loans by class at March 31, 2018 and 2019 are shown below:
At March 31, 2018:
Commercial
Normal
Close
Watch
Likely to become
Bankrupt or
Legally/Virtually
Bankrupt
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
. . . . .
Foreign-excluding MUAH and Krungsri
Loans acquired with deteriorated credit
¥49,050,274
10,215,497
727,932
11,379,291
2,467,540
7,518,383
4,800,281
¥1,690,924
596,662
43,673
279,931
175,733
374,706
10,923
1,491,093
8,780,517
1,669,740
36,049,123
48,153
120,466
40,677
569,137
¥271,456
57,730
9,116
32,692
24,081
77,870
1,145
11,958
36,951
19,913
108,276
Total(1)
¥51,012,654
10,869,889
780,721
11,691,914
2,667,354
7,970,959
4,812,349
1,551,204
8,937,934
1,730,330
36,726,536
quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,035
11,728
3,562
27,325
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥85,111,432
¥2,271,789
¥383,294
¥87,766,515
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,012,978
528,108
¥
(in millions)
¥67,258
¥61,707
¥14,080,236
589,815
¥
Accrual
Nonaccrual
Total(1)
F-53
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention
(in millions)
Classified
Total(1)(2)
MUAH . . . . . . . . . . . . ¥
4,360,445 ¥
14,238 ¥
4,509,044 ¥
59,890 ¥
116,842 ¥
9,060,459
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
5,284,018 ¥
198,526 ¥
123,106 ¥
5,605,650
Normal
Special
Mention
Substandard or
Doubtful or
Doubtful
of Loss
(in millions)
Total(1)
At March 31, 2019:
Commercial
Normal
Close Watch
Likely to become
Bankrupt or
Legally/Virtually
Bankrupt
Total(1)
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 49,391,991 ¥ 1,242,075 ¥
Manufacturing . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . .
Communication and information
services . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . .
Loans acquired with deteriorated credit
10,819,594
672,152
11,403,613
2,436,489
7,240,801
5,199,889
1,465,652
8,610,464
1,543,337
35,418,267
279,801
37,236
222,791
174,784
329,249
7,654
34,542
119,581
36,437
562,854
217,745 ¥
47,968
7,857
22,515
19,953
68,736
898
10,172
24,947
14,699
112,103
50,851,811
11,147,363
717,245
11,648,919
2,631,226
7,638,786
5,208,441
1,510,366
8,754,992
1,594,473
36,093,224
quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,622
10,833
3,790
26,245
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 84,821,880 ¥ 1,815,762 ¥
333,638 ¥
86,971,280
Accrual
Nonaccrual
Total(1)
(in millions)
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥13,661,794 ¥
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
516,983 ¥
66,290 ¥
61,599 ¥
13,728,084
578,582
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention
(in millions)
Classified
Total(1)(2)
MUAH . . . . . . . . . . . . ¥
4,752,021 ¥
15,540 ¥
4,699,698 ¥
51,948 ¥
88,356 ¥
9,607,563
Normal
Special
Mention
Substandard or
Doubtful or
Doubtful
of Loss
(in millions)
Total(1)
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
5,682,245 ¥
199,070 ¥
129,222 ¥
6,010,537
F-54
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notes:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
(2) Total loans of MUFG Americas Holdings do not include FDIC covered loans which are not individually rated totaling ¥953 million and
¥689 million as of March 31, 2018 and 2019, respectively. The MUFG Group will be reimbursed for a substantial portion of any future
losses on FDIC covered loans under the terms of the FDIC loss share agreements.
The MUFG Group classifies loans into risk categories based on relevant information about the ability of
borrowers to service their debt, including, but not limited to, historical and current financial information,
historical and current payment experience, credit documentation, public and non-public information about
borrowers and current economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes of the Commercial segment is the internal
credit rating assigned to each borrower based on the MUFG Group’s internal borrower ratings of 1 through 15,
with the rating of 1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a
borrower, the MUFG Group evaluates the borrower’s expected debt-service capability based on various
information, including financial and operating information of the borrower as well as information on the industry
in which the borrower operates, and the borrower’s business profile, management and compliance system. In
evaluating a borrower’s debt-service capability, the MUFG Group also conducts an assessment of the level of
earnings and an analysis of the borrower’s net worth. Based on the internal borrower rating, loans within the
Commercial segment are categorized as Normal (internal borrower ratings of 1 through 9), Close Watch (internal
borrower ratings of 10 through 12), and Likely to become Bankrupt or Legally/Virtually Bankrupt (internal
borrower ratings of 13 through 15).
Loans to borrowers categorized as Normal represent those that are not deemed to have collectibility issues.
Loans to borrowers categorized as Close Watch represent those that require close monitoring as the
borrower has begun to exhibit elements of potential concern with respect to its business performance and
financial condition, the borrower has begun to exhibit elements of serious concern with respect to its business
performance and financial condition, including business problems requiring long-term solutions, or the
borrower’s loans are TDRs or loans contractually past due 90 days or more for special reasons.
Loans to borrowers categorized as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those
that have a higher probability of default than those categorized as Close Watch due to serious debt repayment
problems with poor progress in achieving restructuring plans, the borrower being considered virtually bankrupt
with no prospects for an improvement in business operations, or the borrower being legally bankrupt with no
prospects for continued business operations because of non-payment, suspension of business, voluntary
liquidation or filing for legal liquidation.
The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card
segment and consumer loans within the MUFG Americas Holdings segment. The accrual status of these loans is
determined based on the number of delinquent payments. See Note 1 for further details of categorization of
Accrual and Nonaccrual.
Commercial loans within the MUFG Americas Holdings segment are categorized as either pass or criticized
based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk
graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the
borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan
and result in further downgrade. Classified credits are those that are internally risk graded as Substandard or
F-55
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full
satisfaction of the debt. A credit classified as Doubtful has critical weaknesses that make full collection
improbable on the basis of currently existing facts and conditions.
Loans within the Krungsri segment are categorized as Normal, Special Mention, Substandard, Doubtful, and
Doubtful of Loss primarily based on their delinquency status. Loans categorized as Special Mention generally
represent those that have the overdue principal or interest payments for a cumulative period exceeding one month
commencing from the contractual due date. Loans categorized as Substandard, Doubtful or Doubtful of Loss
generally represent those that have the overdue principal or interest payments for a cumulative period exceeding
three months commencing from the contractual due date.
For the Commercial, Residential and Card segments, credit quality indicators are based on information as of
March 31. For the MUFG Americas Holdings and Krungsri segments, credit quality indicators are generally
based on information as of December 31.
Past Due Analysis
Ages of past due loans by class at March 31, 2018 and 2019 are shown below:
At March 31, 2018:
Commercial
Domestic . . . . . . . . . . . . .
Manufacturing . . . . . . .
Construction . . . . . . . . .
Real estate . . . . . . . . . .
Services . . . . . . . . . . . .
Wholesale and retail . . .
Banks and other
financial
institutions . . . . . . . .
Communication and
information
services . . . . . . . . . . .
Other industries . . . . . .
Consumer . . . . . . . . . . .
Foreign-excluding MUAH
and Krungsri . . . . . . . . .
Residential . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in millions)
Total
Loans(1)
Recorded
Investment>
90 Days and
Accruing
¥ 13,290
1,495
359
2,090
1,025
3,886
¥ 43,913
1,300
437
3,225
620
4,198
¥ 57,203
2,795
796
5,315
1,645
8,084
¥ 50,955,451
10,867,094
779,925
11,686,599
2,665,709
7,962,875
¥ 51,012,654
10,869,889
780,721
11,691,914
2,667,354
7,970,959
¥
6,419
—
—
1,633
26
1,349
—
21
21
4,812,328
4,812,349
—
657
251
3,527
12,512
78,073
18,887
23,145
116,665
328
28,315
5,469
19,655
19,399
32,218
13,648
99,315
985
28,566
8,996
32,167
97,472
51,105
36,793
215,980
1,550,219
8,909,368
1,721,334
36,694,369
13,974,118
528,284
9,009,426
5,383,477
1,551,204
8,937,934
1,730,330
36,726,536
14,071,590
579,389
9,046,219
5,599,457
—
—
3,411
1,083
10,806
—
771
—
Total . . . . . . . . . . . . . . . . . . . . .
¥262,572
¥228,148
¥490,720
¥116,545,125
¥117,035,845
¥
19,079
F-56
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019:
Commercial
Domestic . . . . . . . . . . . . .
Manufacturing . . . . . . .
Construction . . . . . . . . .
Real estate . . . . . . . . . .
Services . . . . . . . . . . . .
Wholesale and retail . . .
Banks and other
financial
institutions . . . . . . . .
Communication and
information
services . . . . . . . . . . .
Other industries . . . . . .
Consumer . . . . . . . . . . .
Foreign-excluding MUAH
and Krungsri . . . . . . . . .
Residential . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in millions)
Total
Loans(1)
Recorded
Investment>
90 Days and
Accruing
¥ 11,551
1,597
218
2,034
778
2,791
¥ 30,648
3,036
60
4,256
569
2,390
¥ 42,199
4,633
278
6,290
1,347
5,181
¥ 50,809,612
11,142,730
716,967
11,642,629
2,629,879
7,633,605
¥ 50,851,811
11,147,363
717,245
11,648,919
2,631,226
7,638,786
¥ 6,900
—
1
2,524
1
62
—
21
21
5,208,420
5,208,441
—
411
365
3,357
10,881
62,686
17,203
28,696
126,313
758
13,037
6,521
19,993
16,615
30,568
10,827
106,777
1,169
13,402
9,878
30,874
79,301
47,771
39,523
233,090
1,509,197
8,741,590
1,584,595
36,062,350
13,641,449
527,421
9,557,501
5,771,541
1,510,366
8,754,992
1,594,473
36,093,224
13,720,750
575,192
9,597,024
6,004,631
—
—
4,312
236
6,584
—
2,287
—
Total . . . . . . . . . . . . . . . . . . . . .
¥257,330
¥215,428
¥472,758
¥116,369,874
¥116,842,632
¥16,007
Note:
(1) Total loans in the above table do not include loans held for sale and loans acquired with deteriorated credit quality and represent balances
without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
Allowance for Credit Losses
Changes in the allowance for credit losses by portfolio segment for the fiscal years ended March 31, 2017,
2018 and 2019 are shown below:
Fiscal year ended March 31, 2017:
Commercial Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year . . . .
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Others(1)
¥816,559
¥58,598
¥31,187
¥108,454
¥ 96,332
¥1,111,130
177,295
108,262
21,124
87,138
(6,030)
12,224
5,339
1,853
3,486
—
13,289
16,309
1,998
14,311
—
(62)
32,074
2,916
29,158
(5,501)
50,942
51,774
16,058
35,716
(1,290)
253,688
213,758
43,949
169,809
(12,821)
Balance at end of fiscal year
. . . . . . . . .
¥900,686
¥67,336
¥30,165
¥ 73,733
¥110,268
¥1,182,188
F-57
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fiscal year ended March 31, 2018:
Commercial
Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . ¥
900,686 ¥
67,336 ¥ 30,165 ¥
73,733 ¥ 110,268 ¥
1,182,188
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Others(1)
(297,401)
134,807
24,913
109,894
(2,293)
(22,291)
3,838
1,339
2,499
—
23,422
22,696
1,228
21,468
—
(9,309)
14,701
6,140
8,561
(2,098)
64,732
56,067
17,490
38,577
8,173
(240,847)
232,109
51,110
180,999
3,782
Balance at end of fiscal year
. . . . . ¥
491,098 ¥
42,546 ¥ 32,119 ¥
53,765 ¥ 144,596 ¥
764,124
Fiscal year ended March 31, 2019:
Commercial
Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . ¥
491,098 ¥
42,546 ¥ 32,119 ¥
53,765 ¥ 144,596 ¥
764,124
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Others(1)
(43,850)
76,664
17,565
59,099
1,466
(4,480)
274
834
(560)
—
23,809
24,310
932
23,378
—
9,277
13,224
3,733
49,574
59,569
21,053
9,491
(970)
38,516
(10,842)
34,330
174,041
44,117
129,924
(10,346)
Balance at end of fiscal year
. . . . . ¥
389,615 ¥
38,626 ¥ 32,550 ¥
52,581 ¥ 144,812 ¥
658,184
Note:
(1) Others are principally comprised of gains or losses from foreign exchange translation.
F-58
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Allowance for credit losses and recorded investment in loans by portfolio segment at March 31, 2018 and
2019 are shown below:
At March 31, 2018:
Commercial
Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
414,706 ¥
16,644 ¥ 21,223 ¥
7,743 ¥
29,402 ¥
489,718
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
64,375
24,718
10,884
45,571
115,161
260,709
Loans acquired with deteriorated
credit quality(2)
. . . . . . . . . . . . . .
12,017
1,184
12
451
33
13,697
Total . . . . . . . . . . . . . . . . . . . . ¥
491,098 ¥
42,546 ¥ 32,119 ¥
53,765 ¥ 144,596 ¥
764,124
Loans:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
977,945 ¥
110,197 ¥ 66,957 ¥
82,545 ¥
84,094 ¥
1,321,738
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
86,761,245
13,961,393
512,432
8,963,679
5,515,363
115,714,112
Loans acquired with deteriorated
credit quality(2)
. . . . . . . . . . . . . .
27,325
8,646
10,426
15,188
6,193
67,778
Total(1)
. . . . . . . . . . . . . . . . . . ¥87,766,515 ¥14,080,236 ¥589,815 ¥9,061,412 ¥5,605,650 ¥117,103,628
At March 31, 2019:
Commercial
Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
312,970 ¥
14,175 ¥ 21,829 ¥
8,294 ¥
28,254 ¥
385,522
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
63,366
23,413
10,708
44,282
116,529
258,298
Loans acquired with deteriorated
credit quality(2)
. . . . . . . . . . . . . .
13,279
1,038
13
5
29
14,364
Total . . . . . . . . . . . . . . . . . . . . ¥
389,615 ¥
38,626 ¥ 32,550 ¥
52,581 ¥ 144,812 ¥
658,184
Loans:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
879,944 ¥
102,948 ¥ 64,752 ¥
69,760 ¥
83,259 ¥
1,200,663
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
86,065,091
13,617,802
510,440
9,527,264
5,921,372
115,641,969
Loans acquired with deteriorated
credit quality(2)
. . . . . . . . . . . . . .
26,245
7,334
3,390
11,228
5,906
54,103
Total(1)
. . . . . . . . . . . . . . . . . . ¥86,971,280 ¥13,728,084 ¥578,582 ¥9,608,252 ¥6,010,537 ¥116,896,735
Notes:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
(2) Loans acquired with deteriorated credit quality in the above table include impaired loans which are individually evaluated for
impairment.
F-59
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Nonperforming loans were actively disposed of by sales during recent years. The allocated allowance for
credit losses for such loans was removed from the allowance for credit losses and transferred to the valuation
allowance for loans held for sale upon a decision to sell. Net charge-offs in the above table include a decrease
from charge-offs in the allowance for credit losses amounting to ¥11.0 billion and ¥12.2 billion for the fiscal
years ended March 31, 2017 and 2018, respectively, and an increase from recoveries in the allowance for credit
losses amounting to ¥15.1 billion for the fiscal year ended March 31, 2019 due to loan disposal activity.
The MUFG Group sold ¥833 billion, ¥1,409 billion and ¥1,769 billion of loans within the Commercial
segment during the fiscal years ended March 31, 2017, 2018 and 2019, respectively.
Loans Acquired in a Transfer
In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality, the
following table sets forth information regarding loans acquired in connection with mergers, for which it is probable,
at acquisition, that the MUFG Group will be unable to collect all contractually required payments receivable.
Loans acquired during the fiscal year:
Contractually required payments receivable at acquisition . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows expected to be collected at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of loans at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretable yield for loans within the scope of the guidance on loans and debt
securities acquired with deteriorated credit quality:
2018
2019
(in millions)
¥
¥
537
197
197
3,880
1,449
1,449
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications from (to) nonaccretable difference . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 40,917
—
(14,067)
(11)
3,267
(434)
¥ 29,672
—
(7,178)
—
896
(230)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 29,672
¥ 23,160
Loans within the scope of the guidance on loans and debt securities acquired with
deteriorated credit quality:
Outstanding balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥223,695
180,011
91,176
67,778
¥180,011
161,525
67,778
54,103
Nonaccruing loans within the scope of the guidance on loans and debt securities
acquired with deteriorated credit quality:
Carrying amount at acquisition date during fiscal year
. . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
197
6,659
¥
1,449
6,284
Allowance for credit losses within the scope of the guidance on loans and debt
securities acquired with deteriorated credit quality:
Balance of allowance for credit losses at beginning of fiscal year . . . . . . . . . . . . . . . .
Additional provisions during fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions of allowance during fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of allowance for credit losses at end of fiscal year . . . . . . . . . . . . . . . . . . . . .
¥ 14,523
2,285
732
13,697
¥ 13,697
1,744
401
14,364
F-60
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group considered prepayments in the determination of contractual cash flows and cash flows
expected to be collected based on historical results.
Lease Receivables
As part of its financing activities, the MUFG Group enters into leasing arrangements with customers. The MUFG
Group’s leasing operations are conducted through leasing subsidiaries and consist principally of direct financing leases
involving various types of data processing equipment, office equipment and transportation equipment.
As of March 31, 2018 and 2019, the components of the investment in direct financing leases were as
follows:
Minimum lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated residual values of leased property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less—unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,862,664
31,650
(279,081)
¥1,922,339
27,468
(299,283)
Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,615,233
¥1,650,524
Future minimum lease payment receivables under noncancelable leasing agreements as of March 31, 2019
were as follows:
2018
2019
(in millions)
Direct
Financing
Leases
(in millions)
Fiscal year ending March 31:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 510,439
425,023
353,355
240,609
171,286
221,627
Total minimum lease payment receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,922,339
Sales of Loans
The MUFG Group originates various types of loans to corporate and individual borrowers in Japan and
overseas in the normal course of business. In order to improve its loan quality, MUFG Bank and Mitsubishi UFJ
Trust and Banking actively disposed of nonperforming loans. Most of the nonperforming loans were disposed of
by sales to third parties without any continuing involvement. Management of MUFG Bank and Mitsubishi UFJ
Trust and Banking generally approves disposals after significant sales terms, including prices, are negotiated. As
such, loans are disposed of by sales shortly after the loans are transferred to the held-for-sale classification. The
net gains on the sales of loans were ¥19,466 million, ¥2,976 million and ¥20,696 million for the fiscal years
ended March 31, 2017, 2018 and 2019, respectively.
Related Party Loans
In some cases, the banking subsidiaries of MUFG make loans to related parties, including their directors and
executive officers, in the course of their normal commercial banking business. At March 31, 2018 and 2019,
outstanding loans to such related parties were not material.
F-61
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In the opinion of management, these related party loans were made on substantially the same terms,
including interest rates and collateral requirements, as those terms prevailing at the date these loans were made.
For the fiscal years ended March 31, 2017, 2018 and 2019, there were no loans to related parties that were
charged off. Additionally, at March 31, 2017, 2018, and 2019, there were no loans to related parties that were
impaired.
5.
PREMISES AND EQUIPMENT
Premises and equipment at March 31, 2018 and 2019 consisted of the following:
2018
2019
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 370,669
739,665
659,699
311,645
119,195
¥ 362,742
829,606
648,598
305,281
34,002
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200,873
1,187,285
2,180,229
1,206,629
Premises and equipment-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,013,588
¥ 973,600
Premises and equipment include capitalized leases, principally related to data processing equipment, which
amounted to ¥31,458 million and ¥34,141 million at March 31, 2018 and 2019, respectively. Accumulated
depreciation on such capitalized leases at March 31, 2018 and 2019 amounted to ¥17,298 million and
¥19,946 million, respectively.
MUFG Bank has entered into sales agreements to sell its buildings and land and, under separate agreements,
leased those properties back for its business operations, including bank branches. MUFG Bank either provided
nonrecourse financing to the buyers for the sales proceeds or invested in the equity or common stock of the
buyers. As a result, MUFG Bank was considered to have continuing involvement with the properties. For
accounting and reporting purposes, these transactions were accounted for under the financing method with the
sales proceeds recognized as a financing obligation. The properties were reported on the accompanying
consolidated balance sheets and depreciated. The financing obligation at March 31, 2018 and 2019 was
¥41,892 million and ¥40,732 million, respectively.
For the fiscal years ended March 31, 2017, 2018 and 2019, the MUFG Group recognized ¥5,964 million,
¥39,358 million and ¥31,345 million, respectively, of impairment losses for long-lived assets, primarily real
estate which was either formerly used for its banking operations and is no longer used or real estate that is being
used where recovery of the carrying amount is doubtful. In addition, ¥901 million, ¥213 million and ¥411 million
of impairment losses were recognized for real estate held for sale for the fiscal years ended March 31, 2017, 2018
and 2019, respectively. These losses are included in Other non-interest expenses. In computing the amount of
impairment losses, fair value was determined primarily based on market prices, if available, or the estimated
price based on an appraisal.
Impairment losses for the fiscal year ended March 31, 2018 included ¥34,016 million of losses on long-lived
assets used for MUFG Bank’s operations. In relation to a restructuring of operating divisions of MUFG Bank,
which is a transformation of Corporate Banking Business Group and Retail Banking Business Group into
Retail & Commercial Banking Business Group and Japanese Corporate & Investment Banking Business Group,
F-62
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
based on an MUFG Re-Imagining Strategy published on May 15, 2017, and the new medium-term business plan,
MUFG Bank reevaluated the profitability of some of its domestic operating assets. As a result of the
reevaluation, it was determined that carrying amounts of these operating assets were unlikely to be recovered,
and the impairment losses were recorded.
Impairment losses for the fiscal year ended March 31, 2019 included ¥21,096 million losses on long-lived
assets, including land, buildings, and equipment and furniture, which were held by certain consumer finance
subsidiary. See Note 6 for the details of these impairments.
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The table below presents the movement in the carrying amount of goodwill by business segment during the
fiscal years ended March 31, 2018 and 2019:
Effective April 1, 2018, the MUFG Group reorganized its business groups in an effort to further integrate
the expertise and capabilities of its consolidated subsidiaries to respond to the needs of customers more
effectively and efficiently, as part of its current medium-term business plan. To make and execute unified group-
wide strategies based on customer characteristics and the nature of business, the MUFG Group integrated the
operations of its consolidated subsidiaries into six business segments.—Retail & Commercial Banking, Japanese
Corporate & Investment Banking, Global Corporate & Investment Banking, Global Commercial Banking, Asset
Management & Investor Services, and Global Markets. See Note 30 for the business segment information of the
MUFG Group.
Balance at March 31, 2017:
Goodwill(1)
Accumulated impairment losses(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments and other . . . . . . . .
Balance at March 31, 2018:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments and other . . . . . . . .
Balance at March 31, 2019:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . .
Global
Commercial
Banking
Business
Group
Asset
Management &
Investor
Services
Business
Group
Global
Markets
Business
Group
(in millions)
Total
¥ 611,827
(177,750)
¥ 28,134
(14,368)
¥2,300
¥ 642,261
— (192,118)
434,077
(8,399)
13,766
(410)
2,300
—
450,143
(8,809)
603,428
(177,750)
425,678
(7,206)
27,724
(14,368)
13,356
(237)
2,300
633,452
— (192,118)
2,300
—
441,334
(7,443)
596,222
(177,750)
27,487
(14,368)
2,300
626,009
— (192,118)
¥ 418,472
¥ 13,119
¥2,300
¥ 433,891
Note:
(1) Effective April 1, 2018, the MUFG Group reorganized its business groups. Goodwill originally recognized for Retail Banking Business
Group, Corporate Banking Business Group, Trust Assets Business Group and Global Business Group other than MUAH and Krungsri
F-63
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
was ¥1,900,019 million, which has been fully impaired before April 1, 2017. As these impairment losses recorded in past before the
reorganization of the segment and are irrelevant to the annual impairment test under the new segment, the accumulated impaired loss is
not allocated to new business segments after the reorganization of business group.
U.S. GAAP requires to test goodwill for impairment at least annually, or more frequently if events or
changes in circumstances indicate that goodwill may be impaired, using a two-step process that begins with an
estimation of the fair value of a reporting unit, which is to be compared with the carrying amount of the reporting
unit including goodwill, to identify potential impairment of goodwill. If the carrying amount of a reporting unit
including goodwill exceeds its estimated fair value, the second step of the goodwill impairment test is performed
to measure the amount of impairment loss recorded in the consolidated statements of income. This test requires
comparison of the implied fair value of the reporting unit’s goodwill with the carrying amount of its goodwill.
For the fiscal years ended March 31, 2017, the MUFG Group recognized ¥6,638 million, in impairment of
goodwill relating to reporting units within the Trust Assets Business Group segment. There were no impairment
losses recognized for the fiscal years ended March 31, 2018 and 2019. The MUFG Group readjusted its future
cash flow projection of the reporting units in this segment, considering the subsidiaries’ recent business
performance. Due to the situation, the fair value of the reporting units, which were based on discounted future
cash flows, fell below the carrying amounts of the reporting units. Accordingly, the second step of the goodwill
impairment test was performed for the reporting units. As a result, the carrying amounts of the reporting units’
goodwill exceeded the implied fair value of the reporting units’ goodwill, and the impairment losses were
recognized on the related goodwill.
Other Intangible Assets
The table below presents the gross carrying amount, accumulated amortization and net carrying amount, in
total and by major class of other intangible assets at March 31, 2018 and 2019:
2018
2019
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
(in millions)
Intangible assets subject to amortization:
Software . . . . . . . . . . . . . . . . . . . . . . ¥2,585,161 ¥1,852,333 ¥ 732,828 ¥2,703,413 ¥2,029,775 ¥673,638
88,643
Core deposit intangibles . . . . . . . . . .
38,153
246,526 141,410
Customer relationships . . . . . . . . . . .
42,921
34,283
Trade names . . . . . . . . . . . . . . . . . . .
5,381
4,220
. . . . . . . . . . . . . . . . . . . . . . . .
Other
45,297
164,753
47,020
5,729
128,679
391,832
77,821
9,706
126,796
387,936
77,204
9,601
83,382
227,079
30,801
3,977
Total . . . . . . . . . . . . . . . . . . . . . ¥3,193,199 ¥2,197,572
995,627 ¥3,304,950 ¥2,403,447 901,503
Intangible assets not subject to
amortization:
Other(1) . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,492
¥1,011,119
25,693
¥927,196
Note:
(1)
Intangible assets not subject to amortization includes ¥7,268 million and ¥17,431 million of mortgage servicing rights accounted for at
fair value at March 31, 2018 and 2019, respectively.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2018 amounted to
¥242,017 million, which primarily consisted of ¥239,460 million of software and ¥2,200 million of customer
F-64
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
relationships. The weighted average amortization periods for these assets are 5 years and 22 years, respectively.
There is no significant residual value estimated for these assets. Intangible assets not subject to amortization
acquired during the fiscal year ended March 31, 2018 amounted to ¥28 million.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2019 amounted to
¥262,700 million, which primarily consisted of ¥262,408 million of software. The weighted average amortization
periods for these assets are 6 years. There is no significant residual value estimated for these assets. Intangible
assets not subject to amortization acquired during the fiscal year ended March 31, 2019 amounted to
¥11,172 million.
For the fiscal years ended March 31, 2017, 2018 and 2019, the MUFG Group recognized ¥5,803 million,
¥21,900 million and ¥118,108 million, respectively, of impairment losses for intangible assets whose carrying
amounts exceeded their fair value. In computing the amount of impairment losses, fair value was determined
primarily based on the present value of expected future cash flows, the estimated value based on appraisals, or
market prices.
The impairment loss for the fiscal year ended March 31, 2018 included a loss of ¥11,121 million relating to
the foreign subsidiary’s customer relationships under the Trust Asset Business Group segment. The intangible
assets were valued based on discounted expected future cash flows. The estimated future cash flows of the above
customer relationships were revised downward due to a decrease in acquired customer base. Accordingly, the
MUFG group revaluated the intangible assets and recognized impairment losses.
The impairment loss for the fiscal year ended March 31, 2019 included a loss of ¥137,186 million relating to
software held by certain consumer finance subsidiary under the Retail & Commercial Banking Business Group
segment. The consumer finance subsidiary determined to fundamentally review its current system integration
plan, comprehensively taking into account the scale, complexity and the degree of difficulty for the system
development to respond rapid changes in payments market in an appropriate manner, at the meeting of the Board
of Directors on March 25, 2019. The consumer finance subsidiary considered software under development
unlikely to have cost reduction effect and remain in use in the future, and reevaluated the profitability of existing
software in relation to its system integration plan. As a result, it was determined that carrying amounts of both
system software under development and long lived assets group of credit business, including existing system
software, land, buildings, and equipment and furniture exceeded their fair values, and ¥87,596 million and
¥28,494 million of impairment losses were recognized on system software under development and existing
software, respectively. In computing the amount of impairment losses, the fair value was primarily estimated
using an income approach. The income approach is based on the present value of expected cash flows, which
represents market participant perspective. In addition to the impairments on software, ¥21,096 million of
impairment losses on long-lived assets, including land, buildings, and equipment and furniture, were recognized.
The estimated aggregate amortization expense for intangible assets for the next five fiscal years is as
follows:
Fiscal year ending March 31:
(in millions)
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥230,962
195,126
160,504
120,350
83,523
F-65
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7.
INCOME TAXES
Income before Income Tax Expense
Income before income tax expense by jurisdiction for the fiscal years ended March 31, 2017, 2018 and 2019
was as follows:
Domestic income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
2019
(in millions)
¥(413,499) ¥ 803,057
858,762
686,042
¥228,018
642,824
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 272,543
¥1,661,819
¥870,842
Income Tax Expense (Benefit)
The detail of current and deferred income tax expense (benefit) for the fiscal years ended March 31, 2017,
2018 and 2019 was as follows:
2017
2018
2019
(in millions)
Current:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 176,415
130,406
¥ 180,109
107,119
¥
57,303
123,730
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
306,821
287,228
181,033
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(217,485)
5,117
116,873
3,722
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(212,368)
120,595
(32,746)
(15,050)
(47,796)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) reported in Accumulated OCI relating to:
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives qualifying for cash flow hedges . . . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94,453
407,823
133,237
20,237
(3,926)
(9,443)
48,504
(1,957)
53,415
120,588
(960)
(4,421)
50,774
(34,527)
131,454
15,590
4,293
(1,845)
(38,229)
15,148
(5,043)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 147,868
¥ 539,277
¥ 128,194
The MUFG Group files tax returns on a consolidated basis for corporate income taxes within Japan. A
consolidated basis for corporate income taxes results in the reporting of taxable income or loss based upon the
combined profits or losses of the parent company and its wholly-owned domestic subsidiaries.
In June 2016, the Tokyo Metropolitan Government Bureau of Taxation promulgated revisions to the local
tax law. The revision reduces the effective statutory rate of corporate income tax from approximately 31.5% as of
March 31, 2016 to 30.6% for the fiscal year beginning on or after April 1, 2017. The revision resulted in a
decrease of ¥26,820 million in income tax expense for the fiscal year ended March 31, 2017.
F-66
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In the United States of America, on December 22, 2017, the Tax Cuts & Jobs Act was signed into law
reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the
reduction in the corporate income tax rate, the MUFG Group revalued its net deferred tax liabilities at March 31,
2018, resulting in a one-time tax benefit of ¥10,395 million.
Reconciliation of Effective Income Tax Rate
Income taxes in Japan applicable to the MUFG Group are imposed by the national, prefectural and
municipal governments, and in the aggregate resulted in a normal effective statutory rate of approximately
31.5%, 30.6%, and 30.6% for the fiscal years ended March 31, 2017, 2018 and 2019, respectively. Foreign
subsidiaries are subject to income taxes of the countries in which they operate.
A reconciliation of the effective income tax rates reflected in the accompanying consolidated statements of
income to the combined normal effective statutory tax rates for the fiscal years ended March 31, 2017, 2018 and
2019 is as follows:
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit and payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lower tax rates applicable to income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and interest expense for uncertainty in income taxes . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in tax laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
2019
31.5% 30.6% 30.6%
0.2
2.0
—
0.8
(1.7)
(9.6)
(0.4)
(0.2)
(3.0)
25.4
(2.0)
(12.5)
0.7
3.5
0.0
(0.6)
0.1
5.4
(0.6)
(9.8)
0.6
(1.2)
0.5
—
(3.3)
(2.5)
(1.4)
(9.1)
0.6
0.6
0.2
0.0
(0.9)
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34.7% 24.5% 15.3%
F-67
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are computed for each tax jurisdiction using currently enacted tax rates
applicable to periods when the temporary differences are expected to reverse. The tax effects of the items
comprising the MUFG Group’s net deferred tax assets at March 31, 2018 and 2019 were as follows:
2018
2019
(in millions)
Deferred tax assets:
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment, including sale-and-leaseback transactions . . . . . . . . . . .
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 337,718
167,355
3,483
133,728
120,505
111,677
—
(215,130)
¥ 301,222
177,143
691
236,363
158,144
101,118
5,238
(218,191)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
659,336
761,728
Deferred tax liabilities:
Investment securities (including trading account assets at fair value under the fair
value option) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
973,390
52,396
83,445
15,484
119,970
911,483
38,772
65,115
—
280,701
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,244,685
1,296,071
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (585,349) ¥ (534,343)
The valuation allowance was provided primarily against deferred tax assets recorded at MUFG and its
subsidiaries with operating loss carryforwards. The valuation allowance is determined to reduce the measurement
of deferred tax assets not expected to be realized. Management considers all available evidence, both positive and
negative, to determine whether the valuation allowance is necessary based on the weight of that evidence.
Management determines the amount of the valuation allowance based on future reversals of existing taxable
temporary differences and future taxable income exclusive of reversing temporary differences. Future taxable
income is developed from forecasted operating results, based on recent historical trends and approved business
plans, the eligible carryforward periods and other relevant factors.
For certain subsidiaries where strong negative evidence exists, such as the existence of significant amounts
of operating loss carryforwards, cumulative losses and the expiration of unused operating loss carryforwards in
recent years, a valuation allowance was recognized against the deferred tax assets as of March 31, 2018 and 2019
to the extent that it is more likely than not that they will not be realized.
For the fiscal year ended March 31, 2018, the MUFG Group released a valuation allowance of
¥53,360 million which was mainly due to the commencement of a certain subsidiary’s application of the
consolidated corporate-tax system. Management believes that the net operating loss carryforwards related to
Japanese corporate taxes will be fully utilized by the application of the consolidated corporate-tax system.
F-68
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income taxes are not provided on undistributed earnings of certain foreign subsidiaries that are considered
to be indefinitely reinvested in the operations of such subsidiaries. At March 31, 2018 and 2019, the
undistributed earnings of such foreign subsidiaries amounted to approximately ¥38,358 million and
¥48,103 million, respectively. Determination of the amount of unrecognized deferred tax liabilities with respect
to these undistributed earnings is not practicable because of the complexity associated with its hypothetical
calculation including foreign withholding taxes and foreign tax credits. MUFG has neither plans nor the intention
to dispose of investments in such foreign subsidiaries and, accordingly, does not expect to record capital gains or
losses, or otherwise monetize the undistributed earnings of such foreign subsidiaries.
Furthermore, under the Japanese tax law, 95% of a dividend received from a foreign company in which a
domestic company has held generally at least 25% of the outstanding shares for a continuous period of six
months or more ending on the date on which the dividend is declared can be excluded from the domestic
company’s taxable income. Therefore, if undistributed earnings of certain foreign subsidiaries are repatriated
through dividends, only 5% of the amount of dividends will be included in taxable income.
Operating Loss and Tax Credit Carryforwards
At March 31, 2019, the MUFG Group had operating loss carryforwards for corporate tax of
¥527,882 million and tax credit carryforwards of ¥52,546 million for tax purposes. Such carryforwards, if not
utilized, are scheduled to expire as follows:
Operating loss
carryforwards
Tax credit
carryforwards
(in millions)
Fiscal year ending March 31:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 and thereafter
No definite expiration date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 33,066
12,727
23,346
68,850
105,110
167,035
95,686
22,062
¥
700
194
230
232
182
117
46,239
4,652
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥527,882
¥52,546
Uncertainty in Income Tax
The following is a roll-forward of the MUFG Group’s unrecognized tax benefits for the fiscal years ended
March 31, 2017, 2018 and 2019:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross amount of increases for current year’s tax positions . . . . . . . . . . . . . . .
Gross amount of increases for prior years’ tax positions . . . . . . . . . . . . . . . . .
Gross amount of decreases for prior years’ tax positions . . . . . . . . . . . . . . . . .
Net amount of changes relating to settlements with tax authorities . . . . . . . . .
Decreases due to lapse of applicable statutes of limitations . . . . . . . . . . . . . . .
Foreign exchange translation and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
2019
¥ 9,950
888
1,014
(95)
(39)
(3,437)
(430)
(in millions)
¥ 7,851
427
6,642
(455)
(1,074)
(253)
(221)
¥12,917
313
8,836
(1,090)
—
(1,540)
(276)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,851
¥12,917
¥19,160
F-69
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The total amounts of unrecognized tax benefits for the years ended March 31, 2017, 2018 and 2019 that, if
recognized, would affect the effective tax rate are ¥1,443 million, ¥6,518 million and ¥14,092 million,
respectively. The remainder of the uncertain tax positions have offsetting amounts in other jurisdictions or are
temporary differences.
The MUFG Group classifies interest and penalties, if applicable, related to income taxes as Income tax
expense. Accrued interest and penalties (not included in the “unrecognized tax benefits” above) are a component
of Other liabilities. The following is a roll-forward of the interest and penalties recognized in the accompanying
consolidated financial statements for the fiscal years ended March 31, 2017, 2018 and 2019:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest and penalties in the consolidated statements of income . . . . . . . . . . . . .
Total cash settlements, foreign exchange translation and others . . . . . . . . . . . . . . . . .
¥4,727
(591)
(82)
(in millions)
¥4,054
694
(184)
¥ 4,564
(1,655)
147
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,054
¥4,564
¥ 3,056
2017
2018
2019
The MUFG Group is subject to ongoing tax examinations by the tax authorities of the various jurisdictions
in which it operates. The following are the major tax jurisdictions in which the MUFG Group operates and the
status of years under audit or open to examination:
Jurisdiction
Tax years
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States—Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States—California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 and forward
2014 and forward
2015 and forward
2012 and forward
2017 and forward
The MUFG Group is currently under continuous examinations by the tax authorities in various domestic and
foreign jurisdictions and many of these examinations are resolved every year. The unrecognized tax benefits will
decrease since resolved items will be removed from the balance regardless of whether their resolution results in
payment or recognition. It is reasonably possible that the unrecognized tax benefits will decrease by
approximately ¥2.6 billion during the next twelve months.
8.
PLEDGED ASSETS AND COLLATERAL
Pledged Assets
At March 31, 2019, assets mortgaged, pledged, or otherwise subject to lien were as follows:
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
(in millions)
¥ 8,921,825
7,907,010
14,192,075
51,714
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,072,624
F-70
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The above pledged assets were classified by type of liabilities to which they related as follows:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements and securities lending transactions . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
(in millions)
223,075
¥
16,316,732
14,522,393
10,424
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,072,624
At March 31, 2019, certain investment securities, principally Japanese national government and Japanese
government agency bonds, loans, and other assets with a combined carrying value of ¥19,875,392 million were
pledged for acting as a collection agent of public funds, for settlement of exchange at the Bank of Japan and
Japanese Banks’ Payment Clearing Network, for derivative transactions and for certain other purposes.
The MUFG Group engages in on-balance sheet securitizations. These securitizations of mortgage and
apartment loans, which do not qualify for sales treatment, are accounted for as secured borrowings. The amount
of loans in the table above represents the carrying amount of these transactions with the carrying amount of the
associated liabilities included in Other short-term borrowings and Long-term debt.
Under Japanese law, Japanese banks are required to maintain certain reserves on deposit with the Bank of
Japan based on the amount of deposit balances and certain other factors. There are similar reserve deposit
requirements for foreign offices and subsidiaries engaged in banking businesses in foreign countries. At
March 31, 2018 and 2019 the reserve funds required to be maintained by the MUFG Group, which are included
in Cash and due from banks and Interest-earning deposits in other banks, were ¥2,679,482 million and
¥2,568,340 million, respectively.
Collateral
The MUFG Group accepts and provides financial assets as collateral for transactions, principally
commercial loans, repurchase agreements and securities lending transactions, call money, and derivatives.
Financial assets eligible for such collateral include, among others, marketable equity securities, trade and notes
receivable and CDs.
Secured parties, including creditors and counterparties to certain transactions with the MUFG Group, may
sell or repledge financial assets provided as collateral. Certain contracts, however, may not be specific about the
secured party’s right to sell or repledge collateral under the applicable statutes and, therefore, whether or not the
secured party is permitted to sell or repledge collateral would differ depending on the interpretations of specific
provisions of the existing statutes, contract or certain market practices.
If the MUFG Group determines, based on available information, that a financial asset provided as collateral
might not be sold or repledged by the secured parties, such collateral is not separately reported in the
accompanying consolidated balance sheets. If a secured party is permitted to sell or repledge financial assets
provided as collateral by contract or custom under the existing statutes, the MUFG Group reports such pledged
financial assets separately on the face of the accompanying consolidated balance sheets. At March 31, 2019, the
MUFG Group pledged ¥30,204 billion of assets that may not be sold or repledged by the secured parties.
Certain banking subsidiaries accept collateral for commercial loans and certain banking transactions under a
standardized agreement with customers, which provides that these banking subsidiaries may require the
F-71
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
customers to provide collateral or guarantees with respect to the loans and other banking transactions. Financial
assets pledged as collateral are generally negotiable and transferable instruments, and such negotiability and
transferability are authorized by applicable legislation. In principle, Japanese legislation permits these banking
subsidiaries to repledge financial assets accepted as collateral unless otherwise prohibited by contract or relevant
statutes. Nevertheless, the MUFG Group did not sell or repledge nor does it plan to sell or repledge such
collateral accepted in connection with commercial loans before a debtor’s default or other credit events specified
in the agreements as it is not customary within the banking industry in Japan to dispose of collateral before a
debtor’s default and other specified credit events. Derivative agreements commonly used in the marketplace do
not prohibit a secured party’s disposition of financial assets received as collateral, and in resale agreements and
securities borrowing transactions, securities accepted as collateral may be sold or repledged by the secured
parties. At March 31, 2018 and 2019, the fair value of the collateral accepted by the MUFG Group that is
permitted to be sold or repledged was ¥25,358 billion and ¥22,927 billion, respectively, of which ¥17,738 billion
and ¥16,514 billion, respectively, was sold or repledged.
At March 31, 2018 and 2019, the cash collateral pledged for derivative transactions, which is included in
Other assets, was ¥1,473,109 million and ¥1,276,897 million, respectively, and the cash collateral received for
derivative transactions, which is included in Other liabilities, was ¥1,158,053 million and ¥844,234 million,
respectively.
9. DEPOSITS
The balances of time deposits, including CDs, issued in amounts of ¥10 million (approximately
U.S.$90 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 29, 2019) or more with
respect to domestic deposits and issued in amounts of U.S.$100,000 or more with respect to foreign deposits
were ¥27,381,920 million and ¥22,386,612 million, respectively, at March 31, 2018, and ¥25,899,780 million
and ¥23,858,381 million, respectively, at March 31, 2019.
The maturity information at March 31, 2019 for domestic and foreign time deposits, including CDs, is
summarized as follows:
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after two years through three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after three years through four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after four years through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥33,351,324
4,987,763
2,688,960
539,629
574,244
836,549
¥23,559,245
1,145,596
351,794
146,985
22,104
29,634
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥42,978,469
¥25,255,358
Domestic
Foreign
(in millions)
10. CALL MONEY AND FUNDS PURCHASED
A summary of funds transactions for the fiscal years ended March 31, 2018 and 2019 is as follows:
Outstanding at end of fiscal year:
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal range of maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2,452,543
1 day to 30 days
¥
2,450,320
1 day to 30 days
0.31%
0.12%
2018
2019
(in millions, except percentages and days)
F-72
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. DUE TO TRUST ACCOUNT
Mitsubishi UFJ Trust and Banking holds assets on behalf of its customers in an agent, fiduciary or trust
capacity. Such trust account assets are not the MUFG Group’s proprietary assets and are managed and accounted
for separately.
However, excess cash funds of individual trust accounts are often placed with Mitsubishi UFJ Trust and
Banking which manages the funds together with its own funds in its proprietary account. Due to trust account
reflects a temporary placement of the excess funds from individual trust accounts and, in view of the MUFG
Group’s funding, due to trust account is similar to short-term funding, including demand deposits and other
overnight funds purchased. The balance changes in response to the day-to-day changes in the excess funds placed
by the trust accounts. A summary of due to trust account transactions at March 31, 2018 and 2019 is as follows:
Amount outstanding at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate on outstanding balance at end of fiscal year . . . . .
2018
2019
(in millions, except percentages)
¥2,735,952
¥3,386,158
0.00%
0.00%
12. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
At March 31, 2018 and 2019, the MUFG Group had unused lines of credit for financing amounting to
¥5,142,206 million and ¥5,525,069 million, respectively. The amounts principally consist of pooled collateral
which are used to cover shortages in the Bank of Japan account and to meet liquidity needs. The MUFG Group
may borrow from the Bank of Japan on demand up to the total amount of collateral eligible for credit extension.
Other short-term borrowings at March 31, 2018 and 2019 were comprised of the following:
2018
2019
(in millions, except percentages)
Domestic offices:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from the Bank of Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from other financial institutions . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,094,487
305,520
243,968
84,620
¥1,033,568
241,070
227,482
122,166
Total domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,728,595
1,624,286
Foreign offices:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from other financial institutions . . . . . . . . . . . . . . . . . . . . . . .
Short-term debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,275,278
784,949
18,523
73,917
Total foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,152,667
Total
Less unamortized discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,881,262
138
3,929,636
967,901
68,492
141,803
5,107,832
6,732,118
1,045
Other short-term borrowings—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥6,881,124
¥6,731,073
Weighted average interest rate on outstanding balance at end of fiscal year . . .
1.29%
1.97%
F-73
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Long-term debt (with original maturities of more than one year) at March 31, 2018 and 2019 was comprised
of the following:
MUFG:
2018
2019
(in millions)
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt(1):
¥
1,973
¥
1,725
Fixed rate bonds, payable in US dollars, due 2021-2039, principally 2.19%-4.29% . . . . . . . .
Fixed rate bonds, payable in Euro, due 2021-2033, principally 0.40%-1.75% . . . . . . . . . . . . .
Fixed rate bonds, payable in other currencies, due 2025-2027, principally 3.55%-4.05%(2)
. .
Floating rate bonds, payable in US dollars, due 2021-2023, principally 3.31%-4.51% . . . . . .
Floating rate bonds, payable in Euro, due 2023, principally 0.24% . . . . . . . . . . . . . . . . . . . . .
1,737,809
230,629
17,639
424,795
—
2,949,022
301,124
21,257
765,188
43,596
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,410,872
4,080,187
Subordinated debt(1):
Fixed rate bonds, payable in Japanese yen, due 2024-2030, principally 0.37%-1.39% . . . . . .
Adjustable rate bonds, payable in Japanese yen, due 2024-2028, principally 0.30%-0.66% . .
Adjustable rate bonds, payable in Japanese yen, no stated maturity, principally
482,662
795,944
618,925
890,359
1.03%-4.42% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,557,610
1,706,695
Adjustable rate borrowings, payable in Japanese yen, due 2025-2028, principally
0.46%-0.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,500
32,500
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally
1.17%-4.78% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds, payable in Japanese yen, no stated maturity, principally 3.00% . . . . . . . .
Floating rate borrowings, payable in Japanese yen, due 2025-2028, principally
1,500
3,500
45,960
3,500
0.57%-0.79% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,000
86,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,949,716
3,383,939
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,362,561
7,465,851
MUFG Bank:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation under sale-and-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt(1):
¥
6,906
41,892
¥
7,704
40,732
Fixed rate bonds, payable in Japanese yen, due 2019-2027, principally 0.22%-2.69% . . . . . .
Fixed rate bonds, payable in US dollars, due 2019-2049, principally 0.00%-4.70% . . . . . . . .
Fixed rate bonds, payable in Euro, due 2022-2037, principally 0.88%-2.06% . . . . . . . . . . . . .
Fixed rate bonds, payable in other currencies, due 2021-2047, principally 0.00%-5.30%(2)
. .
Fixed rate borrowings, payable in Japanese yen, due 2019-2028, principally
0.00%-0.25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate borrowings, payable in US dollars, due 2018, principally 7.49% . . . . . . . . . . . . . .
Fixed rate borrowings, payable in Euro, due 2026, principally 0.00% . . . . . . . . . . . . . . . . . . .
Fixed rate borrowings, payable in other currencies, due 2030, principally 2.93%(2) . . . . . . . . .
Adjustable rate bonds, payable in US dollars, due 2030, principally 3.00% . . . . . . . . . . . . . . .
Floating rate bonds, payable in US dollars, due 2018, principally 3.13% . . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in US dollars, due 2019-2031, principally
2.64%-3.34% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in Euro, due 2021-2022, principally 0.00%-0.06% . . . . . .
Floating rate borrowings, payable in other currencies, due 2028, principally 3.23%(2)
. . . . . .
346,800
1,451,745
111,956
19,502
9,561,784
38
1,044
—
1,062
53,120
1,071,239
20,150
—
234,500
1,284,812
112,687
19,084
10,786,372
—
—
9,483
1,110
—
1,008,949
15,382
5,240
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,638,440
13,477,619
Subordinated debt(1):
Fixed rate bonds, payable in Japanese yen, due 2019-2031, principally 1.31%-2.91% . . . . . .
Fixed rate borrowings, payable in Japanese yen, due 2022-2035, principally
520,350
513,420
0.37%-2.24% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98,400
73,400
Adjustable rate borrowings, payable in Japanese yen, due 2024-2028, principally
0.37%-2.56% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,000
20,000
F-74
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2018
2019
(in millions)
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally
2.67%-4.78% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in Japanese yen, due 2027, principally 0.19% . . . . . . . . . .
496,000
15,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,202,750
355,000
15,000
976,820
Obligations under loan securitization transaction accounted for as secured borrowings due 2019-
2078, principally 0.13%-6.90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
622,061
639,037
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,512,049
15,141,912
Other subsidiaries:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt(1):
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2044, principally
0.00%-20.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate borrowings, bonds and notes, payable in US dollars, due 2019-2037, principally
¥
9,835
¥
13,107
3,453,352
1,291,537
0.00%-34.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
936,086
1,385,936
Fixed rate borrowings, bonds and notes, payable in Euro, due 2020-2026, principally
0.15%-1.28% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,619
2,479
Fixed rate borrowings, bonds and notes, payable in Thai baht, due 2019-2025, principally
0.01%-7.15% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
330,814
334,586
Fixed rate borrowings, bonds and notes, payable in other currencies, due 2019-2037,
principally 0.00%-15.33%(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190,567
219,781
Floating/Adjustable rate borrowings, bonds and notes, payable in Japanese yen, due 2019-
2048, principally 0.00%-7.70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,342,318
1,425,387
Floating rate borrowings, bonds and notes, payable in US dollars, due 2019-2028,
principally 0.00%-27.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
186,515
244,253
Floating rate borrowings, bonds and notes, payable in other currencies, due 2019-2022,
principally 1.43%-3.41%(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,420
6,241
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,447,691
4,910,200
Subordinated debt(1):
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2030, principally
0.65%-2.61% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate bonds and notes, payable in US dollars, due 2019-2027, principally
364,326
269,373
7.50%-10.85% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,661
1,409
Fixed rate bonds and notes, payable in Thai baht, due 2020-2027, principally
3.40%-3.90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate bonds and notes, payable in other currencies, due 2021, principally 0.00%(2) . . . . .
Adjustable rate borrowings, bonds and notes, payable in Japanese yen, no stated maturity,
144,900
7,428
143,212
7,347
principally 2.83% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,500
4,500
Floating rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2021,
principally 0.53%-0.73% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,493
41,000
Floating rate bonds and notes, payable in US dollars, due 2019-2036, principally
4.49%-11.86% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,250
5,172
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700,558
472,013
Obligations under loan securitization transaction accounted for as secured borrowings due 2020-
2022, principally 1.10%-2.20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,551
2,813
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,208,635
5,398,133
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,083,245
28,005,896
Debt Issuance Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(13,689) ¥
(15,353)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥27,069,556
¥27,990,543
Notes:
(1) Adjustable rate debts are debts where interest rates are reset in accordance with the terms of the debt agreements, and floating rate debts
are debts where interest rates are repriced in accordance with movements of markets indices.
F-75
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) Minor currencies, such as Australian dollars, British pounds, Indonesian rupiah, Brazilian real, Russian ruble, etc, have been summarized
into the “other currencies” classification.
The MUFG Group uses derivative financial instruments to manage its interest rate and currency exposures
for certain debts. The derivative financial instruments include swaps, forwards, options and other types of
derivatives. As a result of these derivative instruments, the effective rates reflected in the table above may differ
from the coupon rates. The interest rates for the adjustable and floating rate debt shown in the above table are
those in effect at March 31, 2018 and 2019.
Certain debt agreements permit the MUFG Group to redeem the related debt, in whole or in part, prior to
maturity at the option of the issuer on terms specified in the respective agreements.
The following is a summary of maturities of long-term debt subsequent to March 31, 2019:
MUFG
BK
Other
subsidiaries
Total
(in millions)
Fiscal year ending March 31:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
¥
450
685,348
1,172,368
746,235
265,873
4,595,577
¥ 1,551,272
8,552,229
2,166,840
663,227
315,828
1,892,516
¥1,502,213
895,647
720,272
580,257
414,380
1,285,364
¥ 3,053,935
10,133,224
4,059,480
1,989,719
996,081
7,773,457
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,465,851
¥15,141,912
¥5,398,133
¥28,005,896
New Issuances of Bonds for Basel III
For the fiscal year ended March 31, 2019, the MUFG Group issued to institutional investors in Japan
¥155,000 million aggregate principal amount of unsecured perpetual subordinated Additional Tier 1 notes. These
notes are subject to the MUFG Group’s discretion to cease interest payments and a write-down of the principal
upon the occurrence of certain events, including when the MUFG Group’s Common Equity Tier 1 ratio declines
below 5.125%, when the MUFG Group is deemed to be at risk of becoming non-viable or when the MUFG
Group becomes subject to bankruptcy proceedings.
For the fiscal year ended March 31, 2019, the MUFG Group issued $13,220 million (approximately
¥1,467,288 million), €1,000 million (approximately ¥124,560 million) and HK$302 million (approximately
¥4,270 million) of bonds with an intent to count towards Total Loss-Absorbing Capacity (“TLAC”) to global
institutional investors to meet the TLAC requirement under the standards issued by the Financial Stability Board
(“FSB”). Under the FSB’s TLAC standard, the MUFG Group is required to hold TLAC debt in an amount not
less than 16% of risk-weighted assets and 6% of the applicable Basel III leverage ratio denominator by
January 1, 2019, and not less than 18% of risk-weighted assets and 6.75% of the applicable Basel III leverage
ratio denominator by January 1, 2022.
13. SEVERANCE INDEMNITIES AND PENSION PLANS
Defined Benefit Pension Plans
The MUFG Group has funded non-contributory defined benefit pension plans, which cover substantially all
of its employees and mainly provide for lifetime annuity payments commencing at age 65 (“pension benefits”)
based on eligible compensation at the time of severance, rank, years of service and other factors.
F-76
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG Bank and certain domestic subsidiaries, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ
Securities Holdings, Mitsubishi UFJ NICOS and some subsidiaries of MUFG have non-contributory Corporate
Defined Benefit Pension plans which provide benefits to all their domestic employees.
The MUFG Group also offers qualified and nonqualified defined benefit pension plans in foreign offices
and subsidiaries for their employees. The qualified plans are non-contributory defined pension plans, which
provide benefits upon retirement based on years of service and average compensation and cover substantially all
of the employees of such foreign offices and subsidiaries. With respect to the offices and subsidiaries in the
United States of America, the qualified plans are funded on a current basis in compliance with the requirement of
the Employee Retirement Income Security Act of the United States of America. The nonqualified plans are
non-contributory defined benefit pension plans, under which certain employees earn pay and interest credits on
compensation amounts above the maximum stipulated by applicable laws under the qualified plans.
Severance Indemnities Plans
The MUFG Group has SIPs under which their employees in Japan, other than those who are directors, are
entitled, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of
employment, to lump-sum severance indemnities based on eligible compensation at the time of severance, rank,
years of service and other factors. Under SIPs, benefit payments in the form of a lump-sum cash payment with no
option to receive annuity payments, upon mandatory retirement at normal retirement age or earlier termination of
employment, are provided. When a benefit is paid in a single payment to a benefit payee under the plans, the
payment represents final relief of the obligation.
Other Postretirement Plans
The MUFG Group’s foreign offices and subsidiaries, primarily in the United States of America, provide
their employees with certain postretirement medical and life insurance benefits (“other benefits”).
F-77
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net periodic cost of pension benefits and other benefits for the fiscal years ended March 31, 2017, 2018 and
2019 include the following components:
Domestic subsidiaries
Foreign offices and subsidiaries
2017
2018
Pension
benefits
and SIP
Pension
benefits
and SIP
2019
Pension
benefits
and SIP
2017
2018
2019
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Service cost—benefits
earned during the
fiscal year . . . . . . . . . ¥ 49,057 ¥ 47,064 ¥ 48,352 ¥ 13,107 ¥
990 ¥ 10,169 ¥
676 ¥ 12,395 ¥
525
Interest cost on
projected benefit
obligation . . . . . . . . .
Expected return on plan
assets . . . . . . . . . . . . .
Amortization of net
12,308
14,383
13,504
15,287
1,229
15,359
1,079
14,958
1,046
(60,255) (68,432)
(74,270)
(29,339)
(2,047)
(32,110)
(2,122)
(33,266) (2,314)
actuarial loss . . . . . . .
17,764
7,309
731
12,707
1,366
8,847
1,124
9,993
707
Amortization of prior
service cost
Loss (gain) on
. . . . . . . .
(6,348)
(1,094)
(1,210)
(2,045)
(1,534)
(3,090)
(2,775)
(3,039) (2,020)
settlements and
curtailment
. . . . . . . .
Net periodic benefit cost
(1,765)
(4,394)
(5,980)
(208)
—
52
—
49
—
(income)
. . . . . . . . . . ¥ 10,761 ¥ (5,164) ¥(18,873) ¥ 9,509 ¥
4 ¥
(773) ¥(2,018) ¥ 1,090 ¥(2,056)
As a result of adopting the new guidance issued in March 2017, as described in Note 1, the service cost
component continues to be presented in Salaries and employee benefits while other components of net pension
benefit/cost (i.e., Interest cost on projected benefit obligation, Expected return on plan assets, Amortization of net
actuarial loss, Amortization of prior service cost, and Loss (gain) on settlements and curtailment disclosed in the
above table) are now presented in Other non-interest expenses.
F-78
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the assumptions used in computing the present value of the projected
benefit obligations and the net periodic benefit cost:
Domestic subsidiaries
Foreign offices and subsidiaries
2017
2018
2019
2017
2018
2019
Pension
benefits
and SIP
Pension
benefits
and SIP
Pension
benefits
and SIP
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Weighted-average assumptions used:
Discount rates in determining
expense . . . . . . . . . . . . . . . . . . . 0.68% 0.82% 0.76% 3.90% 3.03% 3.52% 3.61% 3.19% 3.27%
Discount rates in determining
benefit obligation . . . . . . . . . . . 0.82
0.76
0.61
3.81
3.86
3.38
3.43
3.87
3.99
Rates of increase in future
compensation level for
determining expense . . . . . . . . . 3.23
Rates of increase in future
compensation level for
determining benefit
obligation . . . . . . . . . . . . . . . . . 3.23
Expected rates of return on plan
3.23
3.21
4.65
— 4.65
— 4.65
—
3.21
3.21
4.65
— 4.65
— 5.01
—
assets . . . . . . . . . . . . . . . . . . . . . 2.75
2.87
2.83
6.80
7.50
6.71
7.50
6.70
7.50
The following tables present the assumed health care cost trend rates for foreign offices and subsidiaries,
which are used to measure the expected cost of benefits for the next year, and the effect of a one-percentage-
point change in the assumed health care cost trend rate:
Initial trend rate . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . .
Year the rate reaches the ultimate trend rate . .
4.44%
3.94%
2026
4.44%
3.94%
2027
7.00%
4.50%
2026
7.00%
4.50%
2027
MUAH
Other than MUAH
2018(1)
2019(1)
2018(1)
2019(1)
MUAH
Other than MUAH
One-percentage-
point increase
One-percentage-
point decrease
One-percentage-
point increase
One-percentage-
point decrease
(in millions)
Effect on total of service and interest cost
components . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on postretirement benefit obligation . . .
¥ 183
3,110
¥ (152)
(2,630)
¥
44
812
¥ (35)
(644)
Note:
(1) Fiscal years of MUFG Americas Holdings and foreign subsidiaries end on December 31. Therefore, the above tables present the rates
and amounts at December 31, 2017 and 2018, respectively.
F-79
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table sets forth the combined funded status and amounts recognized in the accompanying
consolidated balance sheets at March 31, 2018 and 2019:
Domestic subsidiaries
Foreign offices and subsidiaries
2018
2019
2018
2019
Non-contributory
pension benefits
and SIP
Non-contributory
pension benefits
and SIP
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Change in benefit obligation:
Benefit obligation at beginning of fiscal year . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/ Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lump-sum payment
. . . . . . . . . . . . . . . . . . . .
Translation adjustments and other
¥1,793,848
47,064
14,383
—
(29)
—
49,678
(67,913)
(15,237)
—
¥1,821,794
48,352
13,504
—
(160)
—
43,527
(66,539)
(18,594)
—
¥478,463 ¥35,222 ¥502,056 ¥34,347
525
1,046
452
—
—
(2,354)
(2,221)
—
(285)
12,395
14,958
37
(17)
64
(28,466)
(19,894)
— (1,750)
(10,303)
10,169
15,359
28
—
—
25,519
(19,388)
(861)
(7,233)
676
1,079
455
—
—
506
(2,520)
(1,071)
Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . . . .
1,821,794
1,841,884
502,056
34,347
469,080
31,510
Change in plan assets:
Fair value of plan assets at beginning of fiscal year . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/ Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Translation adjustments and other
2,346,310
250,704
74,181
47
—
(67,913)
—
2,603,329
13,664
44,427
(93)
—
(66,539)
—
477,479
75,824
16,969
—
28
(19,388)
(8,266)
30,339
4,890
190
—
455
(2,520)
(888)
542,646
(21,353)
3,117
—
37
(19,894)
(11,058)
32,466
(1,948)
102
—
452
(2,221)
(593)
Fair value of plan assets at end of fiscal year . . . . . . . . . . . . . .
2,603,329
2,594,788
542,646
32,466
493,495
28,258
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 798,849
(17,314)
¥ 770,564
(17,660)
¥ 83,578 ¥ 2,552 ¥ 67,821 ¥ 1,372
(4,624)
(43,406)
(42,988)
(4,433)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 781,535
¥ 752,904
¥ 40,590 ¥ (1,881) ¥ 24,415 ¥ (3,252)
The aggregated accumulated benefit obligations of these plans at March 31, 2018 and 2019 were as follows:
Aggregated accumulated benefit obligations . . . . . . . . . . . . . .
¥1,784,837
¥1,800,992
¥475,522
¥457,048
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the plans
with accumulated benefit obligations in excess of plan assets at March 31, 2018 and 2019 were as follows:
Domestic
subsidiaries
Foreign offices
and subsidiaries
2018
2019
2018
2019
(in millions)
Domestic
subsidiaries
Foreign offices
and subsidiaries
2018
2019
2018
2019
(in millions)
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,445
22,445
5,272
¥23,108
23,108
5,629
¥62,511
52,012
19,521
¥63,273
52,249
19,866
F-80
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ
NICOS and other subsidiaries paid special lump-sum termination benefits which are not a part of pension plans
to certain early-terminated employees. The amounts charged to operations for such early termination benefits for
the fiscal years ended March 31, 2017, 2018 and 2019 were ¥7,722 million, ¥10,153 million and ¥9,325 million,
respectively.
The following table presents the amounts recognized in Accumulated OCI of the MUFG Group at
March 31, 2018 and 2019:
Domestic subsidiaries
Foreign offices and subsidiaries
2018
Pension
benefits
and SIP
2019
Pension
benefits
and SIP
2018
2019
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Net actuarial loss . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Prior service cost
¥ 135,656
(6,669)
¥ 245,037
(5,459)
¥111,820
(17,936)
¥
7,449
(6,237)
¥ 126,238
(14,536)
¥
8,628
(4,263)
Gross amount recognized in
Accumulated OCI
. . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
128,987
(81,747)
239,578
(115,816)
93,884
(25,251)
1,212
(358)
111,702
(29,875)
4,365
(1,282)
Net amount recognized in
Accumulated OCI
. . . . . . . . . . . . . .
¥ 47,240
¥ 123,762
¥ 68,633
¥
854
¥
81,827
¥
3,083
The following table presents OCI for the fiscal years ended March 31, 2018 and 2019:
Domestic subsidiaries
Foreign offices and subsidiaries
2018
Pension
benefits
and SIP
2019
Pension
benefits
and SIP
2018
2019
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
¥(132,593) ¥ 104,132
¥ (18,165) ¥ (2,262) ¥
26,155
¥
1,908
Net actuarial loss (gain) arising during
the year . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost arising during the
year . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
65
—
Losses (gains) due to amortization:
Net actuarial loss . . . . . . . . . . . . .
. . . . . . . . . . . . .
Prior service cost
Curtailment and settlement
. . . . . . . . .
Foreign currency translation
(7,309)
1,094
4,394
(731)
1,210
5,980
(8,847)
3,090
(52)
(1,124)
2,775
—
(9,993)
3,039
(49)
(707)
2,020
—
adjustments . . . . . . . . . . . . . . . . . . .
—
—
(3,502)
(36)
(1,399)
(68)
Total changes in Accumulated OCI . . . ¥(134,414) ¥ 110,591
¥ (27,476) ¥
(647) ¥
17,818
¥
3,153
F-81
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the expected amounts that will be amortized from Accumulated OCI as
components of net periodic benefit cost, before taxes, for the fiscal year ending March 31, 2020:
Domestic
subsidiaries
Foreign offices
and subsidiaries
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,395
(1,269)
Pension
benefits
and SIP
Pension
benefits
Other
benefits
(in millions)
¥ 7,731
(3,056)
¥ 1,130
(1,916)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,126
¥ 4,675
¥ (786)
Investment policies
MUFG’s investment policy for plan assets is based on an asset liability matching strategy which is intended
to maintain adequate liquidity for benefit payments and to achieve a stable increase in the plan assets in the
medium and long-term through proper risk control and return maximization. As a general rule, investment
policies for plan assets are reviewed periodically for some plans and in the following situations for all plans:
(1) large fluctuations in pension plan liabilities caused by modifications to pension plans, or (2) changes in the
market environment. The plan assets allocation strategies are the principal determinant in achieving expected
investment returns on the plan assets. Actual asset allocations may fluctuate within acceptable ranges due to
market value variability. Plan assets are managed by a combination of internal and external asset management
companies and are rebalanced when market fluctuations cause an asset category to fall outside of its strategic
asset allocation range. Performance of each plan asset category is compared against established indices and
similar plan asset groups to evaluate whether the risk associated with the portfolio is appropriate for the level of
return.
The weighted-average target asset allocation of plan assets for the pension benefits and other benefits at
March 31, 2019 was as follows:
Asset category
Japanese equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic
subsidiaries
Foreign offices
and subsidiaries
Pension
benefits
and SIP
39.3%
32.1
14.9
9.1
1.3
3.3
Pension
benefits
Other
benefits
0.3%
—
48.5
39.1
9.9
2.2
—%
—
70.0
30.0
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0% 100.0% 100.0%
Basis and procedure for estimating long-term return of each asset category
MUFG’s expected long-term rate of return on plan assets for domestic defined benefit pension plans and
SIPs is based on a building-block methodology, which calculates the total long-term rate of return of the plan
assets by aggregating the weighted rate of return derived from both long-term historical performance and
forward-looking return expectations from each asset category.
F-82
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG has determined the expected long-term rate of return for each asset category as follows:
‰
‰
Japanese equity securities: the rate for Japanese debt securities plus a premium for the risk associated
with Japanese equity securities
Japanese debt securities: economic growth rate of Japan
‰ Non-Japanese equity securities: the rate for non-Japanese debt securities plus a premium for the risk
associated with non-Japanese equity securities
‰ Non-Japanese debt securities: global economic growth rate
Foreign offices and subsidiaries periodically reconsider the expected long-term rate of return for their plan
assets. They evaluate the investment return volatility of different asset categories and compare the liability
structure of their pension and other benefits to those of other companies, while considering their funding policy
to maintain a funded status sufficient to meet participants’ benefit obligations, and reduce long-term funding
requirements and pension costs. Based on this information, foreign offices and subsidiaries update the expected
long-term rate of return.
Cash flows
The MUFG Group expects to contribute to the plan assets for the fiscal year ending March 31, 2020 based
upon its current funded status and expected asset return assumptions as follows:
For the pension benefits of domestic subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the pension benefits of foreign offices and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
For the other benefits of foreign offices and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
32.7 billion
0.7 billion
0.4 billion
Estimated future benefit payments
The following table presents benefit payments expected to be paid, which include the effect of expected
future service for the fiscal years indicated:
Domestic
subsidiaries
Foreign offices
and subsidiaries
Pension
benefits
and SIP
Pension
benefits
Other
benefits
(in millions)
Fiscal year ending March 31:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter (2025-2029)
¥ 84,558
82,297
82,320
81,710
81,684
401,772
¥ 19,923
20,928
21,903
22,881
23,726
162,850
¥ 1,997
2,072
2,129
2,177
2,205
10,222
F-83
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair value measurement of the plan assets
The following is a description of the valuation methodologies used for plan assets measured at fair value as
well as the classification of the plan assets pursuant to the fair value hierarchy described in Note 32:
Government bonds and other debt securities
When quoted prices are available in an active market, the MUFG Group adopts the quoted prices to measure
the fair value of securities and such securities are classified in Level 1 of the fair value hierarchy. Level 1
securities include Japanese government bonds, most non-Japanese government bonds and certain corporate
bonds. When quoted prices are available but not traded actively, such securities are classified in Level 2 of the
fair value hierarchy. When quoted prices are not available, the MUFG Group generally estimates fair values by
using non-binding prices obtained from independent pricing vendors. Such securities are generally classified in
Level 2 of the fair value hierarchy. Level 2 securities include certain non-Japanese government bonds, official
institution bonds and corporate bonds. When there is lack of liquidity for securities or significant inputs adopted
to the fair value measurements are unobservable, such securities are classified in Level 3 of the fair value
hierarchy. Such Level 3 securities mainly consist of non-Japanese corporate bonds.
Marketable equity securities
When quoted prices are available in an active market, the MUFG Group adopts the quoted prices to measure
the fair value of marketable equity securities and such securities are classified in Level 1 of the fair value
hierarchy. When quoted prices are available but not traded actively, such securities are classified in Level 2 of
the fair value hierarchy.
Japanese pooled funds
Japanese pooled funds are investment fund vehicles designed for Japanese pension plan investments under
Japanese pension trust fund regulations. Based upon the nature of the funds’ investments, Japanese pooled funds
are categorized into four major fund types: Japanese marketable equity securities type, Japanese debt securities
type, Non-Japanese marketable equity securities type and Non-Japanese debt securities type. The other types of
funds invest in short-term financial instruments or loans receivable. Japanese pooled funds are generally readily
redeemable at their net asset values. The fair values of Japanese pooled funds are measured at their net asset
values per share (or its equivalent) as a practical expedient.
Other investment funds
Other investment funds include mutual funds, private investments funds, common collective funds, private
equity funds and real estate funds. The listed investment funds or mutual funds are valued at quoted prices and
classified in Level 1 or Level 2 of the fair value hierarchy. When there is no available market quotation, the fair
values are generally determined at net asset values per share (or its equivalent) as a practical expedient. Other
investment funds classified in Level 3 of the fair value hierarchy consist of certain real estate funds whose fair
values are not measured at their net asset values but by using significant unobservable inputs and there is inherent
lack of the funds’ liquidity.
Japanese general accounts of life insurance companies
These instruments are contracts with life insurance companies that guarantee return of a certain level of
fixed income, which are mainly invested in assets with low market risk such as Japanese debt securities. They are
measured at conversion value and classified in Level 2 of the fair value hierarchy.
F-84
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other investments
Other investments mainly consist of call loans and the rest consist of miscellaneous accounts such as
deposits with banks and short-term investments. These instruments are generally classified in Level 1 or Level 2
of the fair value hierarchy depending on observability of the inputs to measure their fair values.
The following table presents the fair value of each major category of plan assets as of March 31, 2018 and
2019:
Pension benefits and SIP Investments:
At March 31, 2018
Assets category
Domestic subsidiaries
Foreign offices and subsidiaries
Level 1
Level 2 Level 3
Total
Level 1
Level 2 Level 3
Total
(in millions)
Japanese government bonds . . . . . . . . . . . ¥ 139,847 ¥
Non-Japanese government bonds . . . . . .
Other debt securities . . . . . . . . . . . . . . . .
Japanese marketable equity securities . . .
Non-Japanese marketable equity
15,552
201
934,691
— ¥ — ¥ 139,847 ¥
944
3,482
—
16,496
4,754
— 934,691
—
1,071
17,945
— ¥
— ¥ — ¥
—
4,081 — 22,026
— 81,968 — 81,968
887
— —
887
securities . . . . . . . . . . . . . . . . . . . . . . .
Other investment funds . . . . . . . . . . . . . .
Japanese general account of life
insurance companies(1) . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . .
71,729
—
255
—
—
—
71,984
42,166
— 99,798
815 — 42,981
9,997 — 109,795(2)
— 225,925
23,195
3,485
— 225,925
26,680
—
—
2
— —
155
4,867
—
5,024
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,165,505 ¥253,801 ¥1,071 ¥1,420,377 ¥160,798 ¥101,728 ¥155 ¥262,681
At March 31, 2019
Assets category
Domestic subsidiaries
Foreign offices and subsidiaries
Level 1
Level 2 Level 3
Total
Level 1
Level 2 Level 3
Total
(in millions)
Japanese government bonds . . . . . . . . . . . ¥ 146,060 ¥
Non-Japanese government bonds . . . . . .
Other debt securities . . . . . . . . . . . . . . . .
Japanese marketable equity securities . . .
Non-Japanese marketable equity
8,570
109
855,353
— ¥ — ¥ 146,060 ¥
656
3,698
—
9,226
4,837
— 855,353
—
1,030
38,687
— ¥
— ¥ — ¥
—
4,615 — 43,302
— 100,462 — 100,462
—
— —
—
securities . . . . . . . . . . . . . . . . . . . . . . .
Other investment funds . . . . . . . . . . . . . .
Japanese general account of life
insurance companies(1) . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . .
64,957
—
234
—
—
—
65,191
20,569
— 73,286
652 — 21,221
9,044 — 82,330(2)
— 222,460
18,626
917
— 222,460
19,543
—
—
18
— —
188
4,415
—
4,621
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,075,966 ¥245,674 ¥1,030 ¥1,322,670 ¥132,560 ¥119,188 ¥188 ¥251,936
Notes:
(1) “Japanese general accounts of life insurance companies” is a contract with life insurance companies that guarantees a return of
approximately 1.24% from April 1, 2017 to March 31, 2018 and 1.24% from April 1, 2018 to March 31, 2019.
(2) Other investment funds of the foreign offices and subsidiaries include mutual funds and real estate funds of ¥93,821 million and
¥516 million, respectively, which were held by MUFG Americas Holdings at December 31, 2017 and ¥68,556 million and nil,
respectively, at December 31, 2018.
F-85
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents fair values of certain investments valued at net asset value per share (or its
equivalent) as a practical expedient that were excluded from the above table as of March 31, 2018 and 2019:
Assets category
Japanese pooled funds:
Domestic subsidiaries
Foreign offices and
subsidiaries
2018
2019
2018
2019
(in millions)
Japanese marketable equity securities . . . . . . . . . . . . .
Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese marketable equity securities . . . . . . . .
Non-Japanese debt securities . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
Total pooled funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
83,205
252,730
151,893
100,998
135,275
724,101
¥ 109,915
184,121
162,901
155,792
134,306
747,035
— ¥
—
—
—
—
—
—
—
—
—
—
—
Other investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
458,851(1)
525,083(1)
279,965(2) 241,559(2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,182,952
¥1,272,118
¥279,965
¥241,559
Notes:
(1) Other investment funds of the domestic subsidiaries include mutual funds and real estate funds of ¥433,221 million and ¥13,664 million,
respectively, at March 31, 2018 and ¥500,850 million and ¥12,058 million, respectively, at March 31, 2019.
(2) Other investment funds of the foreign offices and subsidiaries include mutual funds, real estate funds and common collective funds of
¥63,088 million, ¥40,205 million and ¥158,249 million, respectively, at March 31, 2018 and ¥53,775 million, ¥46,818 million and
¥140,728 million, respectively, at March 31, 2019.
Other debt securities and Japanese debt securities in the above Pension benefits and SIP tables include
¥982 million (0.03% of plan assets) of debt securities issued by the MUFG Group at March 31, 2018 and
¥1,224 million (0.04% of plan assets) at March 31, 2019, respectively. Japanese marketable equity securities in
the above Pension benefits and SIP tables include ¥7,596 million (0.24% of plan assets) of common stock issued
by the MUFG Group at March 31, 2018 and ¥5,414 million (0.18% of plan assets) at March 31, 2019,
respectively.
Other post retirement plan investments:
Assets category
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in millions)
Foreign offices and subsidiaries
2018
2019
Non-Japanese government bonds . . . . . . . . . . . . . . . . . . . ¥2,523 ¥ — ¥ — ¥ 2,523 ¥1,705 ¥ — ¥ — ¥ 1,705
— 6,124
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
—
Non-Japanese marketable equity securities . . . . . . . . . . . .
Other investment funds(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
— 5,487
130
—
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 6,124
6
—
—
5,487
— 130
— 5,797
7
—
—
6,082
264
1
— 5,797
7
—
— 6,082
265
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥8,606 ¥6,068 ¥ — ¥14,674 ¥7,192 ¥6,260 ¥ — ¥13,452
Note:
(1) Other investment funds mainly consist of mutual funds.
F-86
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents fair values of certain investments valued at net asset value per share (or its
equivalent) as a practical expedient that were excluded from the above table as of March 31, 2018 and 2019:
Assets category
Other investment funds(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign offices
and subsidiaries
2018
2019
(in millions)
¥17,792
¥14,806
¥17,792
¥14,806
Note:
(1) Other investment funds of the foreign offices and subsidiaries include mutual funds, common collective funds and pooled separate accounts
with variable life insurance policies of ¥553 million, ¥11,332 million and ¥5,907 million, respectively, which were held by MUFG
Americas Holdings at December 31, 2017 and ¥147 million, ¥9,583 million and ¥5,076 million, respectively, at December 31, 2018.
The following tables present a reconciliation of plan assets measured at fair value using significant
unobservable inputs (Level 3) during the fiscal years ended March 31, 2018 and 2019:
Pension benefits and SIP Investments:
Assets category
March 31,
2017
Realized
gains
(losses)
Unrealized
gains
(losses)
Other debt securities . . . . . . . . . . .
Other investment funds . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
¥ 208
206
¥ 414
¥ (6)
36
¥30
¥(18)
—
¥(18)
Purchase,
sales and
settlements
(in millions)
¥ 887
(242)
¥ 645
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2018
¥
¥
— ¥
—
— ¥
— ¥1,071
—
—
— ¥1,071
Domestic subsidiaries
Assets category
March 31,
2017
Realized
gains
(losses)
Unrealized
gains
(losses)
Other investments . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
¥ 760
¥ 760
¥51
¥51
¥ (2)
¥ (2)
Purchase,
sales and
settlements
(in millions)
¥(654)
¥(654)
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2018
¥
¥
— ¥
— ¥
— ¥ 155
— ¥ 155
Foreign offices and subsidiaries
Assets category
March 31,
2018
Realized
gains
(losses)
Unrealized
gains
(losses)
Other debt securities . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
¥1,071
¥1,071
¥ 4
¥ 4
¥ 49
¥ 49
Purchase,
sales and
settlements
(in millions)
¥ (94)
¥ (94)
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2019
¥
¥
— ¥
— ¥
— ¥1,030
— ¥1,030
Domestic subsidiaries
Assets category
March 31,
2018
Realized
gains
(losses)
Unrealized
gains
(losses)
Other investments . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
¥ 155
¥ 155
¥—
¥—
¥ (3)
¥ (3)
Purchase,
sales and
settlements
(in millions)
¥ 36
¥ 36
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2019
¥
¥
— ¥
— ¥
— ¥ 188
— ¥ 188
Foreign offices and subsidiaries
F-87
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Defined Contribution Plans
The MUFG Group maintains several qualified defined contribution plans in its domestic and foreign offices
and subsidiaries, all of which are administered in accordance with applicable local laws and regulations. Each
office and subsidiary matches eligible employee contributions up to a certain percentage of benefits-eligible
compensation per pay period, subject to plan and legal limits. Terms of the plan, including matching percentage
and vesting periods, are individually determined by each office and subsidiary.
The cost of these defined contribution plans charged to operations for the fiscal years ended March 31,
2017, 2018 and 2019 was ¥15,636 million, ¥17,413 million and ¥17,859 million, respectively.
14. OTHER ASSETS AND LIABILITIES
Major components of other assets and liabilities at March 31, 2018 and 2019 were as follows:
2018
2019
(in millions)
Other assets:
Accounts receivable:
Receivables from brokers, dealers and customers for securities
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid benefit cost (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash collateral pledged for derivative transactions (Note 8) . . . . . . . . . . . . . . .
Cash collateral for the use of Bank of Japan’s settlement infrastructure . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,017,194
1,190,885
2,219,196
884,979
1,473,109
851,066
3,029,635
¥ 1,141,075
1,394,794
2,487,389
839,757
1,276,897
911,528
2,990,462
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,666,064
¥11,041,902
Other liabilities:
Accounts payable:
Payables to brokers, dealers and customers for securities transactions . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for off-balance sheet credit instruments . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantees and indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash collateral received for derivative transactions (Note 8) . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,247,652
1,357,387
654,053
81,739
64,735
41,349
1,158,053
2,802,445
¥ 1,289,672
1,308,733
624,062
119,307
65,690
45,346
844,234
3,061,462
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,407,413
¥ 7,358,506
Investments in equity method investees include marketable equity securities carried at ¥1,627,896 million
and ¥1,936,468 million at March 31, 2018 and 2019, respectively. Corresponding aggregated market values were
¥3,186,618 million and ¥2,702,838 million, respectively. Marketable equity securities include Morgan Stanley’s
common stock carried at ¥1,206,998 million and ¥1,326,339 million at March 31, 2018 and 2019, respectively.
As of March 31, 2019, the MUFG Group held approximately 24.01% of its common stock. Investments in equity
method investees also include investments in Morgan Stanley MUFG Securities, Co., Ltd. at ¥174,459 million
and ¥178,679 million at March 31, 2018 and 2019, respectively.
F-88
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group periodically evaluates whether a loss in value of investments in equity method investees
is other-than-temporary. As a result of evaluations, the MUFG Group recognized other-than-temporary declines
in the value of an investment and recorded impairment losses related to certain affiliated companies of
¥5,465 million, ¥29,442 million and ¥51,645 million for the fiscal years ended March 31, 2017, 2018 and 2019
respectively. The impairment losses are included in Equity in earnings of equity method investees—net in the
accompanying consolidated statements of income.
Summarized Financial Information of the MUFG Group’s Equity Method Investees
Summarized financial information of Morgan Stanley, the largest portion of the MUFG Group’s equity
method investees, as of March 31, 2018 and 2019, and for each of the three years ended March 31, 2019 is as
follows:
2018
2019
(in billions)
Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥29,008
8,525
14,431
91,207
17,043
20,709
20,713
82,762
155
¥ 29,392
10,718
15,416
97,223
19,948
21,431
21,165
88,134
130
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . .
Net income applicable to Morgan Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,939
2,871
1,068
730
(in billions)
¥4,354
3,133
1,221
759
¥ 4,365
3,170
1,195
944
2017
2018
2019
Morgan Stanley early adopted the new accounting guidance on “Targeted Improvements to Accounting for
Hedging Activities” on January 1, 2018. This resulted in recording a cumulative catch-up adjustment by Morgan
Stanley, decreasing the MUFG Group’s proportionate share of Retained earnings as reflected on the MUFG
Group’s consolidated statement of equity.
Summarized financial information of the MUFG Group’s equity method investees, other than Morgan
Stanley as of March 31, 2018 and 2019, and for each of the three years ended March 31, 2019 is as follows:
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2019
(in billions)
¥14,343
26,008
7,783
21,209
1,009
¥15,772
28,910
9,103
23,423
1,135
F-89
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
2019
(in billions)
¥901
329
572
136
337
229
¥1,036
430
606
157
205
135
¥777
252
525
97
147
97
15. OFFSETTING OF DERIVATIVES, REPURCHASE AGREEMENTS, AND SECURITIES
LENDING TRANSACTIONS
The following tables present, as of March 31, 2018 and 2019, the gross and net amounts of the derivatives,
resale and repurchase agreements, and securities borrowing and lending transactions, including the related gross
amounts subject to an enforceable master netting arrangement or similar agreement not offset in the consolidated
balance sheets. The MUFG Group primarily enters into International Swaps and Derivatives Association master
netting agreements, master repurchase agreements and master securities lending agreements or similar
agreements for derivative contracts, resale and repurchase agreements, and securities borrowing and lending
transactions. In the event of default on or termination of any one contract, these agreements provide the
contracting parties with the right to net a counterparty’s rights and obligations and to liquidate and setoff
collateral against any net amount owed by the counterparty. Generally, as the MUFG Group has elected to
present such amounts on a gross basis, the amounts subject to these agreements are included in “Gross amounts
not offset in the consolidated balance sheet” column in the tabular disclosure below. For certain transactions
where a legal opinion with respect to the enforceability of netting has not been sought or obtained, the related
amounts are not subject to enforceable master netting agreements and not included in “Gross amounts not offset
in the consolidated balance sheet” column in the tabular disclosure below.
At March 31, 2018
Financial assets:
Derivative assets . . . . . . . .
Receivables under resale
agreements . . . . . . . . . . .
Receivables under
securities borrowing
transactions . . . . . . . . . .
Gross amounts of
recognized
assets/liabilities
Gross amounts
offset in the
consolidated
balance sheet
Net amounts
presented in the
consolidated
balance sheet
Gross amounts not offset in
the consolidated balance sheet
Financial
instruments
Cash collateral
received/pledged
Net amounts
(in billions)
¥12,585
¥ —
¥12,585
¥ (9,664)
¥ (832)
¥2,089
8,825
(3,099)
5,726
(5,171)
(17)
538
9,305
(36)
9,269
(9,208)
(1)
60
Total . . . . . . . . . . . . . .
¥30,715
¥(3,135)
¥27,580
¥(24,043)
¥ (850)
¥2,687
Financial liabilities:
Derivative liabilities . . . . .
Payables under repurchase
agreements . . . . . . . . . . .
Payables under securities
lending transactions . . . .
Obligations to return
securities received as
collateral
. . . . . . . . . . . .
¥11,877
¥ —
¥11,877
¥ (9,631)
¥(1,126)
¥1,120
21,169
(3,034)
18,135
(17,890)
8,206
(36)
8,170
(8,139)
(31)
(12)
3,177
—
3,177
(1,072)
—
214
19
2,105
¥3,458
Total . . . . . . . . . . . . . .
¥44,429
¥(3,070)
¥41,359
¥(36,732)
¥(1,169)
F-90
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019
Financial assets:
Derivative assets . . . . . . . .
Receivables under resale
agreements . . . . . . . . . . .
Receivables under
securities borrowing
transactions . . . . . . . . . .
Gross amounts of
recognized
assets/liabilities
Gross amounts
offset in the
consolidated
balance sheet
Net amounts
presented in the
consolidated
balance sheet
Gross amounts not offset in
the consolidated balance sheet
Financial
instruments
Cash collateral
received/pledged
Net amounts
(in billions)
¥13,205
¥ —
¥13,205
¥(10,752)
¥ (590)
¥1,863
13,885
(2,910)
10,975
(9,793)
(20)
1,162
2,759
—
2,759
(2,693)
—
66
Total . . . . . . . . . . . . . .
¥29,849
¥(2,910)
¥26,939
¥(23,238)
¥ (610)
¥3,091
Financial liabilities:
Derivative liabilities . . . . .
Payables under repurchase
agreements . . . . . . . . . . .
Payables under securities
lending transactions . . . .
Obligations to return
securities received as
collateral
. . . . . . . . . . . .
¥12,710
¥ —
¥12,710
¥(10,671)
¥ (933)
¥1,106
28,125
(2,900)
25,225
(24,930)
(15)
913
3,087
—
—
913
(880)
3,087
(1,244)
—
—
280
33
1,843
¥3,262
Total . . . . . . . . . . . . . .
¥44,835
¥(2,900)
¥41,935
¥(37,725)
¥ (948)
16. REPURCHASE AGREEMENTS, AND SECURITIES LENDING TRANSACTIONS ACCOUNTED
FOR AS SECURED BORROWINGS
The following tables present gross obligations for payables under repurchase agreements, payables under
securities lending transactions and obligations to return securities received as collateral by remaining contractual
maturity and class of collateral pledged at March 31, 2018 and 2019. Potential risks associated with these
arrangements primarily relate to market and liquidity risks. To manage risks associated with market exposure, the
MUFG Group generally revalues the collateral underlying its repurchase agreements and securities lending
transactions on a daily basis and monitors the value of the underlying securities, consisting of primarily high-
quality securities such as Japanese national government and Japanese government agency bonds, and foreign
government and official institution bonds. In the event the market value of such securities falls below the related
agreements at contract amounts plus accrued interest, the MUFG Group may be required to deposit additional
collateral when appropriate. To address liquidity risks, the MUFG Group conducts stress tests to ensure the
adequate level of liquidity is maintained in the event of a decline in the fair value of any collateral pledged.
Payables under repurchase agreements . . . . . . . . . .
Payables under securities lending transactions . . . .
Obligations to return securities received as
March 31, 2018
Remaining Contractual Maturity
Overnight
and open
30 days
or less
31-90
days
¥2,290
4,647
¥14,328
2,343
(in billions)
¥2,004
1,216
Over
90 days
¥2,547
—
Total
¥21,169
8,206
collateral
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,855
202
120
—
3,177
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥9,792
¥16,873
¥3,340
¥2,547
¥32,552
F-91
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Payables under repurchase agreements . . . . . . . . . .
Payables under securities lending transactions . . . .
Obligations to return securities received as
March 31, 2019
Remaining Contractual Maturity
Overnight
and open
30 days
or less
31-90
days
¥3,892
913
¥18,586
—
(in billions)
¥2,824
—
Over
90 days
¥2,823
—
Total
¥28,125
913
collateral
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,572
396
117
2
3,087
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,377
¥18,982
¥2,941
¥2,825
¥32,125
Secured borrowing by the class of collateral pledged at March 31, 2018 and 2019 was as follows:
March 31, 2018
Payables under
repurchase
agreements
Payables under
securities lending
transactions
Obligations
to return
securities received
as collateral
Total
(in billions)
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . . . . .
¥ 2,462
¥7,085
¥1,242
¥10,789
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,316
570
3,567
121
123
10
36
—
—
—
1,085
—
1,344
84
—
—
507
—
15,696
654
3,567
121
1,715
10
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥21,169
¥8,206
¥3,177
¥32,552
March 31, 2019
Payables under
repurchase
agreements
Payables under
securities lending
transactions
Obligations
to return
securities received
as collateral
Total
(in billions)
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . . . . .
¥ 8,306
¥
21
¥ 856
¥ 9,183
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,291
705
4,369
238
200
16
—
—
—
—
892
—
1,286
172
—
—
772
1
15,577
877
4,369
238
1,864
17
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥28,125
¥ 913
¥3,087
¥32,125
F-92
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. PREFERRED STOCK
Pursuant to the Articles of Incorporation, MUFG had been authorized to issue 400,000,000 shares of
Class 5 Preferred Stock, 200,000,000 shares of Class 6 Preferred Stock, and 200,000,000 shares of Class 7
Preferred Stock without par value as of March 31, 2019.
All classes of preferred stock are non-voting and have preference over common stock for the payment of
dividends and the distribution of assets in the event of a liquidation or dissolution of MUFG. They are all
non-cumulative and non-participating with respect to dividend payments. Shareholders of all classes of preferred
stock have the right to receive a liquidation distribution at ¥2,500 and do not have the right to participate in any
further liquidation distributions.
As of March 31, 2017, 2018 and 2019, there was no preferred stock outstanding and the entire amount of
Capital stock on the consolidated balance sheets consisted of only common stock.
18. COMMON STOCK AND CAPITAL SURPLUS
The changes in the number of issued shares of common stock during the fiscal years ended March 31, 2017,
2018 and 2019 were as follows:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . .
Retirement of shares of common stock . . . . . . . . . . . . . . . .
2017
2018
2019
14,168,853,820
(shares)
14,168,853,820
— (268,825,800)
13,900,028,020
(232,257,500)
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . .
14,168,853,820
13,900,028,020
13,667,770,520
Under the Companies Act, issuances of common stock, including conversions of bonds and notes, are
required to be credited to the common stock account for at least 50% of the proceeds and to the legal capital
surplus account (“legal capital surplus”) for the remaining amounts.
The Companies Act permits Japanese companies, upon approval by the Board of Directors, to issue shares
in the form of a “stock split,” as defined in the Companies Act. Also, prior to April 1, 1991, Japanese companies
were permitted to issue free share distributions. MUFG Bank and Mitsubishi UFJ Trust and Banking from time
to time made free share distributions. These free distributions usually ranged from 5% to 10% of outstanding
common stock and publicly-owned corporations in the United States issuing shares in similar transactions would
be required to account for them as stock dividends as of the shareholders’ record date by reducing retained
earnings and increasing the appropriate capital accounts by an amount equal to the fair value of the shares issued.
The application of such U.S. accounting practices to the cumulative free distributions made by MUFG Bank and
Mitsubishi UFJ Trust and Banking at March 31, 2019, would have increased capital accounts by
¥1,910,106 million with a corresponding decrease in unappropriated retained earnings.
The Companies Act permits that common stock, legal reserve, additional paid-in capital, and other capital
surplus and retained earnings can be transferred among these accounts under certain conditions upon the approval
of a shareholders’ meeting. The Companies Act limits the increase of paid-in capital in case disposition of
treasury stock and issuance of common stock are performed at the same time.
As for Capital surplus, the fee retained by MUFG’s subsidiary as underwriting compensation, net of stock
issuance expense, was included in the total Capital surplus balance.
F-93
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Treasury Stock
The Companies Act permits Japanese companies to effect purchases of their own shares pursuant to a
resolution by the shareholders at an annual general meeting until the conclusion of the following ordinary general
meeting of shareholders, and to hold such shares as their treasury stock indefinitely regardless of purpose.
However, the Companies Act requires the amount of treasury stock purchased should be within the amount of
retained earnings available for dividends. Disposition of treasury stock is subject to the approval of the Board of
Directors and is to follow the procedures similar to a public offering of shares for subscription.
From May 17, 2016 to June 13, 2016, MUFG repurchased 190,614,800 shares of MUFG’s common stock.
These purchases were made through Off-Auction Own Share Repurchase Trading (ToSTNeT-3) of the Tokyo
Stock Exchange and by market purchases based on the discretionary dealing contract regarding repurchase of
own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of
the Board of Directors of MUFG held on May 16, 2016. The repurchase plan as authorized by the Board of
Directors of MUFG allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which
represents the equivalent of 1.67% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies.
From November 15, 2016 to December 22, 2016, MUFG repurchased 142,238,800 shares of MUFG’s
common stock by market purchases based on the discretionary dealing contract regarding repurchase of own
shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the
Board of Directors of MUFG held on November 14, 2016. The repurchase plan, as authorized by the Board of
Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which
represents the equivalent of 1.69% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies.
From May 16, 2017 to June 21, 2017 MUFG repurchased 141,158,900 shares of MUFG’s common stock by
market purchases based on the discretionary dealing contract regarding repurchase of own shares for
approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on May 15, 2017. The repurchase plan as authorized by the Board of Directors of
MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which represents the
equivalent of 1.49% of the total number of common shares outstanding, or of an aggregate repurchase amount of
up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve
capital efficiency, and to implement flexible capital policies. On July 20, 2017, MUFG cancelled all the acquired
shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on
May 15, 2017.
From November 15, 2017 to December 22, 2017, MUFG repurchased 127,666,900 shares of MUFG’s
common stock by market purchases based on the discretionary dealing contract regarding repurchase of own
shares for approximately ¥100 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the
Board of Directors of MUFG held on November 14, 2017. The repurchase plan as authorized by the Board of
Directors of MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which
represents the equivalent of 1.50% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies. On January 22, 2018,
MUFG cancelled all of the acquired shares in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on November 14, 2017.
F-94
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
From May 16, 2018 to June 4, 2018, MUFG repurchased 72,420,700 shares of MUFG’s common stock by
market purchases based on the discretionary dealing contract regarding repurchase of own shares for
approximately ¥50 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on May 15, 2018. The repurchase plan as authorized by the Board of Directors of
MUFG allowed for the repurchase of an aggregate amount of up to 100,000,000 shares, which represents the
equivalent of 0.76% of the total number of common shares outstanding, or of an aggregate repurchase amount of
up to ¥50 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve
capital efficiency, and to implement flexible capital policies. On July 20, 2018, MUFG cancelled all of the
acquired shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held
on May 15, 2018.
From November 14, 2018 to December 10, 2018, MUFG repurchased 159,836,800 shares of MUFG’s
common stock by market purchases based on the discretionary dealing contract regarding repurchase of own
shares for approximately ¥100 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the
Board of Directors of MUFG held on November 13, 2018. The repurchase plan as authorized by the Board of
Directors of MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which
represents the equivalent of 1.52% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies. On January 22, 2019,
MUFG cancelled all of the acquired shares in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on November 13, 2018.
Parent Company Shares Held by Subsidiaries and Affiliated Companies
At March 31, 2019, certain subsidiaries and affiliated companies owned shares of common stock of MUFG.
Such shares are included in treasury stock in the accompanying consolidated balance sheets and deducted from
the MUFG’s shareholders’ equity.
19. RETAINED EARNINGS, LEGAL RESERVE AND DIVIDENDS
In addition to the Companies Act, Japanese banks, including MUFG Bank and Mitsubishi UFJ Trust and
Banking, are required to comply with the Banking Law of Japan (the “Banking Law”).
Legal Reserve Set Aside as Appropriation of Retained Earnings and Legal Capital Surplus
Under the Companies Act
The Companies Act provides that an amount at least equal to 10% of the aggregate amount of cash
dividends and certain appropriations of retained earnings associated with cash outlays applicable to each period
shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as an
appropriation of retained earnings and the legal capital surplus equals 25% of stated capital as defined in the
Companies Act.
Under the Banking Law
The Banking Law provides that an amount at least equal to 20% of the aggregate amount of cash dividends
and certain appropriations of retained earnings associated with cash outlays applicable to each fiscal year shall be
appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as appropriation
of retained earnings and the legal capital surplus equals 100% of stated capital as defined in the Companies Act.
F-95
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Transfer of Legal Reserve
Under the Companies Act
Under the Companies Act, Japanese companies, including MUFG, were permitted, pursuant to a resolution
by the shareholders at a general meeting, to make legal reserve set aside as appropriation of retained earnings and
legal capital surplus available for dividends until the aggregate amount of the legal reserve and legal capital
surplus equals 25% of stated capital as defined in the Companies Act.
Under the Companies Act, Japanese companies, including MUFG, MUFG Bank and Mitsubishi UFJ Trust
and Banking, are permitted, primarily pursuant to a resolution by the shareholders at a general meeting, to
transfer legal capital surplus and legal reserve to stated capital and/or retained earnings without limitations of
thresholds, thereby effectively removing the thresholds provided for in the Companies Act and Banking Law at
the company’s discretion.
Under the Banking Law
Under the Banking Law, Japanese banks, including MUFG Bank and Mitsubishi UFJ Trust and Banking,
were permitted, pursuant to a resolution by the shareholders at a general meeting, to set aside a legal reserve as
an appropriation of retained earnings and legal capital surplus available for dividends until the aggregate amount
of the legal reserve and legal capital surplus equals 100% of stated capital as defined in the Companies Act.
Unappropriated Retained Earnings and Dividends
In addition to the provision that requires an appropriation for legal reserve as described above, the
Companies Act and the Banking Law impose certain limitations on the amount available for dividends.
Under the Companies Act, the amount available for dividends is based on the amount recorded in MUFG’s
general books of account maintained in accordance with accounting principles generally accepted in Japan
(“Japanese GAAP”). The adjustments included in the accompanying consolidated financial statements but not
recorded in MUFG’s general books of account, as explained in Note 1, have no effect on the determination of
retained earnings available for dividends under the Companies Act. Under the Banking Law, MUFG, MUFG
Bank and Mitsubishi UFJ Trust and Banking have to meet the minimum capital adequacy requirements and
distributions of retained earnings of MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking, which are
otherwise distributable to shareholders, are restricted in order to maintain the minimum capital requirements.
MUFG, formerly known as Mitsubishi Tokyo Financial Group, was established on April 2, 2001 with
common stock of ¥924,400 million, preferred stock of ¥222,100 million, legal capital surplus of
¥2,838,693 million and no retained earnings in accordance with the Commercial Code of Japan (“the Code”),
which was replaced by the Companies Act, and Japanese GAAP.
On October 1, 2005, MUFG started with common stock and preferred stock of ¥1,383,052 million, a legal
capital surplus of ¥3,577,570 million and retained earnings of ¥757,458 million in accordance with the Code and
Japanese GAAP.
MUFG’s amount available for dividends, at March 31, 2019, was ¥4,221,793 million, which is based on the
amount recorded in MUFG’s general books of account under Japanese GAAP.
Annual dividends, including those for preferred stock, are approved by the shareholders at an annual general
meeting held subsequent to the fiscal year to which the dividends are applicable. In addition, a semi-annual
interim dividend payment may be made by resolution of the Board of Directors, subject to limitations imposed by
the Companies Act and the Banking Law.
F-96
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In the accompanying consolidated statements of equity, dividends and appropriations to legal reserve shown
for each fiscal year represent dividends approved and paid during the fiscal year and the related appropriation to
legal reserve.
20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the changes in Accumulated OCI, net of tax and net of noncontrolling interests,
for the fiscal years ended March 31, 2017, 2018 and 2019:
Accumulated other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on investment securities(1):
2017
2018
2019
(in millions)
Balance at beginning of fiscal year
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . . . . . . . . . . . .
Effect of adopting new guidance on consolidation of certain variable interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,995,314 ¥2,032,807 ¥ 2,270,346
60,616
—
244,249
118
31,984
—
entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax effects . . . . . . .
Effect of adopting new guidance on recognition and measurement of financial
assets and financial liabilities (Note 1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,509
—
—
—
(6,828)
—
—
— (2,700,331)
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,032,807 ¥2,270,346 ¥ (369,369)
Net debt valuation adjustments:
Balance at beginning of fiscal year
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax effects . . . . . . .
Effect of adopting new guidance on recognition and measurement of financial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
(2,080) ¥ (10,632) ¥
(8,552)
—
(2,178)
(3,678)
(16,488)
9,729
—
assets and financial liabilities (Note 1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (10,632) ¥ (16,488) ¥
(1,911)
(8,670)
Net unrealized gains (losses) on derivatives qualifying for cash flow hedges:
Balance at beginning of fiscal year
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax effects . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
4,516 ¥
(13,245)
—
(8,729) ¥
(7,025)
(3,496)
(19,250)
(4,890)
—
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
(8,729) ¥ (19,250) ¥
(24,140)
Defined benefit plans:
Balance at beginning of fiscal year
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax effects . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (317,422) ¥ (214,062) ¥ (119,593)
(88,680)
—
109,012
(14,543)
103,360
—
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (214,062) ¥ (119,593) ¥ (208,273)
Foreign currency translation adjustments:
Balance at beginning of fiscal year
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on consolidation of certain variable interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 620,931 ¥ 482,039 ¥
(137,256)
(119,213)
362,300
(36,117)
entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax effects . . . . . . .
(1,636)
—
—
(526)
—
—
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 482,039 ¥ 362,300 ¥
326,183
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,281,423 ¥2,477,315 ¥ (284,269)
Note:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019.
F-97
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the before tax and net of tax changes in each component of Accumulated OCI
for the fiscal years ended March 31, 2017, 2018 and 2019:
2017
2018
2019
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax
Before tax
(in millions)
Net unrealized gains (losses) on
investment securities:
Net unrealized gains on
investment securities(1)
. . . . . . . ¥ 307,476 ¥(107,082) ¥ 200,394 ¥ 631,154 ¥(204,916) ¥ 426,238 ¥ 132,723 ¥ (24,690) ¥108,033
Reclassification adjustment for
gains included in net income
before attribution of
noncontrolling interests . . . . . . .
(274,278)
86,845
(187,433) (280,258)
84,328
(195,930)
(28,953)
9,100
(19,853)
Net change . . . . . . . . . . . . . .
33,198
(20,237)
12,961
350,896
(120,588) 230,308
103,770
(15,590)
88,180
Net unrealized gains (losses) on
investment securities
attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . .
Net unrealized gains on
investment securities
attributable to Mitsubishi UFJ
Financial Group . . . . . . . . . . . .
Net debt valuation adjustments:
Net debt valuation adjustments . . .
Reclassification adjustment for
losses included in net income
before attribution of
noncontrolling interests . . . . . . .
(19,023)
(13,941)
27,564
31,984
244,249
60,616
(12,693)
3,994
(8,699)
(3,555)
1,088
(2,467)
13,006
(3,982)
9,024
215
(68)
147
417
(128)
289
1,016
(311)
705
Net change . . . . . . . . . . . . . .
(12,478)
3,926
(8,552)
(3,138)
960
(2,178)
14,022
(4,293)
9,729
Net debt valuation adjustments
attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . .
Net debt valuation adjustments
attributable to Mitsubishi UFJ
Financial Group . . . . . . . . . . . .
Net unrealized gains (losses) on
derivatives qualifying for cash flow
hedges:
Net unrealized losses on
derivatives qualifying for cash
flow hedges . . . . . . . . . . . . . . . .
Reclassification adjustment for
losses (gains) included in net
income before attribution of
noncontrolling interests . . . . . . .
(18,367)
Net change . . . . . . . . . . . . . .
(22,688)
Net unrealized gains on
derivatives qualifying for cash
flow hedges attributable to
noncontrolling interests . . . . . . .
Net unrealized losses on
derivatives qualifying for cash
flow hedges attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . .
—
(8,552)
—
(2,178)
—
9,729
(4,321)
2,041
(2,280)
(3,430)
1,571
(1,859)
(10,397)
2,825
(7,572)
7,402
9,443
(10,965)
(8,016)
(13,245)
(11,446)
2,850
4,421
(5,166)
3,662
(980)
2,682
(7,025)
(6,735)
1,845
(4,890)
—
—
—
(13,245)
(7,025)
(4,890)
F-98
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2017
2018
2019
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax
Before tax
(in millions)
Defined benefit plans:
Defined benefit plans . . . . . . . . . . . . . . 131,971
Reclassification adjustment for losses
(gains) included in net income
before attribution of noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . .
20,105
(41,852)
90,119 154,708
(48,537)
106,171 (126,001)
37,655
(88,346)
(6,652)
13,453
5,904
(2,237)
3,667
(1,168)
574
(594)
Net change . . . . . . . . . . . . . . . . . . 152,076
(48,504)
103,572 160,612
(50,774)
109,838 (127,169)
38,229
(88,940)
Defined benefit plans attributable to
noncontrolling interests . . . . . . . . . .
Defined benefit plans attributable to
Mitsubishi UFJ Financial Group . . .
Foreign currency translation adjustments:
Foreign currency translation
212
103,360
826
109,012
(260)
(88,680)
adjustments . . . . . . . . . . . . . . . . . . . . (148,460)
2,424
(146,036) (137,811)
32,767
(105,044)
(18,062)
(17,932)
(35,994)
Reclassification adjustment for losses
(gains) included in net income
before attribution of noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . .
3,293
(467)
2,826
(1,494)
1,760
266
(9,002)
2,784
(6,218)
Net change . . . . . . . . . . . . . . . . . . (145,167)
1,957
(143,210) (139,305)
34,527
(104,778)
(27,064)
(15,148)
(42,212)
Foreign currency translation
adjustments attributable to
noncontrolling interests . . . . . . . . . .
Foreign currency translation
adjustments attributable to
Mitsubishi UFJ Financial Group . . .
Other comprehensive income (loss)
attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,954)
14,435
(6,095)
(137,256)
(119,213)
(36,117)
¥ (23,709)
¥ 224,845
¥(59,342)
Note:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019.
F-99
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the effect of the reclassification of significant items out of Accumulated
OCI on the respective line items of the accompanying consolidated statements of income for the fiscal years
ended March 31, 2017, 2018 and 2019:
2017
2018
2019
Amount reclassified out of
Accumulated OCI
Line items in the consolidated
statements of income
(in millions)
Details of Accumulated OCI components
Net unrealized losses (gains) on investment
securities
Net gains on sales and redemptions of
Available-for-sale debt securities(1)
Impairment losses on investment
. . .
¥(307,041) ¥(287,279) ¥(29,182)
Investment securities gains
(losses)—net
Investment securities gains
(losses)—net
securities . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,744
19
6,759
262
596
(367)
Net debt valuation adjustments . . . . . . . . . . . . .
(274,278)
86,845
(280,258)
84,328
(28,953) Total before tax
9,100
Income tax expense
¥(187,433) ¥(195,930) ¥(19,853) Net of tax
215
¥
417
¥ 1,016
Equity in earnings of
equity
method investees—net
215
(68)
417
(128)
1,016 Total before tax
(311)
Income tax expense
147
¥
289
¥
705 Net of tax
¥
¥
Net unrealized losses (gains) on derivatives
qualifying for cash flow hedges
Interest rate contracts . . . . . . . . . . . . . . . .
¥ (18,332) ¥
(7,782) ¥ 3,739
Interest income on Loans,
including fees
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(35)
(18,367)
7,402
(234)
(8,016)
2,850
(77)
3,662 Total before tax
(980)
Income tax expense
¥ (10,965) ¥
(5,166) ¥ 2,682 Net of tax
Defined benefit plans
Net actuarial loss(2)
. . . . . . . . . . . . . . . . . .
Prior service cost(2)
. . . . . . . . . . . . . . . . . .
Gain on settlements and curtailment, and
other(2) . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 31,837
¥ 17,280
¥ 11,431
(9,927)
(6,959)
(6,269)
Other non-interest
expenses
Other non-interest
expenses
Other non-interest
expenses
(1,805)
20,105
(6,652)
(4,417)
(6,330)
5,904
(2,237)
(1,168) Total before tax
574
Income tax expense
¥ 13,453
¥
3,667
¥
(594) Net of tax
F-100
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Details of Accumulated OCI components
2017
2018
2019
Amount reclassified out of
Accumulated OCI
Line items in the consolidated
statements of income
(in millions)
Foreign currency translation adjustments . . . .
¥
(39) ¥
3,332
3,293
(467)
(5,743) ¥ (9,004) Other non-interest income
4,249
2 Other non-interest expenses
(1,494)
1,760
(9,002) Total before tax
2,784
Income tax expense
¥
2,826
¥
266
¥ (6,218) Net of tax
Total reclassifications for the period . . . . . . . .
¥(269,032) ¥(283,447) ¥(34,445) Total before tax
87,060
86,573
11,167
Income tax expense
¥(181,972) ¥(196,874) ¥(23,278) Net of tax
Notes:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019 while included unrealized gains
(losses) related to both debt and equity securities for the fiscal years ended March 31, 2017 and 2018.
(2) These Accumulated OCI components are components of net periodic benefit cost. See Note 13 for more information.
21. NONCONTROLLING INTERESTS
Deconsolidation of Subsidiaries
The gains and losses due to deconsolidation of subsidiaries were recognized under “Other non-interest
income” and “Other non-interest expenses,” respectively, in the accompanying consolidated statements of
income. The amount of net losses was ¥2,848 million for the fiscal year ended March 31, 2017, the amount of net
gains was ¥4,448 million for the fiscal year ended March 31, 2018 and the amount of net gains was
¥7,228 million for the fiscal year ended March 31, 2019, respectively.
Changes in MUFG’s Ownership Interests in Subsidiaries
The following table presents the effect on MUFG’s shareholders’ equity from changes in ownership of
subsidiaries resulting from transactions with the noncontrolling interest shareholders during the fiscal years
ended March 31, 2017, 2018 and 2019:
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . .
Transactions between Mitsubishi UFJ Financial Group and the
noncontrolling interest shareholders:
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net transfers to the noncontrolling interest shareholders . . . . . . . . . . . . . . . .
Change from net income attributable to Mitsubishi UFJ Financial Group
and transactions between Mitsubishi UFJ Financial Group and the
noncontrolling interest shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
2019
¥202,680
(in millions)
¥1,228,160
¥718,645
—
(429)
(429)
(34,751)
8,006
(26,745)
—
(78)
(78)
¥202,251
¥1,201,415
¥718,567
F-101
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
22. REGULATORY CAPITAL REQUIREMENTS
Japan
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings are
subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in
which they operate. Failure to meet minimum capital requirements will initiate certain mandatory actions by
regulators that, if undertaken, could have a direct material effect on MUFG’s consolidated financial statements.
In Japan, MUFG, MUFG Bank, and Mitsubishi UFJ Trust and Banking are subject to regulatory capital
requirements promulgated by the Financial Services Agency of Japan (“FSA”) in accordance with the provisions
of the Banking Law and related regulations. A banking institution is subject to the minimum capital requirements
both on a consolidated basis and a stand-alone basis, and is required to maintain the minimum capital irrespective
of whether it operates independently or as a subsidiary under the control of another company. When a bank
holding company manages operations of its banking subsidiaries, it is required to maintain the minimum capital
adequacy ratio on a consolidated basis in the same manner as its subsidiary banks. The FSA provides two sets of
capital adequacy guidelines. One is a set of guidelines applicable to Japanese banks and bank holding companies
with their foreign offices conducting international operations, as defined, and the other is applicable to Japanese
banks and bank holding companies that are not engaged in international operations conducted by their foreign
offices.
The Basel Committee on Banking Supervision (“BCBS”) of the Bank for International Settlements
(“BIS”) sets capital adequacy standards for all internationally active banks to ensure minimum levels of capital.
The Basel Committee revised the 1988 Accord (“Basel I”) in June 2004 and released “International
Convergence of Capital Measurement and Capital Standards: A Revised Framework” (“Basel II”). In addition,
the Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global
regulatory framework, which has been referred to as “Basel III,” in July and September 2010. In December 2010,
the Basel Committee agreed on the details of the Basel III rules. Effective as of March 31, 2013, Basel III was
adopted by the FSA with transitional measures for Japanese banking institutions with international operations
conducted by their foreign offices. MUFG calculated capital ratios as of March 31, 2018 and 2019 in accordance
with Basel III.
Capital Ratios
Basel III, the same as Basel II, is based on “three pillars”: (1) minimum capital requirements, (2) the self-
regulation of financial institutions based on supervisory review process, and (3) market discipline through the
disclosure of information. The framework of the 1988 Accord, Basel I is improved and expanded to be included
in “minimum capital requirements” as the first pillar of Basel II and Basel III.
As for the denominator of the capital ratio, the Basel framework provides the following risk-based
approaches and a range of options for determining risk-weighted assets.
“Credit Risk”
The Basel framework provides options for determining the risk-weighted assets for credit risk to allow
banks to select approaches that are most appropriate for their level of risk assessment. Banks choose one of
three approaches: “Standardized Approach,” “Foundation Internal Ratings-Based Approach” or “Advanced
Internal Ratings-Based Approach (“AIRB”).”
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
“Market Risk”
In the “Amendment to the Capital Accord to incorporate market risks” of the year 1996, a choice between
two methodologies “the Standardized Measurement Method” and “Internal Models Approach” is permitted.
“Combination of Internal Models Approach and the Standardized Measurement Method” is also allowed
under certain conditions. This is unchanged in Basel III.
“Operational Risk”
Operational risk, which is defined as the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events, is newly added in Basel II. The Basel framework presents three
methods for calculating operational risk capital charges: (i) the Basic Indicator Approach; (ii) the
Standardized Approach; or (iii) Advanced Measurement Approaches (“AMA”). Banks adopt one of the
three approaches to determine the risk-weighted assets for operational risk.
Banks need to obtain approval from their supervisors prior to adopting the following approaches to calculate
capital requirements for each risk:
‰
‰
‰
the Advanced Internal Ratings-Based Approach for credit risk
the Internal Models Approach for market risk
the Standardized Approach and AMA for operational risk
With approval from the FSA, MUFG and most of its major subsidiaries adopt AIRB to calculate capital
requirements for credit risk, adopt the AMA to calculate capital requirements for operational risk, as for market
risk, adopt the Internal Models Approach mainly to calculate general market risk and adopt the Standardized
Measurement Method to calculate specific risk.
The MUFG Group’s proprietary assets do not include trust assets under management and administration in a
capacity of agent or fiduciary and, accordingly trust account assets are generally not included in the capital
measure. However, guarantees for trust principal are counted as off-balance sheet items requiring a capital charge
in accordance with the capital adequacy guidelines.
Under Basel III, as adopted by the FSA, MUFG’s risk-weighted assets increased, largely reflecting the new
capital charge of the credit valuation adjustment (CVA), the credit risk related to asset value correlation
multiplier for large financial institutions, and the 250% risk-weighted threshold items not deducted from
Common Equity Tier 1 capital, as well as the conversion of certain Basel II capital deductions to risk-weighted
assets, such as securitizations.
On the other hand, as for the numerator of the capital ratio, there are three primary regulatory capital ratios
used to assess capital adequacy, Common Equity Tier 1, Tier 1 and Total capital ratios, which are determined by
dividing applicable capital components by risk-weighted assets. Tier 1 capital consists of Common Equity Tier 1
capital and Additional Tier 1 capital. Common Equity Tier 1 capital is primarily consisting of common stock,
capital surplus, retained earnings, and Accumulated OCI. Regulatory adjustments including certain intangible
fixed assets, such as goodwill, and defined-benefit pension fund assets, are made to Common Equity Tier 1.
Additional Tier 1 capital generally consists of Basel III compliant preferred securities, and during the transition
period, other capital that meets Tier 1 requirements under Basel II standards.
Tier 2 capital generally consists of Basel III compliant subordinated debts, capital that meets Tier 2
requirements under Basel II standards during the transition period, certain allowances for credit losses, and
noncontrolling interests in subsidiaries’ Tier 2 instruments. Total capital is defined as the sum of Tier 1 and
Tier 2 capital.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer and the Global
Systematically Important Bank (“G-SIB”), as designated by the FSB, surcharge requirements became applicable
to Japanese banking institutions with international operations conducted through foreign offices. The
requirements had been phased in and fully implemented as of March 31, 2019. MUFG is required to maintain a
capital conservation buffer of 1.875% and 2.5%, a G-SIB surcharge of 1.125% and 1.5%, and a countercyclical
buffer of 0.01% and 0.04%, in addition to the 4.50% minimum Common Equity Tier 1 capital ratio, as of
March 31, 2018 and 2019, respectively.
Leverage Ratios
The leverage ratio is designed for monitoring and preventing the build-up of excessive leverage in the
banking sector and is expressed as the ratio of Tier 1 capital to both on and off-balance sheet assets adjusted in
accordance with the FSA guidance. In December 2017, the Group of Central Bank Governors and Heads of
Supervision announced final Basel III reforms. The announced reforms include revisions to the measurement of
the leverage ratio and a 3% minimum leverage ratio requirement, plus a G-SIB leverage ratio buffer equal to
50% of the applicable G-SIB capital surcharge. The announcement sets forth implementation dates of January 1,
2018 for the minimum leverage ratio requirement and January 1, 2022 for the G-SIB leverage ratio buffer
requirement. Effective as of March 31, 2019, the minimum leverage ratio requirement was adopted by the FSA.
The risk-adjusted capital amounts and ratios, and leverage ratios, of MUFG, MUFG Bank and Mitsubishi
UFJ Trust and Banking presented in the following table are based on amounts calculated in accordance with
Japanese GAAP as required by the FSA.
Actual
For capital
adequacy purposes
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
Consolidated:
At March 31, 2018:
Total capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,795,480
14,470,240
2,545,648
16.56% ¥12,492,344
7,280,570
15.90
1,016,420
20.03
11.01%
8.00
8.00
Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Equity Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,251,749
12,374,074
2,245,853
14,284,945
10,788,381
2,060,107
14.32
13.59
17.67
12.58
11.85
16.21
10,223,072
5,460,427
762,315
8,521,118
4,095,321
571,736
9.01
6.00
6.00
7.51
4.50
4.50
At March 31, 2019:
Total capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,769,793
14,632,620
2,213,195
16.03% ¥14,097,771
8,114,105
14.42
725,540
24.40
12.04%
8.00
8.00
Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Equity Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio(2):
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,276,301
12,639,454
1,928,955
14,322,407
10,990,820
1,775,565
16,276,301
12,639,454
1,928,955
13.90
12.46
21.26
12.23
10.83
19.57
4.94
4.63
5.09
11,755,949
6,085,579
544,155
10.04
6.00
6.00
9,999,582
4,564,184
408,116
9,871,460
8,189,494
1,135,795
8.54
4.50
4.50
3.00
3.00
3.00
F-104
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Actual
For capital
adequacy purposes
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
Stand-alone:
At March 31, 2018:
Total capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,211,327
2,529,316
16.90% ¥ 6,252,458
1,017,331
19.88
8.00%
8.00
Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,344,078
2,232,760
14.51
17.55
Common Equity Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,802,445
2,057,760
12.54
16.18
4,689,344
762,998
3,517,008
572,249
6.00
6.00
4.50
4.50
At March 31, 2019:
Total capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,560,583
2,195,098
15.58% ¥ 6,959,207
723,953
24.25
8.00%
8.00
Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,773,839
1,911,237
13.53
21.12
Common Equity Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,172,206
1,758,237
11.69
19.42
Leverage ratio(2):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,773,839
1,911,237
4.84
5.55
5,219,405
542,965
3,914,554
407,224
7,284,812
1,031,484
6.00
6.00
4.50
4.50
3.00
3.00
Notes:
(1) Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer and G-SIB surcharge requirements became
applicable to Japanese banking institutions with international operations conducted through foreign offices. As a result, in addition to the
4.50% minimum Common Equity Tier 1 capital ratio, MUFG is required to maintain a capital conservation buffer of 1.875% and a
G-SIB surcharge of 1.125% as of March 31, 2018 and a capital conservation buffer of 2.5% and a G-SIB surcharge of 1.5% as of
March 31, 2019. As of the same date, the countercyclical buffer applicable to MUFG is 0.04%.
(2) Effective as of March 31, 2019, the minimum leverage ratio requirement was adopted by the FSA.
Mitsubishi UFJ Morgan Stanley Securities and other securities subsidiaries in Japan and overseas are also
subject to regulatory capital requirements of the countries or jurisdictions in which they operate. In Japan, the
Financial Instruments and Exchange Act and related ordinance require financial instruments firms to maintain a
minimum capital ratio of 120% calculated as a percentage of capital accounts less certain fixed assets, as
determined in accordance with Japanese GAAP, against amounts equivalent to market, counterparty credit and
operational risks. Specific guidelines are issued as a ministerial ordinance which details the definition of essential
components of the capital ratios, including capital, deductible fixed asset items and risks, and related measures.
Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. A capital ratio of less than
140% will call for regulatory reporting and a capital ratio of less than 100% may lead to a suspension of all or
part of the business for a period of time and cancellation of a registration.
At March 31, 2018, Mitsubishi UFJ Morgan Stanley Securities’s capital accounts less certain fixed assets of
¥446,539 million on a stand-alone basis and ¥473,296 million on a consolidated basis, were 291.2% and 293.2%
of the total amounts equivalent to market, counterparty credit and operational risks, respectively. At March 31,
2019, its capital accounts less certain fixed assets of ¥446,609 million on a stand-alone basis and ¥469,272
million on a consolidated basis, were 331.6% and 332.2% of the total amounts equivalent to market, counterparty
credit and operational risks, respectively.
Management believes, as of March 31, 2019, that MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking,
Mitsubishi UFJ Morgan Stanley Securities and other regulated securities subsidiaries met all capital adequacy
requirements to which they are subject.
F-105
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
United States of America
In the United States of America, MUFG Americas Holdings and its banking subsidiary MUFG Union Bank,
N.A. (“MUFG Union Bank” or “BK(US)”), MUFG Bank’s largest subsidiaries operating outside Japan, are
subject to various regulatory capital requirements administered by the U. S. Federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a material effect on MUFG Americas Holdings’s consolidated
financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, MUFG Americas Holdings and MUFG Union Bank must meet specific capital guidelines that involve
quantitative measures of MUFG Americas Holdings’s and MUFG Union Bank’s assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. MUFG Americas Holdings’s capital
amounts and MUFG Union Bank’s prompt corrective action classification are also subject to qualitative
judgments by the regulators about components, risk-weightings and other factors. Prompt corrective action
provisions are not applicable to bank holding companies such as MUFG Americas Holdings. MUFG Union Bank
is subject to laws and regulations that limit the amount of dividends MUFG Union Bank can pay to MUFG
Americas Holdings.
Quantitative measures established by regulation to help ensure capital adequacy require MUFG Americas
Holdings and MUFG Union Bank to maintain minimum amounts and ratios (set forth in the tables below) of
Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital
(as defined) to quarterly average assets (as defined).
In July 2013, the Board of Governors of the Federal Reserve System and the other U.S. Federal banking
agencies adopted final rules making significant changes to the U.S. regulatory capital framework for
U.S. banking organizations (U.S. Basel III). The final rules are intended to conform this framework to the BCBS’
current international regulatory capital accord (Basel III). These rules replace the U.S. Federal banking agencies’
general risk-based capital rules (commonly known as “Basel I”), advanced approaches rules (commonly known
as “Basel II”) that are applicable to certain large banking organizations (including MUFG Union Bank), and
leverage rules, and are subject to certain transition provisions. Among other requirements, the U.S. Basel III rules
revise the definition of capital, increase minimum capital ratios, and introduce a minimum Common Equity
Tier 1 capital ratio of 4.5% and a capital conservation buffer of 2.5% (for a total minimum Common Equity
Tier 1 capital ratio of 7.0%) and a potential countercyclical buffer of up to 2.5%, which would be imposed by
regulators at their discretion if it is determined that a period of excessive credit growth is contributing to an
increase in financial institution systemic risk; mandate a Tier 1 leverage ratio of 4% and introduce, for large and
internationally active bank holding companies, a Tier 1 Supplementary Leverage Ratio that is currently set at 3%
and which incorporates off-balance sheet exposures; revise Basel I rules for calculating risk-weighted assets
under a standardized approach; modify the existing Basel II advanced approaches rules for calculating risk-
weighted assets under U.S. Basel III; and eliminate, for advanced approaches institutions, over a four-year
phase-in period beginning on January 1, 2014, the Accumulated OCI or loss exclusion that had applied under
Basel I and Basel II rules.
As a result of the Federal Reserve’s approval of MUFG Americas Holdings’s request to opt out of the
advanced approaches methodology in the fourth quarter of 2014, MUFG Americas Holdings calculated its
regulatory capital ratios under U.S. Basel I rules at December 31, 2014 and became subject to the U.S. Basel III
standardized approach on January 1, 2015, with certain provisions subject to phase-in periods. As permitted for
institutions not subject to the advanced approaches methodology, MUFG Americas Holdings made a one-time
permanent election in the first quarter of 2015 to exclude certain components of the Accumulated OCI from its
regulatory capital calculations. MUFG Union Bank continues to be subject to the advanced approaches rules.
Advanced approaches institutions were required to apply U.S. Basel III rules beginning on January 1, 2014. The
F-106
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
U.S. Basel III rules are scheduled to be substantially phased in by January 1, 2019. Effective June 30, 2015,
MUFG Americas Holdings updated the methodologies applied to the calculation of its regulatory capital ratios
due to recent regulatory guidance, which clarified the treatment of certain off-balance sheet credit exposures.
These methodologies were applied to MUFG Americas Holdings’s capital ratios and increased the ratios by
approximately 50 basis points. This change did not affect MUFG Union Bank’s ratios as the U.S. Office of the
Comptroller of the Currency (“OCC”) had previously adopted this guidance.
As required under U.S. Basel III rules, the 2.5% capital conservation buffer is being implemented on a
phased-in basis in equal increments of 0.625% per year over a four-year period that commenced on January 1,
2016. MUFG Americas Holdings and MUFG Union Bank would satisfy the minimum capital requirements
including the capital conservation buffer on a fully phased-in basis if those requirements were effective as of
December 31, 2018.
The figures on the table below are calculated according to U.S. Basel III as of December 31, 2017 and 2018.
MUFG Americas Holdings’s actual capital amounts and ratios are presented as follows:
Actual
Minimum capital
ratios required(1)
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
MUAH:
At December 31, 2017:
Total capital (to risk-weighted assets) . . . . . . . . . . . . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . . . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . . . . . . . . . . .
Common Equity Tier 1 capital (to risk-weighted assets) . . . .
At December 31, 2018:
Total capital (to risk-weighted assets) . . . . . . . . . . . . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . . . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . . . . . . . . . . .
Common Equity Tier 1 capital (to risk-weighted assets) . . . .
$17,106
15,708
15,708
15,708
$14,904
14,256
14,256
14,256
17.76% $ 8,910
6,984
16.31
6,245
10.06
5,539
16.31
14.60% $10,081
8,039
13.96
6,502
8.77
6,508
13.96
9.250%
7.250
4.000
5.750
9.875%
7.875
4.000
6.375
Notes:
(1) The minimum capital requirement includes a capital conservation buffer of 1.250% at December 31, 2017 and 1.875% at December 31,
2018.
(2) Excludes certain deductions.
F-107
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The figures on the table below are calculated according to U.S. Basel III as of December 31, 2017 and 2018.
MUFG Union Bank’s actual capital amounts and ratios are presented as follows:
Actual
Minimum capital
ratios required(1)
Ratios OCC
requires to be
“well capitalized”
Amount
Ratio
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
BK(US):
At December 31, 2017:
Total capital (to risk-weighted assets) . . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . .
Common Equity Tier 1 capital (to risk-weighted
$15,335
14,028
14,028
17.68% $8,023
6,288
16.17
4,762
11.78
9.250% $8,673
6,938
7.250
5,953
4.000
10.00%
8.00
5.00
assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,028
16.17
4,987
5.750
5,637
6.50
At December 31, 2018:
Total capital (to risk-weighted assets) . . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . .
. . . .
Tier 1 capital (to quarterly average assets)(2)
Common Equity Tier 1 capital (to risk-weighted
$13,905
13,316
13,316
15.09% $9,102
7,258
14.45
5,018
10.61
9.875% $9,217
7,374
7.875
6,273
4.000
10.00%
8.00
5.00
assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,316
14.45
5,876
6.375
5,991
6.50
Notes:
(1) Beginning January 1, 2017 and 2018, the minimum capital requirement includes a capital conservation buffer of 1.250% and 1.875%,
respectively.
(2) Excludes certain deductions.
Management believes, as of December 31, 2018, that MUFG Americas Holdings and MUFG Union Bank
met all capital adequacy requirements to which they are subject.
As of December 31, 2017 and 2018, the notification from the OCC categorized MUFG Union Bank as “well
capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well
capitalized,” MUFG Union Bank must maintain a minimum total risk-based capital ratio of 10% as of
December 31, 2017 and 2018, a Tier 1 risk-based capital ratio of 8% as of December 31, 2017 and 2018, a Tier 1
capital to quarterly average assets of 5% as of December 31, 2017 and 2018, and Common Equity Tier 1 risk-
based capital ratio of 6.5% as of December 31, 2017 and 2018, as set forth in the table. There are no conditions
or events since that notification that management believes have changed MUFG Union Bank’s category.
F-108
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
23. EARNINGS PER COMMON SHARE APPLICABLE TO COMMON SHAREHOLDERS OF MUFG
Reconciliations of net income and weighted average number of common shares outstanding used for the
computation of basic EPS to the adjusted amounts for the computation of diluted EPS for the fiscal years ended
March 31, 2017, 2018 and 2019 are as follows:
Income (Numerator):
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . .
Effect of dilutive instruments:
Stock acquisition rights and restricted stock units—Morgan
2017
2018
2019
(in millions)
¥
202,680
¥ 1,228,160
¥
718,645
Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,212)
(3,826)
(3,745)
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group and assumed conversions . . . . . . . . . . . . . . . . . . .
¥
199,468
¥ 1,224,334
¥
714,900
Shares (Denominator):
Weighted average common shares outstanding . . . . . . . . . . . . . . . . .
Effect of dilutive instruments:
Stock acquisition rights and the common shares of MUFG
2017
2018
2019
(thousands of shares)
13,574,314
13,291,842
13,058,698
under the Board Incentive Plan(1)
. . . . . . . . . . . . . . . . . . . . . .
10,571
1,650
484
Weighted average common shares for diluted computation . . . . . . . .
13,584,885
13,293,492
13,059,182
2017
2018
(in yen)
2019
Earnings per common share applicable to common shareholders
of Mitsubishi UFJ Financial Group:
Basic earnings per common share:
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
14.93
¥
92.40
¥
55.03
Diluted earnings per common share:
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
14.68
¥
92.10
¥
54.74
Note:
(1) For the fiscal year ended March 31, 2019, the performance-based plan under the Board Incentive Plan could potentially dilute earnings
per common share but were not included in the computation of diluted earnings per common share due to their antidilutive effects.
24. DERIVATIVE FINANCIAL INSTRUMENTS
The MUFG Group uses various derivative financial instruments both for trading purposes and for purposes
other than trading (primarily risk management purposes) in the normal course of business to meet the financial
needs of its customers, as a source of revenue and to manage its exposures to a variety of risks.
Market risk is the possibility that future changes in market indices make the financial instruments less
valuable. The MUFG Group is a party to derivative financial instruments, including swaps, forwards, options and
F-109
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
other types of derivatives, dealing primarily with market risk associated with interest rates, foreign currencies,
equity and commodity prices, and credit risk associated with counterparty’s nonperformance of transactions.
Credit risk is the possibility that a loss may result from a counterparty’s failure to perform according to the
terms and conditions of the contract, which may exceed the value of underlying collateral. To reduce credit risk,
the MUFG Group may require collateral or guarantees based on a case-by-case assessment of creditworthiness of
each customer and evaluation of the instrument. The MUFG Group also uses master netting agreements in order
to mitigate overall counterparty credit risk.
Trading Activities
The MUFG Group’s trading activities include dealing and customer accommodation activities. As part of its
trading activities, the MUFG Group offers a variety of derivative financial instruments for managing interest rate
and foreign exchange risk to its domestic and foreign corporate and financial institution customers. The MUFG
Group also enters into other types of derivative transactions, including equity and credit-related contracts, for its
own account.
Risk Management Activities
As part of the MUFG Group’s risk management activities, asset and liability management is viewed as one
of the methods for the MUFG Group to manage its interest rate exposures on interest-bearing assets and
liabilities. The MUFG Group uses certain derivative financial instruments in order to minimize significant
unplanned fluctuations in earnings that are caused by interest rate volatility. For example, an increase or a
decrease in interest income and interest expense on hedged variable rate assets and liabilities as a result of
interest rate fluctuations are expected to be substantially offset by the variability in earnings by gains and losses
on the derivative instruments that are linked to these hedged assets and liabilities.
The MUFG Group enters into interest rate swaps and other contracts primarily to manage the interest rate
risk of its loans, investment securities and deposit liabilities. Interest rate contracts, which are generally
non-leveraged generic interest rate and basis swaps, options and futures, allow the MUFG Group to effectively
manage its interest rate risk position. Option contracts primarily consist of caps, floors, swaptions and options on
index futures. Futures contracts used for asset and liability management activities are primarily index futures
providing for cash payments based upon the movement of an underlying rate index.
The MUFG Group enters into forward exchange contracts, currency swaps and other contracts in response
to currency exposures resulting from on-balance sheet assets and liabilities denominated in foreign currencies in
order to limit the net foreign exchange position by currency to an appropriate level.
Derivatives Designated as Hedges
The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions
entered by MUFG Americas Holdings whose fiscal period ends on December 31.
Cash Flow Hedges
At December 31, 2018, MUFG Americas Holdings used interest rate floors with a notional amount of
¥55.5 billion and interest rate swaps with a notional amount of ¥19.3 billion to hedge the risk of changes in cash
flows attributable to changes in the designated benchmark interest rate on LIBOR indexed loans and LIBOR
indexed short-term borrowings, respectively. At December 31, 2018, the weighted average remaining life of
active cash flow hedges was 2.6 years.
F-110
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For cash flow hedges, the effective portion of the gain or loss on the hedging instruments is reported as a
component of OCI and reclassified into earnings in the same period or periods during which the hedged cash
flows are recognized in net interest income. Gains and losses representing hedge ineffectiveness are recognized
in non-interest expense in the period in which they arise. At December 31, 2018, MUFG Americas Holdings
expects to reclassify approximately ¥9.8 billion of losses from Accumulated OCI as a reduction to net interest
income during the year ending December 31, 2019. This amount could differ from amounts actually realized due
to changes in interest rates, hedge terminations and the addition of other hedges subsequent to December 31,
2018.
Fair Value Hedges
MUFG Americas Holdings engaged in an interest rate hedging strategy in which one or more interest rate
swaps were associated with a specified interest bearing liability, in order to convert the liability from a fixed rate
to a floating rate instrument. This strategy mitigated the changes in fair value of the hedged liability caused by
changes in the designated benchmark interest rate, LIBOR.
For fair value hedges, any ineffectiveness is recognized in non-interest expense in the period in which it
arises. The change in the fair value of the hedged item and the hedging instrument, to the extent completely
effective, offsets with no impact on earnings. For the fiscal years ended December 31, 2017 and 2018, MUFG
Americas Holdings recorded losses on the hedging instruments and gains on the hedged liability, both of which
were less than ¥1 billion.
Notional Amounts of Derivative Contracts
The following table summarizes the notional amounts of derivative contracts at March 31, 2018 and 2019:
Notional amounts(1)
2018
2019
(in trillions)
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,219.7
220.8
6.1
0.3
6.5
3.1
¥1,409.6
230.5
6.4
0.2
7.2
3.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,456.5
¥1,656.9
Note:
(1)
Includes both written and purchased positions.
F-111
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impact of Derivatives on the Consolidated Balance Sheets
The following table summarizes fair value information on derivative instruments that are recorded on the
MUFG Group’s consolidated balance sheets at March 31, 2018 and 2019:
Fair value of derivative instruments
2018(1)(5)
2019(1)(5)
Not designated
as hedges(2)
Designated
as hedges(3)
Total
derivatives(4)
Not designated
as hedges(2)
Designated
as hedges(3)
Total
derivatives(4)
(in billions)
Derivative assets:
Interest rate contracts . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,712
3,557
207
35
72
2
Total derivative assets . . . . . . . . .
¥12,585
Derivative liabilities:
Interest rate contracts . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . .
Others(6) . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,674
3,000
227
33
71
(145)
¥
¥
¥
Total derivative liabilities . . . . . .
¥11,860
¥
— ¥ 8,712
3,557
—
207
—
35
—
72
—
2
—
— ¥12,585
¥ 8,691
3,000
227
33
71
(145)
17
—
—
—
—
—
17
¥10,108
2,795
188
27
84
2
¥13,204
¥ 9,896
2,671
183
27
69
(136)
¥
¥
1
—
—
—
—
—
1
¥ 10,109
2,795
188
27
84
2
¥ 13,205
¥ — ¥ 9,896
2,671
183
27
69
(136)
—
—
—
—
—
¥11,877
¥12,710
¥ — ¥ 12,710
Notes:
(1) The fair value of derivative instruments is presented on a gross basis even when derivative instruments are subject to master netting
agreements. Cash collateral payable and receivable associated with derivative instruments are not added to or netted against the fair value
amounts.
(2) The derivative instruments which are not designated as a hedging instrument are held for trading and risk management purposes, and are
presented in Trading account assets/liabilities except for (6).
(3) The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions entered into by MUFG
Americas Holdings. The derivative instruments which are designated as hedging instruments are presented in Other assets or Other
liabilities on the accompanying consolidated balance sheets.
(4) This table does not include contracts with embedded derivatives for which the fair value option has been elected.
(5) For more information about fair value measurement and assumptions used to measure the fair value of derivatives, see Note 32.
(6) Others include mainly bifurcated embedded derivatives carried at fair value, which are presented in Deposits and Long-term debt.
F-112
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impact of Derivatives and Hedged Items on the Consolidated Statements of Income and Accumulated OCI
The following tables provide more detailed information regarding the derivative-related impact on the
accompanying consolidated statements of income and Accumulated OCI by accounting designation for the fiscal
years ended March 31, 2017, 2018 and 2019:
Gains and losses for trading and risk management derivatives (not designated as hedging instruments)
Trading and risk management derivatives gains and losses
(Not designated as hedging instruments)
2017
2018
2019
Foreign
exchange
gains (losses)
—net
Trading
account
profits (losses)
—net
Total
Foreign
exchange
gains (losses)
—net
Trading
account
profits (losses)
—net
Total
Foreign
exchange
gains (losses)
—net
Trading
account
profits (losses)
—net
Total
(in billions)
¥ —
¥(137)
¥(137)
¥ —
¥ 51
¥ 51
¥
—
¥
6
¥
6
(183)
—
(183)
(163)
—
(163)
(347)
—
—
—
—
(153)
(153)
2
18
(55)
2
18
(55)
—
—
—
3
(260)
(260)
6
(2)
(22)
6
(2)
(19)
—
—
—
(7)
—
80
—
(40)
(70)
(24)
(347)
80
—
(40)
(77)
¥ (378)
Interest rate
contracts . . . . .
Foreign exchange
contracts . . . . .
Equity
contracts . . . . .
Commodity
contracts . . . . .
Credit
derivatives . . .
Others . . . . . . . .
Total . . . . . .
¥(183)
¥(325)
¥(508)
¥(160)
¥(227)
¥(387) ¥ (354)
¥
Gains and losses for derivatives designated as cash flow hedges
2017
2018
2019
(in billions)
Losses recognized in Accumulated OCI on derivative instruments
(Effective portion)
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) reclassified from Accumulated OCI into income
(Effective portion)
Interest rate contracts(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
¥
¥
¥
(3)
(3)
18
18
¥
¥
¥
¥
(4)
(4)
8
8
¥(11)
¥(11)
¥ (4)
¥ (4)
Note:
(1)
Included in Interest income.
Embedded Derivatives
Features embedded in other non-derivative hybrid contracts are separated from the host contracts and
measured at fair value when they are not clearly and closely related to the host contracts and meet the definition
of a derivative. The change in the fair value of such an embedded derivative is recognized currently in earnings,
unless it qualifies as a hedge. The fair value of the embedded derivative is presented in the accompanying
consolidated balance sheets with the host contract.
F-113
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Credit Derivatives
The MUFG Group enters into credit derivatives to manage its credit risk exposure, to facilitate client
transactions, and for proprietary trading purposes, under which they provide the counterparty protection against
the risk of default on a set of debt obligations issued by a specified reference entity or entities. Types of such
credit derivatives primarily include single name credit default swaps, index and basket credit default swaps. The
MUFG Group will have to perform under a credit derivative if a credit event as defined under the contract
occurs. Such credit events include bankruptcy, dissolution or insolvency of the referenced entity, default and
restructuring of the obligations of the referenced entity. The MUFG Group’s counterparties are banks, broker-
dealers, insurance and other financial institutions. The contractual or notional amounts of these credit derivatives
represent the maximum potential amounts of future payments without consideration of possible recoveries under
recourse provisions or from collateral held or pledged.
The table below summarizes certain information regarding protection sold through credit derivatives as of
March 31, 2018 and 2019:
At March 31, 2018:
Single name credit default swaps:
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index and basket credit default swaps held by BK:
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index and basket credit default swaps held by
SCHD:
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total index and basket credit default swaps
sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total credit default swaps sold . . . . . . . . . . . . . . . .
Other credit derivatives sold(3)
Investment grade . . . . . . . . . . . . . . . . . . . . . .
Total credit derivatives . . . . . . . . . . . . . . . . . . . . . .
Protection sold
Maximum potential/Notional amount
by expiration period
1 year
or less
1-5 years
Over
5 years
(in millions)
Total
Fair value
(Asset)/
Liability(1)
¥440,610
168,102
—
608,712
¥1,199,269
259,497
45,425
1,504,191
¥ 85,094
4,775
—
89,869
¥1,724,973
432,374
45,425
2,202,772
¥(33,389)
(3,431)
8
(36,812)
3,000
7,000
10,000
15,000
12,000
42,439
69,439
118,359
82,867
201,226
37,781
—
37,781
159,140
89,867
249,007
(3,381)
(1,311)
(4,692)
108,000
29,000
260,951
397,951
6,000
—
1,863
7,863
129,000
41,000
305,253
475,253
(2,641)
(749)
(16,294)
(19,684)
79,439
688,151
599,177
2,103,368
45,644
135,513
724,260
2,927,032
(24,376)
(61,188)
—
¥688,151
74,368
¥2,177,736
—
¥135,513
74,368
¥3,001,400
(24)
¥(61,212)
F-114
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019:
Single name credit default swaps:
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index and basket credit default swaps held by BK:
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index and basket credit default swaps held by
SCHD:
Protection sold
Maximum potential/Notional amount
by expiration period
1 year
or less
1-5 years
Over
5 years
(in millions)
Total
Fair value
(Asset)/
Liability(1)
¥378,527
112,901
—
491,428
¥1,603,962
238,330
5,097
1,847,389
¥145,689
5,672
—
151,361
¥2,128,178
356,903
5,097
2,490,178
¥(30,303)
(127)
(47)
(30,477)
—
—
—
120,854
101,001
221,855
—
—
—
120,854
101,001
221,855
(82)
(2,010)
(2,092)
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,000
—
8,863
21,863
194,618
—
206,832
401,450
8,000
—
3,444
11,444
215,618
—
219,139
434,757
(3,853)
—
(3,043)
(6,896)
Total index and basket credit default swaps
sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total credit default swaps sold . . . . . . . . . . . . . . . .
Other credit derivatives sold(3)
Investment grade . . . . . . . . . . . . . . . . . . . . . .
Total credit derivatives . . . . . . . . . . . . . . . . . . . . . .
21,863
513,291
623,305
2,470,694
11,444
162,805
656,612
3,146,790
(8,988)
(39,465)
77,693
¥590,984
—
¥2,470,694
—
¥162,805
77,693
¥3,224,483
(620)
¥(40,085)
Notes:
(1) Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.
(2) The MUFG Group considers ratings of Baa3/BBB- or higher to meet the definition of investment grade.
(3) Other credit derivatives primarily consist of total return swaps.
Single name credit default swaps—Single name credit default swap protects the buyer against the loss of
principal on a bond or loan in case of a default by the issuer. The protection buyer pays a premium to the MUFG
Group and is protected for the period of the credit default swap. As the seller of protection, the MUFG Group in
turn will have to perform under a credit default swap if a credit event as defined under the contracts occurs. In
order to provide an indication of the current payment/performance risk of the credit default swaps, the external
credit ratings, primarily those provided by Moody’s and Standard & Poor’s (“S&P”), of the underlying reference
entity of the credit default swaps are disclosed.
Index and basket credit default swaps—Index and basket credit default swaps are credit default swaps that
reference multiple names through underlying baskets or portfolios of single name credit default swaps. Typically,
in the event of a default on one of the underlying names, the MUFG Group, as the seller of protection, will have
to pay a pro-rata portion of the total notional amount of the credit default index or basket contract. In order to
provide an indication of the current payment/performance risk of these credit default swaps, MUFG Bank and
Mitsubishi UFJ Securities Holdings rating scale based upon the entity’s internal ratings, which generally
correspond to ratings defined by primarily Moody’s and S&P, of the underlying reference entities comprising the
basket or index were calculated and disclosed.
F-115
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group may economically hedge its exposure to credit derivatives by entering into offsetting
derivative contracts. The carrying value and notional amounts of credit protection sold in which the MUFG
Group held purchased protection with identical underlying referenced entities were approximately ¥52 billion
and ¥2,416 billion, respectively, at March 31, 2018, and approximately ¥35 billion and ¥2,687 billion,
respectively, at March 31, 2019.
Collateral is held by the MUFG Group in relation to these instruments. Collateral requirements are
determined at the counterparty level and cover numerous transactions and products as opposed to individual
contracts.
Credit Risk, Liquidity Risk and Credit-risk-related Contingent Features
Certain derivative instruments held by the MUFG Group contain provisions that require the MUFG Group’s
debt to maintain an investment grade credit rating from each of the major credit rating agencies. If the MUFG
Group’s debt were to fall below investment grade, it would be in violation of these provisions, and the
counterparties to the derivative instruments could request payments on early termination or demand immediate
and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair
value of all derivative instruments with credit-risk-related contingent features that were in a liability position at
March 31, 2018 and 2019 was approximately ¥0.7 trillion and ¥0.6 trillion, respectively, for which the MUFG
Group has posted collateral of approximately ¥127 billion and ¥85 billion, respectively, in the normal course of
business. The amount of additional collateral and early termination amount which could be requested if the
MUFG Group’s debt falls below investment grade was ¥78 billion and ¥65 billion, respectively, as of March 31,
2018 and ¥84 billion and ¥56 billion, respectively, as of March 31, 2019.
25. OBLIGATIONS UNDER GUARANTEES AND OTHER OFF-BALANCE SHEET INSTRUMENTS
Obligations under Guarantees
The MUFG Group provides customers with a variety of guarantees and similar arrangements, including
standby letters of credit, financial and performance guarantees, credit protection, liquidity facilities, other
off-balance sheet credit-related support and similar instruments, in order to meet the customers’ financial and
business needs. The tables below present the contractual or notional amounts of such guarantees at March 31,
2018 and 2019. The contractual or notional amounts of these instruments represent the maximum potential
amounts of future payments without consideration of possible recoveries under recourse provisions or from
collateral held or pledged.
For certain types of derivatives, such as written interest rate options and written currency options, the
maximum potential future payments are unlimited. Accordingly, it is impracticable to estimate the maximum
potential amount of future payments. As such, the notional amounts of the related contracts, other than the
maximum potential payments, are included in the table.
The MUFG Group mitigates its credit risk exposure resulting from guarantees by utilizing various
techniques, including collateralization in the form of cash, securities, and real estate properties based on
management’s credit assessment of the guaranteed parties and the related credit profile. In order to manage the
credit risk exposure, the MUFG Group also enters into sub-participation contracts with third parties who will
fund a portion of the credit facility and bear its share of the loss to be incurred in the event that the customer fails
to fulfill its obligations. The following table includes guarantees of ¥403.2 billion and ¥468.9 billion at
March 31, 2018 and 2019, respectively, which are syndicated out to third parties. The contractual or notional
F-116
Over
5 years
¥
346
106
6,969
2,869
16
Over
5 years
¥
271
140
7,370
5,216
28
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
amounts summarized in the following table do not necessarily bear any direct relationship to the future actual
credit exposure, primarily because of risk management techniques of the MUFG Group.
At March 31, 2018:
Maximum
potential/
Contractual
or Notional
amount
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments(1)
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,311
3,051
40,513
9,444
22
Amount by expiration period
1 year
or less
1-5 years
(in billions)
¥
¥ 3,115
2,144
15,230
6,017
2
850
801
18,314
558
4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥57,341
¥26,508
¥20,527
¥10,306
At March 31, 2019:
Maximum
potential/
Contractual
or Notional
amount
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments(1)
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,901
3,256
58,025
11,520
53
Amount by expiration period
1 year
or less
1-5 years
(in billions)
¥
¥ 2,792
2,332
29,734
5,884
12
838
784
20,921
420
13
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥76,755
¥40,754
¥22,976
¥13,025
Note:
(1) Credit derivatives sold by the MUFG Group are excluded from this presentation.
Nature of Guarantee Contracts
Standby letters of credit and financial guarantees generally include an obligation of an issuer or a designated
third-party to guarantee the performance of the customer to the beneficiary under the terms of contracts such as
lending contracts and other similar financial transactions. The MUFG Group is required to make payments to the
guaranteed parties in the event that the customers fail to fulfill the obligations under the contracts. The guarantees
whose contractual maturities are over 5 years are mainly comprised of guarantees of housing loans.
Performance guarantees are contracts that contingently require the MUFG Group to make payments to the
guaranteed party based on another party’s failure to perform under an obligating agreement, except financial
obligation. For example, performance guarantees include guarantees of completion of construction projects.
Derivative instruments that are deemed to be included within the definition of guarantees as prescribed in
the guidance on guarantees include certain written options and credit default swaps. In order for the MUFG
Group to determine if those derivative instruments meet the definition of guarantees, as prescribed in the
guidance on guarantees, the MUFG Group has to track whether the counterparties are actually exposed to losses
that will result from the adverse change in the underlyings. Accordingly, the MUFG Group has disclosed
information on all credit default swaps and certain written options for which there is a possibility of meeting the
definition of guarantees as prescribed in the guidance on guarantees, regardless of whether the counterparties
F-117
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
have assets or liabilities related to the underlyings of the derivatives. However, credit derivatives sold by the
MUFG Group at March 31, 2018 and 2019 are excluded from this presentation, as they are disclosed in Note 24.
Liabilities of trust accounts represent the trustee’s potential responsibility for temporary payments to
creditors of liabilities of trust accounts making use of funds of the MUFG Group, unless there are certain
agreements with trust creditors that have provisions limiting the MUFG Group’s exposure as a trustee to the trust
account assets. A trust may incur external liabilities to obtain certain services during the terms of the trust
arrangement. While in principle, any liabilities of a trust are payable by the trust account and its beneficiaries. A
trustee’s responsibility may be interpreted to encompass temporary payments for the trust account liabilities
when the trust account does not maintain sufficient liquidity available for such liabilities unless the agreement
with trust creditors limits the trustee’s exposure to the trust account assets. At March 31, 2018 and 2019, there
were liabilities of ¥9,444 billion and ¥11,520 billion, respectively, in the segregated records of trust accounts
including the amounts related to liabilities with provisions limiting trustee responsibility. Liabilities of trust
accounts principally includes obligations to return collateral under security lending transactions. The MUFG
Group has experienced no significant losses on such responsibilities and its exposure to the risk associated with
the temporary payments is judged to be remote because trust account liabilities are generally covered by the
corresponding trust account assets. The MUFG Group continuously monitors the liabilities of trust accounts and
assesses the trust account’s ability to perform its obligations to prevent any unfavorable outcomes; the MUFG
Group claims its recourse for its temporary payments against the trust account assets and the beneficiaries.
Carrying Amount
At March 31, 2018 and 2019, the carrying amounts of the liabilities related to guarantees and similar
instruments set forth above were ¥1,110,505 million and ¥1,051,297 million, respectively, which are included in
Other liabilities and Trading account liabilities. The guarantees and similar instruments comprising the largest
components of the total were options sold in the amount of ¥1,069,156 million and ¥1,005,951 million as of
March 31, 2018 and 2019, respectively. Credit derivatives sold by the MUFG Group at March 31, 2018 and 2019
are excluded from this presentation, as they are disclosed in Note 24. In addition, Other liabilities include an
allowance for off-balance sheet instruments of ¥31,101 million and ¥96,946 million at March 31, 2018 and 2019,
respectively, related to these transactions.
Performance Risk
The MUFG Group monitors performance risk of its guarantees using the same credit rating system utilized
for estimating probabilities of default with its loan portfolio. The MUFG Group’s credit rating system is
consistent with both the method of evaluating credit risk under Basel III and those of third-party credit rating
agencies. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits
are included in the “Not rated” category in the following tables.
F-118
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Presented in the tables below is the maximum potential amount of future payments classified based upon
internal credit ratings as of March 31, 2018 and 2019. The determination of the maximum potential future
payments is based on the notional amount of the guarantees without consideration of possible recoveries under
recourse provisions or from collateral held or pledged. Such amounts do not represent the anticipated losses, if
any, on these guarantees.
At March 31, 2018:
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At March 31, 2019:
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount by borrower grade
Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2)
¥13
5
¥18
Normal
¥4,211
2,910
Close
Watch(1)
(in billions)
¥ 83
113
¥7,121
¥196
Amount by borrower grade
Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2)
¥21
78
¥99
Normal
¥3,779
3,070
Close
Watch(1)
(in billions)
¥ 98
79
¥6,849
¥177
Not
rated
¥ 4
23
¥27
Not
rated
¥ 3
29
¥32
Maximum
potential/
Contractual
or Notional
amount
¥4,311
3,051
¥7,362
Maximum
potential/
Contractual
or Notional
amount
¥3,901
3,256
¥7,157
Notes:
(1) Borrowers classified as Close Watch represent those that require close monitoring as the borrower has begun to exhibit elements of
potential concern with respect to its business performance and financial condition, the borrower has begun to exhibit elements of serious
concern with respect to its business performance and financial condition, including business problems requiring long-term solutions, or
the borrower’s loans are TDRs or loans contractually past due 90 days or more for special reasons.
(2) Borrowers classified as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of
default than those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving restructuring
plans, the borrower being considered virtually bankrupt with no prospects for an improvement in business operations, or the borrower
being legally bankrupt with no prospects for continued business operations because of non-payment, suspension of business, voluntary
liquidation or filing for legal liquidation.
The guarantees the MUFG Group does not classify based upon internal credit ratings are as follows.
The MUFG Group records all derivative contracts at fair value. Aggregate market risk limits have been
established, and market risk measures are routinely monitored against these limits. The MUFG Group also
manages its exposure to these derivative contracts through a variety of risk mitigation strategies, including, but
not limited to, offsetting economic hedge positions. The MUFG Group expects the risk of loss to be remote and
believes that the notional amounts of the derivative contracts generally exceed its exposure.
Liabilities of trust accounts represent the trustee’s potential responsibility for temporary payments to
creditors of liabilities of trust accounts using funds of the MUFG Group. The MUFG Group has experienced no
significant losses on such responsibilities and its exposure to the risk associated with the temporary payments is
judged to be remote because trust account liabilities are generally covered by the corresponding trust account
assets.
F-119
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group conducts securities lending transactions for institutional customers as a fully disclosed
agent. At times, securities lending indemnifications are issued to guarantee that a security lending customer will
be made whole in the event the borrower does not return the security subject to the lending agreement and
collateral held is insufficient to cover the market value of the security. All lending transactions are collateralized,
primarily by cash. At March 31, 2019, the MUFG Group had no exposure that would require it to pay under this
securities lending indemnification, since the collateral market value exceeds the fair value of securities lent.
Other Off-balance Sheet Instruments
In addition to obligations under guarantees and similar arrangements set forth above, the MUFG Group
issues other off-balance sheet instruments to meet the financial needs of its customers and for purposes other than
trading. Such off-balance sheet instruments consist of lending-related commitments, including commitments to
extend credit and commercial letters of credit that the MUFG Group provides to meet the financing needs of its
customers. Once the MUFG Group issues these off-balance sheet instruments, the MUFG Group is required to
extend credit to or make certain payments to the customers or beneficiaries specified pursuant to the underlying
contracts unless otherwise provided in the contracts. Since many of these commitments expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. At March 31,
2019, approximately 64% of these commitments will expire within one year, 33% from one year to five years
and 3% after five years. The table below presents the contractual amounts with regard to such instruments at
March 31, 2018 and 2019:
2018
2019
(in billions)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit
Commercial letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to make investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥80,090
1,191
183
13
¥77,273
1,057
240
5
Commitments to extend credit, which generally have fixed expiration dates or other termination clauses, are
legally binding agreements to lend to customers. Commitments are different from guarantees in that the
commitments are generally revocable or have provisions that enable the MUFG Group to avoid payments in the
event of violations of any conditions of the contracts and certain deterioration of the potential borrowers’
financial condition.
Commercial letters of credit, generally used for trade transactions, are typically secured by the underlying
goods. The MUFG Group continually monitors the type and amount of collateral and other securities, and
requires counterparties to provide additional collateral or guarantors as necessary.
Commitments to make investments are legally binding contracts to make additional contributions to
corporate recovery or private equity investment funds in accordance with limited partnership agreements. Some
of these funds, in which the MUFG Group has significant variable interests, are described in Note 26.
26. VARIABLE INTEREST ENTITIES
In the normal course of business, the MUFG Group has financial interests and other contractual obligations
in various entities which may be deemed to be VIEs such as asset-backed conduits, various investment funds,
special purpose entities created for structured financing, repackaged instruments, entities created for the
securitization of the MUFG Group’s assets and trust arrangements.
F-120
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present the assets and liabilities of consolidated VIEs recorded on the accompanying
consolidated balance sheets at March 31, 2018 and 2019:
Consolidated VIEs
Consolidated assets
At March 31, 2018:
Total
Cash and
due from
banks
Interest-earning
deposits in
other banks
Trading
account
assets
(in millions)
Investment
securities
Loans
All other
assets
598,662
Asset-backed conduits . . . . ¥ 7,390,029 ¥ 52,703
Investment funds . . . . . . . .
—
Special purpose entities
created for structured
financing . . . . . . . . . . . . .
Repackaged instruments . . .
Securitization of the MUFG
198,484
152,781
—
520
Group’s assets . . . . . . . . 10,852,539
7,177,407
44,247
Trust arrangements . . . . . . .
Others . . . . . . . . . . . . . . . . .
—
—
361
Total consolidated assets
¥ 44,902
10,300
¥ 2,273 ¥1,777,017 ¥ 5,502,892 ¥ 10,242
— 107,431
461,036
19,895
2,332
—
—
10,541
14,236
—
17,376
—
92,210
149,194
42,632
46,958
43
—
702
—
— 10,827,488
7,011,255
12,963
152,277
42
25,051
2,632
16,645
before elimination . . . . . 26,414,149
53,584
82,311
481,387 2,041,441 23,546,424 209,002
The amounts eliminated in
consolidation . . . . . . . . .
(7,223,156)
(53,454)
(59,150)
(3,804)
(88,758)
(6,996,317)
(21,673)
Total consolidated assets . . ¥19,190,993 ¥
130
¥ 23,161
¥477,583 ¥1,952,683 ¥16,550,107 ¥187,329
Consolidated liabilities
Total
Deposits
Other short-term
borrowings
Long-term
debt
All other
liabilities
Asset-backed conduits . . . . . . . . . . . . . . . . . ¥ 7,409,190 ¥
Investment funds . . . . . . . . . . . . . . . . . . . . .
Special purpose entities created for
11,735
(in millions)
— ¥ 5,176,663
—
—
¥ 1,708,354 ¥ 524,173
— 11,735
structured financing . . . . . . . . . . . . . . . . .
Repackaged instruments . . . . . . . . . . . . . . .
Securitization of the MUFG Group’s
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust arrangements . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated liabilities before
115,353
148,928
—
—
10,816,672
7,171,852
43,030
—
7,103,738
—
587
12,676
5,000
655
24,747
112,054
132,012
2,712
4,240
10,806,145
5,527
— 67,459
16,680
1,603
elimination . . . . . . . . . . . . . . . . . . . . . . . .
25,716,760
7,103,738
5,220,328
12,760,168
632,526
The amounts eliminated in
consolidation . . . . . . . . . . . . . . . . . . . . . .
(15,347,991)
— (3,028,987)
(12,248,680)
(70,324)
The amount of liabilities with recourse to
the general credit of the MUFG
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of consolidated VIEs for which
creditors or beneficial interest holders do
not have recourse to the general credit of
the MUFG Group . . . . . . . . . . . . . . . . . . ¥
(9,745,330)
(7,103,738)
(2,162,890)
(540)
(478,162)
623,439 ¥
— ¥
28,451
¥
510,948 ¥ 84,040
F-121
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidated VIEs
Consolidated assets
At March 31, 2019:
Total
Cash and
due from
banks
Interest-earning
deposits in
other banks
Trading
account
assets
Investment
securities
Loans
All other
assets
680,922
Asset-backed conduits . . . . . . ¥ 6,698,146 ¥ 92,310
—
Investment funds . . . . . . . . . .
Special purpose entities
created for structured
financing . . . . . . . . . . . . . .
Repackaged instruments . . . .
Securitization of the MUFG
203,458
279,327
—
506
Group’s assets . . . . . . . . . . 10,208,496
7,888,210
34,303
Trust arrangements . . . . . . . .
Others . . . . . . . . . . . . . . . . . .
—
—
362
Total consolidated assets
¥ 26,101
14,113
2,214
—
—
8,953
1,635
(in millions)
¥
477,239
3,005 ¥1,424,444 ¥ 5,124,462 ¥ 27,824
— 171,452
18,118
—
53,346
—
137,509
127,243
86,753
74,001
1,213
—
202
—
— 10,183,624
7,565,862
9,699
311,412
42
24,872
1,781
22,565
before elimination . . . . . . . 25,992,862
93,178
53,016
533,792 1,891,525 23,097,643 323,708
The amounts eliminated in
consolidation . . . . . . . . . . .
(7,772,776) (93,171)
(29,361)
(5,102)
(63,331) (7,552,315) (29,496)
Total consolidated assets . . . . ¥18,220,086 ¥
7
¥ 23,655
¥528,690 ¥1,828,194 ¥15,545,328 ¥294,212
Consolidated liabilities
Total
Deposits
Other short-term
borrowings
Long-term
debt
All other
liabilities
(in millions)
Asset-backed conduits . . . . . . . . . . . . . . . . . . ¥ 6,691,362 ¥
Investment funds . . . . . . . . . . . . . . . . . . . . . .
Special purpose entities created for structured
financing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repackaged instruments . . . . . . . . . . . . . . . . .
Securitization of the MUFG Group’s
114,469
277,179
6,852
— ¥ 4,678,588 ¥ 1,552,572 ¥ 460,202
1,694
—
5,158
—
—
—
609
48,014
111,523
174,215
2,337
54,950
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust arrangements . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,167,632
7,881,332
32,584
—
7,616,575
—
— 10,162,231
—
8,611
5,401
— 264,757
22,499
1,474
Total consolidated liabilities before
elimination . . . . . . . . . . . . . . . . . . . . . . . . .
The amounts eliminated in consolidation . . . .
The amount of liabilities with recourse to the
general credit of the MUFG Group . . . . . .
Liabilities of consolidated VIEs for which
creditors or beneficial interest holders do
not have recourse to the general credit of
the MUFG Group . . . . . . . . . . . . . . . . . . . . ¥
25,171,410
(14,676,389)
7,616,575
(50,396)
4,735,822
(2,996,041)
12,007,173
811,840
(11,517,019) (112,933)
(9,922,307) (7,566,179)
(1,719,246)
(121) (636,761)
572,714 ¥
— ¥
20,535 ¥
490,033 ¥ 62,146
In general, the creditors or beneficial interest holders of consolidated VIEs have recourse only to the assets
of those VIEs of which they are creditors or beneficial interest holders, and do not have recourse to other assets
of the MUFG Group, except where the MUFG Group is also contractually required to provide credit
enhancement or program-wide liquidity.
F-122
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present the total assets of non-consolidated VIEs, the maximum exposure to loss
resulting from the MUFG Group’s involvement with non-consolidated VIEs and the assets and liabilities which
relate to the MUFG’s variable interests in non-consolidated VIEs at March 31, 2018 and 2019:
Non-consolidated VIEs
At March 31, 2018: Total assets
Maximum
exposure
Total
Asset-backed
On-balance sheet assets
Trading
account
assets
Investment
securities
Loans
All
other
assets
(in millions)
On-balance sheet
liabilities
Total
All other
liabilities
conduits . . . . . . ¥ 29,011,749 ¥ 5,721,627 ¥ 4,645,697 ¥
620 ¥1,541,591 ¥3,103,486 ¥
— ¥
— ¥
—
Investment
funds . . . . . . . .
45,090,381
1,776,366
1,525,127
213,722
891,062
413,855
6,488
17,919
17,919
Special purpose
entities created
for structured
financing . . . . .
Repackaged
35,437,349
4,016,999
3,193,621
309,560
116,961 2,697,126
69,974
7,217
7,217
instruments . . .
Others . . . . . . . . .
10,212,933
49,582,444
2,576,619
3,760,375
2,487,377
2,740,529
759,591 1,421,716
69,218
236,852
61,192 2,482,141 102,314
—
24,830
—
24,830
94,882
Total . . . . . . ¥169,334,856 ¥17,851,986 ¥14,592,351 ¥1,378,375 ¥4,032,522 ¥8,933,460 ¥247,994 ¥ 49,966 ¥ 49,966
Non-consolidated VIEs
At March 31, 2019: Total assets
Maximum
exposure
Total
Asset-backed
On-balance sheet assets
Trading
account
assets
Investment
securities
Loans
All
other
assets
(in millions)
On-balance sheet
liabilities
Total
All other
liabilities
conduits . . . . . . ¥29,621,609 ¥ 6,221,274 ¥ 4,982,357 ¥
659 ¥1,704,553 ¥3,277,145 ¥
— ¥
— ¥
—
Investment
funds . . . . . . . .
67,750,419
1,952,676
1,753,823
187,166 1,253,705
304,310
8,642
206
206
Special purpose
entities created
for structured
financing . . . . .
Repackaged
42,676,571
3,972,450
3,015,593
252,597
48,895 2,709,008
5,093
9,827
9,827
instruments . . .
Others . . . . . . . . .
12,885,367
60,074,743
3,477,545
3,482,153
3,383,161
2,454,807
690,305 2,169,798
123,595
478,252
44,806
65,451 2,145,665 120,096
6,087
57,567
6,087
57,567
Total . . . . . . ¥213,008,709 ¥19,106,098 ¥15,589,741 ¥1,254,322 ¥5,242,402 ¥8,914,380 ¥178,637 ¥73,687 ¥73,687
Maximum exposure to loss on each type of entity is determined based on the carrying amount of any
on-balance sheet assets and any off-balance sheet liabilities held, net of any recourse liabilities. Therefore, the
maximum exposure to loss represents the maximum loss the MUFG Group could possibly incur at each balance
sheet date and does not reflect the likelihood of such a loss being incurred. The difference between the amount of
on-balance sheet assets and the maximum exposure to loss primarily comprises the remaining undrawn
commitments.
In February 2015, the FASB issued new guidance which amends the consolidation analysis under the
current consolidation guidance. The amendments change the VIE analysis for limited partnerships and similar
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legal entities, the criteria for evaluating whether fees paid to a decision maker or a service provider are a variable
interest, the effect of fee arrangements and related parties on the primary beneficiary determination, and rescind
the indefinite deferral provision that affects the consolidation evaluation for certain investment funds. The
MUFG group adopted this new accounting guidance on April 1, 2016, which resulted in the consolidation and
deconsolidation of certain investment funds. The net increase in the MUFG Group’s consolidated assets,
liabilities and Noncontrolling interests, were ¥628,236 million, ¥32,254 million and ¥595,982 million,
respectively, as of April 1, 2016. The cumulative effect on retained earnings was a decrease of ¥3,873 million
upon the adoption.
Asset-Backed Conduits
This category primarily comprises the following:
Multi-Seller Conduits (MUFG-sponsored Asset-Backed Commercial Paper (“ABCP”) Conduits and Other
ABCP Conduits)
The MUFG Group administers several conduits under asset-backed financing programs under which the
conduits purchase financial assets, primarily trade accounts receivable, from the MUFG Group’s customers by
issuing short-term financing instruments, primarily commercial paper, to third-party investors. Under the asset-
backed financing programs, the MUFG Group acts as an agent for the conduits, which enter into agreements with
the MUFG Group’s customers where the customers transfer financial assets to the conduits in exchange for
monetary consideration. The MUFG Group also underwrites commercial paper for the conduits that is secured by
the assets held by them and provides program-wide liquidity and credit enhancement facilities to the conduits.
The MUFG Group receives fees related to the services it provides to the conduits and the program-wide liquidity
and credit enhancement. The MUFG Group considers itself to be the primary beneficiary of the multi-seller
conduits because, as an agent and sponsor, the MUFG Group has the power to direct activities of the conduits
that most significantly impact the conduits’ economic performance and also has the obligation to absorb losses of
the conduits that could potentially be significant to the conduits through the program-wide liquidity and credit
enhancement. Consequently, the MUFG Group consolidates the conduits.
In addition to the entities described above, the MUFG Group participates as a provider of financing to
several conduits that are administered by third parties. Most of these conduits are established under a multi-seller
asset-backed financing program and the MUFG Group provides financing along with other financial institutions.
With respect to these conduits, the MUFG Group is not considered as the primary beneficiary because the
MUFG Group’s participation in the conduits is only to provide financing along with other third-party financial
institutions and it does not have the power to direct the activities of the conduits. Consequently, the
MUFG Group does not consolidate the conduits.
Asset-Backed Conduits (MUFG-sponsored Asset-Backed Loan (“ABL”) Programs and Other Programs)
The MUFG Group administers several conduits under asset-backed financing programs where the MUFG
Group provides financing to fund the conduits’ purchases of financial assets, comprising primarily trade accounts
receivable, from its customers. The MUFG Group acts as an agent and sponsor for the conduits, which enter into
agreements with the MUFG Group’s customers where the customers transfer assets to the conduits in exchange
for monetary consideration. In most cases, the MUFG Group is the sole provider of financing that is secured by
the assets held by the conduits. The MUFG Group considers itself to be the primary beneficiary of the conduits
because, as an agent and sponsor for the conduits, the MUFG Group has the power to direct activities of the
conduits, such as selection of the assets to be purchased and condition for purchases, and debt collection from the
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original obligors, that most significantly impact the conduits’ economic performance, and also has the obligation
to absorb losses of the conduits that could potentially be significant to the conduits through financing it provides.
Consequently, the MUFG Group consolidates the conduits.
In addition, the MUFG Group is involved with entities, which take in most cases the form of a trust, where
originators of financial assets, which primarily comprise lease receivables, entrust the assets with trust banks and
receive beneficial certificates of trusts in exchange. The originators then transfer the beneficiary certificates to
the MUFG Group in exchange for cash. The originators of the financial assets entrusted continue to be involved
in the assets as servicers. Because the originators are deemed to have the power to direct activities of the entities
that most significantly impact the entities’ economic performance through their role as a servicer, the MUFG
Group is not considered as the primary beneficiary of these entities. Consequently, the MUFG Group does not
consolidate these entities.
The MUFG Group also participates as a provider of financing to the ABL programs that are managed by
third parties. The MUFG Group is not considered as the primary beneficiary of the entities used in these
programs as the MUFG Group’s participation in the entities is only to provide financing along with other third
parties and it does not have the power to direct the activities of the entities. Consequently, the MUFG Group does
not consolidate the entities used in these programs.
Investment Funds
This category primarily comprises the following:
Corporate Recovery Funds
These entities are established by fund managers, which are unrelated to the MUFG Group, for the purpose
of investing in debt or equity instruments issued by distressed companies. After investment, the fund managers
work closely with the management of the entities and attempt to enhance corporate value by various means
including corporate restructuring and reorganization. Their exit strategies include, among others, sales to others
and initial public offerings.
Typically, these entities take the form of a limited partnership which is entirely funded by general and
limited partner interests. These partnerships are considered as VIEs unless the limited partners hold substantive
kick-out rights or participating rights.
The MUFG Group mostly serves as a limited partner in corporate recovery funds that are considered as
VIEs, and does not have the power to direct the activities of these funds that most significantly impact the
economic performance of these funds. Therefore, the MUFG Group does not consider itself to be the primary
beneficiary of these funds and does not consolidate them.
Private Equity Funds
The MUFG Group is involved in venture capital funds that are established by either the MUFG Group’s
entities or fund managers unrelated to the MUFG Group. These entities have specific investment objectives in
connection with their acquisition of equity interests, such as providing financing and other support to start-up
businesses, medium and small entities in a particular geographical area, and to companies with certain
technology or companies in a high-growth industry.
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These entities typically take the form of a limited partnership and usually are entirely funded by general and
limited partner interests. These partnerships are considered as VIEs unless the limited partners hold substantive
kick-out rights or participating rights.
The MUFG Group participates in these partnerships as a general partner or limited partner. The MUFG
Group consolidates these funds, which are considered as VIEs, if the MUFG Group has the power to direct the
activities of these funds that most significantly impact the economic performance of these funds, and also has the
obligation to absorb losses of these funds that could potentially be significant to these funds or the right to
receive benefits from these funds that could potentially be significant to these funds.
Investment Trusts
The MUFG Group invests in investment trusts that are professionally managed collective investment
schemes which pool money from many investors and invest in, among others, equity and debt securities. Most of
these funds take the form of a trust where there is a separation in investment decisions, which is assumed by an
investment manager who has no investment in a trust, and ownership through beneficiary interests issued by a
trust are owned by investors. Therefore, these investment trusts are considered as VIEs. The MUFG Group
consolidates these funds if the MUFG Group has the power to direct the activities of these funds that most
significantly impact the economic performance of these funds, and also has the obligation to absorb losses of
these funds that could potentially be significant to these funds or the right to receive benefits from these funds
that could potentially be significant to these funds.
Buy-out Financing Vehicles
The MUFG Group provides financing to buy-out vehicles. The buy-out vehicles are established by equity
investments from, among others, private equity funds or the management of target companies for the purpose of
purchasing the equity shares of target companies. Along with other financial institutions, the MUFG Group
provides financing to the buy-out vehicles in the form of loans. While the buy-out vehicles’ equity is normally
substantive in its amount and the rights and obligations associated with it, in some cases, the vehicles have equity
that is insufficient to absorb expected variability primarily because the amount provided by equity investors is
nominal in nature. These vehicles engage in non-investment activities, and are considered as VIEs. In most cases,
the MUFG Group’s participation in these vehicles is only to provide financing to the vehicles, and the power to
direct the activities that most significantly impact the economic performance of the vehicles is held by the
management of target companies. As a result, the MUFG Group is not considered as the primary beneficiary of
these vehicles and does not consolidate them.
Other Investment Funds
The MUFG Group’s investments in VIEs through MUFG Americas Holdings primarily consist of equity
investments in low-income housing credit (“LIHC”) structures, designed to generate a return primarily through
the realization of federal tax credits. MUFG Americas Holdings considers itself as the primary beneficiary of
certain types of LIHC investments.
LIHC Unguaranteed Syndicated Investment Funds
MUFG Americas Holdings creates the investment funds, serves as the managing investor member, and sells
limited investor member interests to third parties. MUFG Americas Holdings receives benefits through income
from the structuring of these funds, servicing fees for managing the funds and, as an investor member, tax
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benefits and tax credits to reduce the MUFG Americas Holdings tax liability. MUFG Americas Holdings
considers itself to be the primary beneficiary and consolidates them upon adoption of the current guidance
because, as a sponsor and managing member of the funds, it has the power to direct activities that most
significantly impact the funds’ economic performance and also has the obligation to absorb losses of the funds
that could potentially be significant to the funds.
LIHC Guaranteed Syndicated Investment Funds
MUFG Americas Holdings also forms limited liability companies, which in turn invest in LIHC operating
partnerships, to create LIHC guaranteed syndicated investment funds. Interests in these funds are sold to third
parties who pay a premium for a guaranteed return. MUFG Americas Holdings earns structuring fees from the
sale of these funds and asset management fees. MUFG Americas Holdings serves as the funds’ sponsor and
non-member asset manager, and also guarantees a minimum rate of return throughout the investment term,
therefore, it directs the activities that most significantly impact the funds’ economic performance and also has an
obligation to absorb losses pertaining to its minimum rate of return guarantee to investors. Therefore, the MUFG
Group is considered as the primary beneficiary of these funds and consolidates them.
Special Purpose Entities Created for Structured Financing
This category primarily comprises the following:
Leasing Transaction Vehicles
These entities are established to raise funds to purchase or build equipment and machinery including, among
others, commercial vessels, passenger and cargo aircraft, and production equipment for the purpose of leasing
them to lessees who use the equipment and machinery as part of their business operations. These entities
typically take the form of a limited partnership or a special purpose company where they fund their purchases of
equipment and machinery via senior and subordinate financing. When entities take the form of a limited
partnership, these entities are considered as VIEs unless limited partners hold substantive kick-out rights or
participating rights. The entities considered as VIEs are typically funded only by senior financing or there is a
guarantee provided to the senior financing by parties unrelated to those providing the senior financing. In most
cases, the MUFG Group participates in the senior financing and does not participate in the subordinate financing
or provide guarantees. Generally, because the MUFG Group’s participation in these entities is only to provide
financing, it does not have the power to direct the activities of the entities that most significantly impact the
economic performance of the entities. Therefore, the MUFG Group does not consider itself to be the primary
beneficiary of these entities and does not consolidate them, except for limited circumstances where the MUFG
Group is directly involved with the structuring of the transaction and has the power to direct the activities of the
entities that most significantly impact the economic performance of the entities.
Project Financing Vehicles
These entities are established to raise funds in connection with, among others, production of natural
resources, construction and development of urban infrastructure (including power plants and grids, highways and
ports), and the development of real estate properties or complexes. These projects typically involve special
purpose companies which issue senior and subordinate financing to raise funds in connection with the various
projects. The subordinate financing is usually provided by parties that will ultimately make use of the assets
constructed or developed. By contrast, the senior financing is typically provided by financial institutions,
including the MUFG Group. Because the MUFG Group’s participation in these entities is only to provide
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financing, it does not have the power to direct the activities that most significantly impact the economic
performance of these entities. Therefore, the MUFG Group is not considered as the primary beneficiary of these
entities and does not consolidate them.
Sale-and-Leaseback Vehicles
The MUFG Group is involved with vehicles that acquire assets, primarily real estate, from the MUFG
Group’s customers and other unrelated parties where the sellers of the assets continue to use the assets through
leaseback agreements. These vehicles typically take the form of a limited partnership, and are considered as VIEs
unless the limited partners hold substantive kick-out rights or participating rights. The subordinated financing of
these vehicles considered as VIEs is usually provided by the sellers of the assets, with the MUFG Group
providing senior financing for the vehicles. Because the MUFG Group’s participation in these vehicles is only to
provide senior financing, it does not have the power to direct the activities that most significantly impact the
economic performance of these vehicles. Therefore, the MUFG Group is not considered as the primary
beneficiary and does not consolidate them.
Securitization of Client Real Estate Properties
These entities are established for the purpose of securitizing real estate properties held by the MUFG
Group’s customers. In most cases, these entities take the form of a limited partnership or a special purpose
company. When entities take the form of a limited partnership, these entities are considered as VIEs unless the
limited partners hold substantive kick-out rights or participating rights. The entities considered as VIEs are
typically funded by senior and subordinated financing where the original owners of the real estate properties
provide the subordinated financing, primarily in the form of partnership interests or subordinated notes, and
financial institutions, including the MUFG Group, provide senior financing in the form of senior loans. Because
the MUFG Group’s participation in these vehicles is only to provide a portion of senior financing, it does not
have the power to direct the activities that most significantly impact the economic performance of these entities.
Therefore, the MUFG Group is not considered as the primary beneficiary and does not consolidate these entities.
Repackaged Instruments
This category primarily comprises the following:
Investments in Financially-Engineered Products
The MUFG Group is involved in special purpose entities that have been established to issue financial
products through the engineering and repackaging of existing financial instruments such as collateralized debt
obligations (“CDOs”). These entities are considered as VIEs because the holders of the equity investment at risk
do not have the power to direct the activities that most significantly impact their economic performance. These
entities are generally arranged and managed by parties that are not related to the MUFG Group. The MUFG
Group’s involvement with the entities arranged and managed by third parties is for investment purposes. In these
cases, the MUFG Group participates as one of many other investors and the MUFG Group typically holds
investments in senior tranches or tranches with high credit ratings. Therefore, the MUFG Group does not have
the power to direct activities of the entities that most significantly impact the entities’ economic performance,
and thus is not considered as the primary beneficiary of these entities and does not consolidate these entities.
In certain instances, special purpose entities have been established and are managed by the MUFG Group.
The MUFG Group’s involvement includes establishing and arranging the transaction and underwriting securities
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issued by the entities to general investors. For these entities, the MUFG Group has the power to direct activities
that most significantly impact the economic performance and it has the obligation to absorb losses or receive
benefits that could potentially be significant to the entities. As such, the MUFG Group considers itself as the
primary beneficiary of these entities and consolidates them.
Investments in Securitized Financial Instruments
The MUFG Group holds investments in special purpose entities that issue securitized financial products.
The assets held by the entities include credit card receivables and residential mortgage loans. These entities are
established and managed by parties that are unrelated to the MUFG Group and the MUFG Group’s involvement
with these entities is for its own investment purposes. In all cases, the MUFG Group participates as one of many
other investors and the MUFG Group does not have the power to direct activities of the entities that most
significantly impact the entities’ economic performance. Therefore, the MUFG Group is not considered as the
primary beneficiary of these entities and does not consolidate them.
Securitization of the MUFG Group’s Assets
This category primarily comprises the following:
Securitization for issuing interests or financing
The MUFG Group establishes entities to securitize its own financial assets that include, among others,
corporate and retail loans and lease receivables. The entities used for securitization, which typically take the form
of a special purpose company or a trust, are established by the MUFG Group and, in most cases, issue senior and
subordinate interests or financing. After securitization, the MUFG Group typically continues to service
securitized assets as a servicer. The MUFG Group may also retain subordinate interests or financing or other
interests. The MUFG Group is considered as the primary beneficiary and consolidates the entities used for
securitization since it has the obligation to absorb losses through subordinate interests, and also has the power for
determining and implementing policies as servicer that give it the ability to manage the entities’ assets that
become delinquent or are in default in order to improve the economic performance of the entities.
Eligible beneficiary interests in housing loan trusts
The MUFG Group establishes trusts, which acquire the MUFG Group’s housing loans and in turn issue
beneficiary interests to the MUFG Group, to pledge these beneficiary interests as collateral for borrowings from
the Bank of Japan, as a result of the decision by the Bank of Japan on June 30, 2016 to accept these beneficial
interests as collateral in the same way as it does for Japanese national government bonds. The MUFG Group is
considered as the primary beneficiary and consolidates the trusts since it has the obligation to absorb losses
through beneficiary interests, and also has the power for determining and implementing policies as servicer that
give it the ability to manage housing loans owned by the trusts that become delinquent or are in default in order
to improve the economic performance of the trusts.
Trust Arrangements
The MUFG Group offers, primarily through Mitsubishi UFJ Trust and Banking, a variety of trust products
and services including securities investment trusts, pension trusts and trusts used as securitization vehicles. In a
typical trust arrangement, however, the MUFG Group manages and administers assets on behalf of the customers
in an agency, fiduciary and trust capacity and does not assume risks associated with the entrusted assets. The
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
trusts are generally considered as VIEs because the trust beneficiaries, who provide all of the equity at risk,
usually do not have power to direct the activities that most significantly impact its economic performance in the
arrangements. The MUFG Group, however, is not considered as the primary beneficiary, except for the case
mentioned below, because it merely receives fees for compensation for its services on terms that are customary
for these activities and the fees are insignificant relative to the total amount of the trusts’ economic performance
and variability. Therefore, the MUFG Group does not consolidate these entities.
With respect to the jointly operated designated money in trusts, Mitsubishi UFJ Trust and Banking pools
money from investors and determines how best to invest it. In addition, certain investors, such as money reserve
funds and investment funds, place excess funds in the jointly operated designated money trusts. Mitsubishi UFJ
Trust and Banking typically invests in high-quality financial assets, including government bonds, corporate
bonds and corporate loans including loans to Mitsubishi UFJ Trust and Banking and receives fees as
compensation for services. In this role as a sponsor of these trusts’ Mitsubishi UFJ Trust and Banking provides
guarantees under which it is required to compensate a loss on the stated principal of the trust beneficial interests.
Mitsubishi UFJ Trust and Banking is considered as the primary beneficiary of these trusts’ because it is exposed
to a potentially significant amount of losses and also has the power to direct activities of these trusts’ that most
significantly impact their economic performance. Upon consolidation of the trusts, the certificates issued to the
investors are accounted for as deposit liabilities as the products are structured and marketed to customers similar
to Mitsubishi UFJ Trust and Banking’s term deposit products.
Mitsubishi UFJ Trust and Banking considers the likelihood of incurring losses on the stated principal
guarantee to be highly remote. In the trusts’ operational history that extends over decades, the stated principal
guarantee has never been called upon. The variability in fair value of the net assets of the trusts has been
primarily affected by the fluctuations in interest rates, and the majority of such variability has been absorbed by
investors or trust beneficiaries.
Others
This category primarily comprises the following:
Financing Vehicles of the MUFG Group’s Customers
The MUFG Group is involved with several entities that are established by the MUFG Group’s customers.
These entities borrow funds from financial institutions and extend loans to their group entities. These entities
effectively work as fund-raising vehicles for their respective group entities and enable the groups to achieve
efficient financing by integrating their financing activities into a single entity. In all cases, the MUFG Group is
not considered as the primary beneficiary because the MUFG Group’s participation in these entities is only to
provide financing, and the customers effectively hold the power to direct activities of these entities that most
significantly impact the economic performance of the entities. Consequently, the MUFG Group does not
consolidate these entities.
Funding Vehicles
The MUFG Group has established several wholly-owned off-shore vehicles which issue securities, typically
preferred stock that is fully guaranteed by the MUFG Group, to investors unrelated to the MUFG Group to fund
purchases of debt instruments issued by the MUFG Group. These entities are considered as VIEs because the
MUFG Group’s investment in the vehicles’ equity is not considered at risk and substantive as the entire amount
raised by the vehicles was used to purchase debt instruments issued by the MUFG Group. Because the MUFG
Group does not have variable interests in these vehicles, the MUFG Group does not consolidate these entities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Troubled Borrowers
During the normal course of business, the borrowers from the MUFG Group may experience financial
difficulties and sometimes enter into certain transactions that require the MUFG Group to assess whether they
would be considered as VIEs due to their difficult financial position. While in most cases such borrowers are not
considered as VIEs when the transactions take place, in limited circumstances they are considered as VIEs due to
insufficient equity investment at risk. In all cases, the MUFG Group is not considered as the primary beneficiary
because the power to direct activities that most significantly impact the economic performance of the troubled
borrowers resides with the management of the troubled borrowers, and the MUFG Group, as a lender, does not
have power over or assume any role in management. Therefore, the MUFG Group does not consolidate these
troubled borrowers.
27. COMMITMENTS AND CONTINGENT LIABILITIES
Lease Commitments
The MUFG Group leases certain technology systems, office space and equipment under noncancelable
agreements which expire through the fiscal year 2048.
Future minimum rental commitments for noncancelable leases at March 31, 2019 were as follows:
Capital
leases
Operating
leases
(in millions)
Fiscal year ending March 31:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,573
5,957
4,739
3,287
1,672
3,104
¥ 94,422
81,431
68,416
56,471
50,571
271,031
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥25,332
¥622,342
Amount representing interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,797)
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,535
Total rental expense for the fiscal years ended March 31, 2017, 2018 and 2019 was ¥113,649 million,
¥119,208 million and ¥116,525million, respectively.
Repayment of Excess Interest
The Japanese government implemented regulatory reforms affecting the consumer lending industry. In
December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Act
Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates from 29.2% per annum to
20% per annum. The reduction in interest rates was implemented in June 2010. The regulatory reforms also
included amendments to the Money Lending Business Act which, effective June 18, 2010, abolished the
so-called “gray-zone interest.” Gray-zone interest refers to interest rates exceeding the limits stipulated by the
Interest Rate Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal).
Under the regulatory reforms, all interest rates for loans originated after this reform are subject to the lower limits
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imposed by the Interest Rate Restriction Act. Furthermore, the new regulations require stringent review
procedures for consumer finance companies before lending, and with the exception of certain provisions, one of
those new regulations introduces a limit on aggregate credit extensions to one-third of the borrower’s annual
income.
Formerly, consumer finance companies were able to charge interest rates exceeding the limits stipulated by
the Interest Rate Restriction Act so long as the payment was made voluntarily by the borrowers, and the lender
complied with various notice and other requirements. Accordingly, MUFG’s consumer finance subsidiaries and
equity method investees offered loans at interest rates above the Interest Rate Restriction Act. Upon the
implementation of the regulatory reforms in June 2010, they lowered the interest rates for loans originated after
this reform to below the Interest Rate Restriction Act.
In 2006, the Supreme Court of Japan passed decisions in a manner more favorable to borrowers requiring
reimbursement of previously paid interest exceeding the limits stipulated by the Interest Rate Restriction Act in
certain circumstances. Borrowers’ claims for reimbursement of excess interest arose after such decisions and
other regulatory changes. The MUFG Group maintains an allowance for repayment of excess interest based on an
analysis of past experience of reimbursement of excess interest, borrowers’ profile, recent trend of borrowers’
claims for reimbursement, and management future forecasts. Management believes that the provision for
repayment of excess interest is adequate and the allowance is at the appropriate amount to absorb probable
losses, so that the impact of future claims for reimbursement of excess interest will not have a material adverse
effect on the MUFG Group’s financial position and results of operations. The allowance for repayment of excess
interest established by MUFG’s consumer finance subsidiaries, which was included in Other liabilities, was
¥23,724 million and ¥24,983 million as of March 31, 2018 and 2019, respectively. Provision (reversal) related to
the allowance is included in Other non-interest expenses in the accompanying consolidated statements of income.
For the fiscal years ended March 31, 2017, 2018 and 2019, there was a negative impact of ¥56,911 million, nil
and ¥15,632 million, respectively, on Equity in earnings of equity method investees—net in the accompanying
consolidated statements of income.
Litigation
In the ordinary course of business, the MUFG Group is subject to various litigation and regulatory matters.
In accordance with applicable accounting guidance, the MUFG Group establishes an accrued liability for loss
contingencies arising from litigation and regulatory matters when they are determined to be probable in their
occurrence and the probable loss amount can be reasonably estimated. Based upon current knowledge and
consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters,
where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material
adverse effect on the MUFG Group’s financial position, results of operations or cash flows. Additionally,
management believes the amount of loss that is reasonably possible, but not probable, from various litigation and
regulatory matters is not material to the MUFG Group’s financial position, results of operations or cash flows.
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28. FEES AND COMMISSIONS INCOME
Disaggregation of Contract Revenue
Details of fees and commissions income for the fiscal years ended March 31, 2017, 2018 and 2019 were as
follows:
2017
2018
2019
Fees and commissions on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on remittances and transfers . . . . . . . . . . . . . .
Fees and commissions on foreign trading business . . . . . . . . . . . . . . .
Fees and commissions on credit card business . . . . . . . . . . . . . . . . . .
Fees and commissions on security-related services . . . . . . . . . . . . . . .
Fees and commissions on administration and management services
for investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on real estate business . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other fees and commissions(2)
¥
53,891
168,571
75,024
198,145
239,516
155,708
103,110
41,818
59,853
39,808
279,449
¥
(in millions)
53,483
¥
169,300
78,239
212,515
258,728
159,481
112,399
44,160
49,223
40,573
284,691
52,624
168,756
73,176
225,877
233,448
147,597
115,002
44,962
46,918
45,160
285,058
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,414,893
¥1,462,792
¥1,438,578
Notes:
(1) Guarantee fees are not within the scope of the guidance on revenue from contracts with customers.
(2) Other fees and commissions include non-refundable financing related fees that are not within the scope of the guidance on revenue from
contracts with customers.
The following is an explanation of the relationship with revenue information disclosed for each reportable
segment.
These revenues from contracts with customers are related to various reportable segments disclosed in
Note 30. The business segment information is derived from the internal management reporting system used by
management to measure the performance of the MUFG Group’s business segments. In addition, the business
segment information is primarily based on the financial information prepared in accordance with accounting
principles generally accepted in Japan as adjusted in accordance with internal management accounting rules and
practices. Further, the format and information as disclosed in Note 30 are not consistent with the accompanying
consolidated financial statements prepared on the basis of U.S. GAAP. For example, management does not use
information on segments’ gross revenue to allocate resources and assess performance.
The majority of fees and commissions on deposits are from the business activities relevant to Retail &
Commercial Banking Business Group (“R&C”), with Global Commercial Banking Group (“GCB”) providing a
smaller impact.
The business activities relevant to fees and commissions on remittances and transfers are attributable to
R&C, Japanese Corporate Investment Banking Group (“JCIB”), Global Corporate Investment Banking Group
(“GCIB”), and GCB with no significant concentration in any particular segments.
The business activities relevant to fees and commissions on foreign trading business are attributable to
R&C, JCIB, GCIB, and GCB with no significant concentration in any particular segments.
F-133
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The business activities relevant to fees and commissions on credit card business are substantially
attributable to R&C.
The majority of fees and commissions on security-related services are from the business activities relevant
to R&C, with JCIB and GCIB providing a smaller impact.
The business activities relevant to fees and commissions on administration and management services for
investment funds are substantially attributable to Asset Management & Investor Service Business Group
(“AM/IS”).
The business activities relevant to trust fees are attributable to R&C, JCIB, and AM/IS with no significant
concentration in any particular segments.
The majority of insurance commissions are from the business activities relevant to R&C, with GCB
providing a smaller impact.
The business activities relevant to fees and commissions on real estate business are attributable to R&C and
JCIB with no significant concentration in any particular segments.
Contract Balances
Contract balances are recognized in the consolidated balance sheets in accordance with the definition of
receivables and contract liabilities specified in the guidance on revenue from contracts with customers.
Receivables include receivables for which the services are completed, and accrued income which represents the
amount of consideration unpaid for the performance obligations that have been fulfilled pursuant to certain
contracts under which the services are continuously provided. Contract liabilities include unearned revenue
which represents the amount of consideration received for the performance obligations that have not been
fulfilled pursuant to certain contracts under which the services are continuously provided.
As of March 31, 2019, receivables from contracts with customers of ¥185 billion were included primarily in
Other assets, and contract liabilities of ¥8 billion were included in Other liabilities.
29. TRADING ACCOUNT PROFITS AND LOSSES
The MUFG Group performs trading activities through market-making, sales and arbitrage, while
maintaining risk levels within appropriate limits in accordance with its risk management policy.
The MUFG Group has trading account securities and trading derivative assets and liabilities for this
purpose. In addition, the trading account securities include foreign currency-denominated debt securities such as
foreign government or official institution bonds, corporate bonds and mortgage-backed securities, which are
mainly comprised of securities measured at fair value under the fair value option.
F-134
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net trading gains (losses) for the fiscal years ended March 31, 2017, 2018 and 2019 were comprised of the
following:
Interest rate and other derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities, excluding derivatives . . . . . . . . . . . . . . . . . . . . .
2017
2018
2019
(in millions)
¥(325,007) ¥(226,788) ¥ (24,031)
192,931
153,674
(314,177)
Trading account profits (losses)—net
Foreign exchange derivative contracts(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(639,184)
(183,159)
(73,114)
(159,986)
168,900
(354,401)
Net trading losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(822,343) ¥(233,100) ¥(185,501)
Note:
(1) Losses on foreign exchange derivative contracts are included in Foreign exchange losses—net in the accompanying consolidated
statements of income. Foreign exchange losses—net in the accompanying consolidated statements of income are also comprised of
foreign exchange gains other than derivative contracts and foreign exchange losses related to the fair value option.
For further information on the methodologies and assumptions used to estimate fair value, see Note 32,
which also shows fair values of trading account securities by major category. Note 24 discloses further
information regarding the derivative-related impact on Trading account profits (losses)—net by major category.
30. BUSINESS SEGMENTS
The reportable segments of the MUFG Group are subject to the periodical review by the Executive
Committee, which represents the MUFG Group’s chief operating decision maker, to determine the allocation of
management resources and assess performance. The MUFG Group has established its business units according to
the characteristics of customers and the nature of the underlying business. Each business unit engages in business
activities based on comprehensive strategies developed for and aimed at respective targeted customers and
businesses. The business segment information is primarily based on the financial information prepared in
accordance with accounting principles generally accepted in Japan as adjusted in accordance with internal
management accounting rules and practices. Accordingly, the format and information are not consistent with the
accompanying consolidated financial statements prepared on the basis of U.S. GAAP. A reconciliation is
provided for the total amounts of segments’ operating profit with income before income tax expense under
U.S. GAAP.
See Note 31 for financial information relating to the MUFG Group’s operations by geographic area. The
geographic financial information is consistent with the basis of the accompanying consolidated financial
statements.
Effective April 1, 2018, the MUFG Group reorganized its business groups in an effort to further integrate
the expertise and capabilities of its consolidated subsidiaries to respond to the needs of customers more
effectively and efficiently, as part of its current medium-term business plan. To make and execute unified group-
wide strategies based on customer characteristics and the nature of business, the MUFG Group integrated the
operations of its consolidated subsidiaries into six business segments.—Retail & Commercial Banking, Japanese
Corporate & Investment Banking, Global Corporate & Investment Banking, Global Commercial Banking, Asset
Management & Investor Services, and Global Markets.
The following is a brief explanation of the MUFG Group’s business segments:
Retail & Commercial Banking Business Group—Covers the domestic retail and commercial banking
businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi
F-135
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
UFJ NICOS and other group companies of MUFG. This business group offers retail and small and medium-sized
enterprise customers in Japan an extensive array of commercial banking, trust banking and securities products
and services.
Japanese Corporate & Investment Banking Business Group—Covers the large Japanese corporate
businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings,
including the transaction banking, investment banking, trust banking and securities businesses. This business
group offers large Japanese corporations advanced financial solutions designed to respond to their diversified and
globalized needs and to contribute to their business and financial strategies through the global network of the
MUFG group companies.
Global Corporate & Investment Banking Business Group—Covers the global corporate, investment and
transaction banking businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings. Through a global
network of offices and branches, this business group provides non-Japanese large corporate and financial
institution customers with a comprehensive set of solutions that meet their increasingly diverse and sophisticated
financing needs.
Global Commercial Banking Business Group—Covers the retail and commercial banking businesses of
MUFG Union Bank and Krungsri. This business group offers a comprehensive array of financial products and
services such as loans, deposits, fund transfers, investments and asset management services for local retail, small
and medium-sized enterprise, and corporate customers across the Asia-Pacific region.
Asset Management & Investor Services Business Group—Covers the asset management and asset
administration businesses of Mitsubishi UFJ Trust and Banking and MUFG Bank. By integrating the trust
banking expertise of Mitsubishi UFJ Trust and Banking and the global strengths of MUFG Bank, the business
group offers a full range of asset management and administration services for corporations and pension funds,
including pension fund management and administration, advice on pension structures, and payments to
beneficiaries, and also offer investment trusts for retail customers.
Global Markets Business Group—Covers the customer business and the treasury operations of MUFG
Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings. The customer business
includes sales and trading in fixed income instruments, currencies and equities as well as other investment
products, and origination and distribution of financial products. The treasury operations include asset and liability
management as well as global investments for the MUFG Group.
Other—Consists mainly of the corporate centers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and
Banking and Mitsubishi UFJ Morgan Stanley Securities. The elimination of duplicated amounts of net revenues
among business segments was also reflected in Other.
Management does not use information on segments’ total assets to allocate resources and assess
performance. Accordingly, business segment information on total assets is not presented.
F-136
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Prior period business segment information has been restated to enable comparison between the relevant
amounts for the fiscal years ended March 31, 2017, 2018 and 2019.
Customer Business
Retail &
Commercial
Banking
Business
Group
Japanese
Corporate &
Investment
Banking
Business
Group
Global
Corporate &
Investment
Banking
Business
Group
Global
Commercial
Banking
Business
Group
Asset
Management
& Investor
Services
Business
Group
Global
Markets
Business
Group Other
Total
Total(1)
(in billions)
Fiscal year ended
March 31, 2017:
Net revenue: . . . . . . . . . . .
BK and TB(2): . . . . . .
Net interest
¥1,568.0
817.0
¥527.1
446.9
income . . . . .
Net fees . . . . . .
Other . . . . . . . .
482.0
300.6
34.4
Other than BK
and TB . . . . . . . . .
Operating expenses . . . . .
751.0
1,234.1
143.8
245.0
58.1
80.2
290.0
Operating profit (loss) . . .
¥ 333.9
¥237.1
Fiscal year ended
March 31, 2018:
Net revenue: . . . . . . . . . . .
BK and TB(2): . . . . . .
Net interest
¥1,584.3
785.9
¥522.6
439.8
income . . . . .
Net fees . . . . . .
Other . . . . . . . .
465.8
288.4
31.7
Other than BK
and TB . . . . . . . . .
Operating expenses . . . . .
798.4
1,227.6
150.7
233.2
55.9
82.8
295.6
Operating profit (loss) . . .
¥ 356.7
¥227.0
Fiscal year ended
March 31, 2019:
Net revenue: . . . . . . . . . . .
BK and TB(2): . . . . . .
Net interest
¥1,521.6
738.6
¥541.5
421.6
income . . . . .
Net fees . . . . . .
Other . . . . . . . .
460.4
243.9
34.3
Other than BK
and TB . . . . . . . . .
Operating expenses . . . . .
783.0
1,222.8
152.1
213.1
56.4
119.9
291.8
Operating profit (loss) . . .
¥ 298.8
¥249.7
¥418.3
275.6
107.3
177.3
(9.0)
142.7
236.0
¥182.3
¥378.6
246.3
95.2
153.1
(2.0)
132.3
242.8
¥135.8
¥399.7
266.6
113.6
152.4
0.6
133.1
247.0
¥152.7
¥628.6
(1.8)
¥176.7
72.7
¥3,318.7
1,610.4
¥686.8
491.5
¥ 56.3 ¥4,061.8
2,190.5
88.6
(1.7)
—
(0.1)
630.4
435.8
¥192.8
—
72.7
—
104.0
114.7
731.4
795.6
83.4
291.0
(8.2)
208.7
199.4
(98.8)
(12.0)
1,221.8
688.6
280.1
1,708.3
2,310.6
195.3
217.4
(32.3)
162.3
1,871.3
2,690.3
¥ 62.0
¥1,008.1
¥469.4
¥(106.0) ¥1,371.5
¥666.3
(3.5)
¥190.4
83.8
¥3,342.2
1,552.3
¥565.2
368.6
¥ 10.7 ¥3,918.1
2,029.9
109.0
(3.4)
—
(0.1)
669.8
463.6
¥202.7
—
83.8
—
106.6
119.4
708.3
758.5
85.5
182.0
(12.2)
198.8
229.4
(79.1)
(41.3)
1,119.7
667.2
243.0
1,789.9
2,349.0
196.6
225.7
(98.3)
142.8
1,888.2
2,717.5
¥ 71.0
¥ 993.2
¥339.5
¥(132.1) ¥1,200.6
¥706.9
(1.4)
¥203.0
93.2
¥3,372.7
1,518.6
¥472.5
303.9
¥ (32.8) ¥3,812.4
1,861.0
38.5
(1.4)
—
—
708.3
486.5
¥220.4
—
93.2
—
109.8
124.6
724.7
702.6
91.3
183.1
(14.2)
135.0
237.4
(67.5)
(131.4)
1,145.2
620.9
94.9
1,854.1
2,372.7
168.6
221.3
(71.3)
146.1
1,951.4
2,740.1
¥ 78.4
¥1,000.0
¥251.2
¥(178.9) ¥1,072.3
Notes:
(1) Prior period business segment information has been restated to reflect the transfer of corporate loan-related businesses of Mitsubishi UFJ
Trust and Banking to MUFG Bank. In accordance with internal management accounting rules and practices, the transfer resulted in a
decrease of the total operating profit by ¥24.3 billion and ¥23.5 billion for fiscal years ended March 31, 2017 and 2018, respectively.
(2) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
F-137
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Reconciliation
As set forth above, the measurement basis and the income and expense items of the internal management
reporting system are different from the accompanying consolidated statements of income. Therefore, it is
impracticable to present reconciliations of all of the business segments’ information, other than operating profit,
to corresponding items in the accompanying consolidated statements of income.
A reconciliation of operating profit under the internal management reporting system for the fiscal years
ended March 31, 2017, 2018 and 2019 above to income before income tax expense shown in the accompanying
consolidated statements of income is as follows:
Operating profit: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of (provision for) credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account profits (losses)—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment securities gains (losses)—net . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt investment securities gains (losses)—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses)—net
Equity in earnings of equity method investees—net . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of (provision for) off-balance sheet credit instruments . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net
2017
2018
2019
¥1,372
(254)
(880)
181
48
(110)
198
(7)
(6)
(107)
(162)
(in billions)
¥1,201
241
(287)
215
71
7
228
—
(22)
96
(88)
¥1,072
(34)
182
(305)
(3)
47
210
—
(118)
(38)
(142)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 273
¥1,662
¥ 871
31. FOREIGN ACTIVITIES
Foreign operations include the business conducted by overseas offices, as well as international business
conducted from domestic offices, principally several international banking-related divisions of MUFG Bank’s
and Mitsubishi UFJ Trust and Banking’s head office in Tokyo, and involve various transactions with debtors and
customers residing outside Japan. Close integration of the MUFG Group’s foreign and domestic activities makes
precise estimates of the amounts of assets, liabilities, income and expenses attributable to foreign operations
difficult and necessarily subjective. Assets, income and expenses attributable to foreign operations are allocated
to geographical areas based on the domicile of the debtors and customers.
F-138
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Generally, interest rates with respect to funds borrowed and loaned between domestic and foreign operations
are based on prevailing money market rates appropriate for the transactions. In general, the MUFG Group has
allocated all direct expenses and a proportionate share of general and administrative expenses to income derived
from foreign loans and other transactions by the MUFG Group’s foreign operations. The following table sets
forth estimated total assets at March 31, 2017, 2018 and 2019, and estimated total revenue, total expense, income
(loss) before income tax expense (benefit) and net income (loss) attributable to Mitsubishi UFJ Financial Group
for the respective fiscal years then ended:
Domestic
Japan
Foreign
Total
United
States of
America
Asia/Oceania
excluding
Japan
Other
areas(1)
Europe
(in millions)
1,903,336 ¥
2,345,731
749,513 ¥
677,548
330,751 ¥
138,128
818,917 ¥
582,665
384,956 ¥
170,858
4,187,473
3,914,930
(442,395)
71,965
192,623
236,252
214,098
272,543
(365,734)
119,189
216,584
102,803
129,838
202,680
191,305,636
46,053,230
23,821,920
25,255,955
10,748,278
297,185,019
2,127,278 ¥ 1,337,529 ¥
1,687,344
843,885
506,211 ¥
173,665
779,983 ¥
651,125
443,106 ¥ 5,194,107
3,532,288
176,269
Fiscal year ended March 31, 2017:
Total revenue(2) . . . . . . . . . . . . . ¥
Total expense(3) . . . . . . . . . . . . .
Income (loss) before income tax
expense (benefit) . . . . . . . . . .
Net income (loss) attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . .
Total assets at end of fiscal
year . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2018:
Total revenue(2) . . . . . . . . . . . . . ¥
Total expense(3) . . . . . . . . . . . . .
Income before income tax
expense . . . . . . . . . . . . . . . . .
439,934
493,644
332,546
128,858
266,837
1,661,819
Net income attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . .
Total assets at end of fiscal
year . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2019:
Total revenue(2) . . . . . . . . . . . . . ¥
Total expense(3) . . . . . . . . . . . . .
Income (loss) before income tax
expense (benefit) . . . . . . . . . .
Net income (loss) attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . .
Total assets at end of fiscal
140,091
447,887
322,581
92,016
225,585
1,228,160
196,121,542
44,831,664
22,342,574
27,163,121
10,111,411
300,570,312
1,886,469 ¥ 1,637,569 ¥
2,204,147
1,012,978
222,267 ¥ 1,157,946 ¥
173,934
892,729
504,372 ¥
253,993
5,408,623
4,537,781
(317,678)
624,591
48,333
265,217
250,379
870,842
(345,148)
573,698
50,877
214,582
224,636
718,645
year . . . . . . . . . . . . . . . . . . . .
194,070,495
49,987,389
21,535,278
27,992,986
11,642,751
305,228,899
Notes:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
(2) Total revenue is comprised of Interest income and Non-interest income.
(3) Total expense is comprised of Interest expense, Provision for (reversal of) credit losses and Non-interest expense.
F-139
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is an analysis of certain asset and liability accounts related to foreign activities at March 31,
2018 and 2019:
2018
2019
(in millions)
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,816,704
8,560,283
¥
828,839
8,453,191
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,376,987
¥ 9,282,030
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥23,904,678
¥26,991,984
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,692,969
¥ 8,779,340
Loans—net of unearned income, unamortized premiums and deferred loan fees . . .
¥51,339,696
¥51,678,674
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥45,818,648
¥49,044,234
Funds borrowed:
Call money, funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under securities lending transactions . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
¥
355,666
8,181,347
276,563
5,152,667
2,223,246
¥
67,246
9,459,547
47,886
5,107,832
2,697,463
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥16,189,489
¥17,379,974
Trading account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,251,049
¥ 3,897,844
32. FAIR VALUE
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The guidance on fair value
measurements also specifies a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in
active markets and the lowest priority to unobservable inputs, for example, the reporting entity’s own data. Based
on the observability of the inputs used in the valuation techniques, the following three-level hierarchy is specified
by the guidance:
‰
‰
‰
Level 1—Unadjusted quoted prices for identical instruments in active markets.
Level 2—Observable inputs other than Level 1 prices for substantially the full term of the instruments,
such as quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; other inputs that are observable; or market-corroborated
inputs.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the instruments.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.
The MUFG Group has an established and documented process for determining fair values in accordance
with the guidance. When available, quoted prices are used to determine fair value. If quoted prices are not
F-140
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
available, fair value is based upon valuation techniques that use observable or unobservable inputs. The fair
values of liabilities are determined by discounting future cash flows at a rate which incorporates the MUFG
Group’s own creditworthiness. In addition, valuation adjustments may be made to ensure the financial
instruments are recorded at fair value. These adjustments include, but are not limited to, amounts that reflect
counterparty credit quality, funding cost, liquidity risk and model risk.
The following section describes the valuation techniques used by the MUFG Group to measure fair values
of certain financial instruments. The discussion includes the general classification of such financial instruments
in accordance with the fair value hierarchy, a brief explanation of the valuation techniques, the significant inputs
to those valuation techniques, and any additional significant assumptions.
Trading Account Assets and Liabilities—Trading Account Securities
When quoted prices are available in an active market, the MUFG Group uses quoted prices to measure the
fair values of securities and such securities are classified in Level 1 of the fair value hierarchy. Examples of
Level 1 securities include certain Japanese and foreign government bonds, and marketable equity securities.
When quoted prices are available but the securities are not traded in active markets, such securities are
classified in Level 2 of the fair value hierarchy. These securities include certain Japanese government agency
bonds, Japanese prefectural and municipal bonds, foreign government and official institution bonds, corporate
bonds, residential mortgage-backed securities and equity securities.
As for quoted prices provided by third-party vendors, independent price verification is performed by the
MUFG group to determine the quality and reliability of the data for fair value measurement purposes. As part of
its independent price verification procedures, the MUFG group obtains a sufficient understanding of the vendors’
pricing sources and valuation processes. Further, the MUFG group performs internal price verification
procedures to ensure that the quoted prices provided from the third-party vendors are reasonable. Such
verification procedures include comparison of pricing sources and analysis of variances beyond certain
thresholds.
When quoted prices are not available, the MUFG Group estimates fair values by using an internal model,
quoted prices of securities with similar characteristics or non-binding prices obtained from independent third
parties. Such securities include certain commercial paper, corporate bonds, asset-backed securities and residential
mortgage-backed securities. For commercial paper, the MUFG Group estimates fair value using discounted cash
flows. The cash flows are estimated in accordance with the terms of contracts and discounted using a discount
rate based on the yield curve estimated from market interest rates appropriate to the securities. Commercial paper
is generally classified in Level 2 of the fair value hierarchy. For corporate bonds, the MUFG Group estimates fair
value using discounted cash flows. The cash flows are estimated in accordance with the terms of contracts and
discounted using discount rates applicable to the maturity of the bonds, which are adjusted to reflect credit risk of
issuers. Credit risk of issuers is reflected in the future cash flows being discounted by the interest rate applicable
to the maturity of the bonds. Corporate bonds are classified in either Level 2 or Level 3 of the fair value
hierarchy, depending primarily on the significance of the adjustments to the unobservable input of credit
worthiness. For residential mortgage-backed securities, the MUFG Group estimates fair value using non-binding
prices obtained from independent third parties. Residential mortgage-backed securities are classified as level 2
unless otherwise significant unobservable input is used for the valuation.
When there is less liquidity for securities or significant inputs used in the fair value measurements are
unobservable, such securities are classified in Level 3 of the fair value hierarchy. Examples of such Level 3
securities include CLOs backed by general corporate loans, which are classified in asset-backed securities. The
F-141
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
fair value of CLOs is measured by weighing the estimated fair value amounts from the internal model and the
non-binding quotes from the independent broker-dealers. The weight of the quotes from independent broker-
dealers is determined based on the result of inquiries with the broker-dealers to understand their basis of fair
value calculation with consideration given to transaction volume. Key inputs to the internal model include
projected cash flows through an analysis of underlying loans, probability of default which incorporates market
indices such as LCDX (which is an index of loan credit default swaps), prepayment rates and discount rates
reflecting liquidity premiums based on historical market data.
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives valued using quoted prices are classified in Level 1 of the fair value hierarchy.
Examples of Level 1 derivatives include stock futures index and interest rate futures. However, the majority of
the derivative contracts entered into by the MUFG Group are traded over-the-counter and valued using valuation
techniques as there are no quoted prices for such derivatives. The valuation techniques and inputs vary depending
on the types and contractual terms of the derivatives. The principal valuation techniques used to value derivatives
include discounted cash flows, the Black-Scholes model and the Hull-White model. The key inputs include
interest rate yield curve, foreign currency exchange rate, volatility, credit quality of the counterparty or the
MUFG Group and spot price of the underlying. These models are commonly accepted in the financial industry
and key inputs to the models are generally readily observable in an active market. Derivatives valued using such
valuation techniques and inputs are generally classified in Level 2 of the fair value hierarchy. Examples of such
Level 2 derivatives include plain-vanilla interest rate swaps, foreign currency forward contracts and currency
option contracts.
Derivatives that are valued using valuation techniques with significant unobservable inputs are classified in
Level 3 of the fair value hierarchy. Examples of Level 3 derivatives include long-term interest rate or currency
swaps and certain credit derivatives, where significant inputs such as volatility, credit curves and correlation of
such inputs are unobservable.
Investment Securities
Investment securities include Available-for-sale debt and equity securities, whose fair values are measured
using the same valuation techniques as the trading account securities described above. Investment securities also
include investments in nonmarketable equity securities which are subject to specialized industry accounting
principles. The valuation of such nonmarketable equity securities involves significant management judgment due
to the absence of quoted prices, lack of liquidity and the long term nature of these investments. Further, there
may be restriction on transfers of nonmarketable equity securities. The MUFG Group values such securities
initially at transaction price and subsequently adjusts such valuations, considering evidence such as current sales
transactions of similar securities, initial public offerings, recent equity issuances and change in financial
condition of the investee company. Nonmarketable equity securities are included in Level 3 of the fair value
hierarchy.
Other Assets
Other assets measured at fair value mainly consist of securities received as collateral that may be sold or
repledged under securities lending transactions, money in trust for segregating cash deposited by customers on
security transactions and derivatives designated as hedging instruments. The securities received as collateral
under lending transactions mainly consist of certain Japanese and foreign government bonds which are valued
using the valuation techniques previously described in the section entitled “Trading Accounts Assets and
Liabilities—Trading Account Securities” above.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Money in trust for segregating cash deposited by customers on security transactions mainly consists of
certain Japanese government bonds which are valued using the valuation techniques described in the “Trading
Account Assets and Liabilities—Trading Account Securities” above and is included in Level 1 or Level 2 of the
fair value hierarchy depending on the component assets.
The fair values of derivatives designated as hedging instruments are measured using the valuation
techniques described in the “Trading Account Assets and Liabilities—Derivatives” above.
Obligations to Return Securities Received as Collateral
Obligations to return securities received as collateral under securities lending transactions are measured at
the fair values of the securities received as collateral. The securities received as collateral consist primarily of
certain Japanese and foreign government bonds, whose fair values are measured using the valuation techniques
described in the “Trading Account Assets and Liabilities—Trading Account Securities” above.
Other Short-term Borrowings and Long-term Debt
Certain short-term borrowings and long-term debt are measured at fair value due to the election of the fair
value option. The fair value of these instruments are measured principally based on the discounted cash flows.
Where the inputs into the valuation techniques are mainly based on observable inputs, these instruments are
classified in Level 2 of the fair value hierarchy. Where significant inputs are unobservable, they are classified in
Level 3 of the fair value hierarchy.
Market Valuation Adjustments
Counterparty credit risk adjustments are made to certain financial assets such as over-the-counter
derivatives to factor in counterparty credit exposure. As not all counterparties have the same credit risk, it is
necessary in calculating credit risk adjustments, to take into account probability of a default event occurring for
each counterparty, which is primarily derived from observed or estimated spreads on credit default swaps. In
addition, the counterparty credit risk adjustment takes into account the effect of credit risk mitigation such as
pledged collateral and the legal right of offset with the counterparty.
Funding valuation adjustment (“FVA”) represents the adjustment to reflect the impact of uncollateralized
funding. The FVA is calculated using the MUFG’s market funding spread and the funding exposure of any
uncollateralized component of the over-the-counter derivative instrument. The MUFG Group’s FVA framework
incorporates key inputs, such as the expected future funding requirements arising from the MUFG Group’s
positions with each counterparty and collateral arrangements, and the estimated market funding cost in the
principal market, which considers the MUFG Group’s credit risk.
Liquidity adjustments are applied mainly to the instruments classified in Level 3 of the fair value hierarchy
when recent observable prices of such instruments are not available or such instruments are traded in inactive or
less active markets. The liquidity adjustments are based on the facts and circumstances of the markets including
the availability of external quotes and the time since the latest available quote.
Model valuation adjustments such as unobservable parameter valuation adjustments may be provided when
the fair values of instruments are determined based on internally developed valuation techniques. Examples of
such adjustments include adjustments to the model price of certain derivatives where parameters such as
correlation are unobservable. Unobservable parameter valuation adjustments are applied to mitigate the
uncertainty inherent in the resulting valuation estimate.
F-143
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investments in Certain Entities That Calculate Net Asset Value per Share
The MUFG Group has interests in investment funds mainly private equity funds, and real estate funds that
are measured at fair value on a recurring or nonrecurring basis.
Private equity funds have specific investment objectives in connection with their acquisition of equity
interests, such as providing financing and other support to start-up businesses, medium and small entities in a
particular geographical area, and to companies with certain technology or companies in a high-growth industry.
Generally, these investments cannot be redeemed with the funds, and the return of invested capital and its gains
are derived from distributions received upon the liquidation of the underlying assets of the fund, the timing of
which is uncertain.
Real estate funds invest globally and primarily in real estate companies, debt recapitalizations and direct
property. These investments are generally not redeemable with the funds. Distributions from each fund will be
received as the underlying investments of the funds are liquidated, the timing of which is uncertain.
F-144
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the financial instruments carried at fair value by level within the fair value
hierarchy as of March 31, 2018 and 2019:
At March 31, 2018
Assets
Trading account assets:
Level 1
Level 2
Level 3
Fair Value
(in millions)
Trading securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,876,424
¥10,876,080
¥ 827,493
¥22,579,997
Debt securities
Japanese national government and Japanese government
agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . .
Foreign government and official institution bonds . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,388,143
—
8,190,781
—
—
—
—
—
1,297,500
71,175
3,320
1,890
65,965
—
—
477,530
189,756
469,342
3,255,503
4,432,307
186,351
2,800
1,210,775
651,716
12,420,100
8,681,427
3,543,413
118,351
6,239
70,670
—
—
1,047
23,092
41,141
684,637
33,450
—
44,126
93,900
27,092
12,118
22,994
30,753
943
1,865,673
189,756
8,661,170
3,278,595
4,473,448
870,988
36,250
1,210,775
1,993,342
12,585,175
8,711,839
3,557,421
207,310
36,992
71,613
Investment securities:
Available-for-sale debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,105,682
9,376,772
350,660
32,833,114
Japanese national government and Japanese government agency
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . . . . . .
Foreign government and official institution bonds . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonmarketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(3)(4)
21,522,128
—
1,583,554
—
—
—
—
—
6,255,413
6,255,413
—
955,548
3,045,776
1,537,431
567,946
1,113,323
1,617,520
92,806
1,397,177
4,793
416,171
416,171
—
93,042
— 24,567,904
1,537,431
—
2,171,692
20,192
1,119,360
6,037
1,617,535
15
95,236
2,430
1,558,349
161,172
165,607
160,814
6,699,943
28,359
6,671,584
—
28,359
28,359
1,057,250
8,660
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,264,242
¥33,182,165
¥1,309,072
¥75,755,479
Liabilities
Trading account liabilities:
Trading securities sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation to return securities received as collateral
. . . . . . . . . . . . . . . . . . .
Others(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
208,354
80,673
3,085
2,058
75,530
—
—
3,030,974
—
¥
7,060
11,844,463
8,659,042
2,992,812
117,572
4,362
70,675
145,988
507,700
¥
— ¥
81,781
12,496
5,382
33,679
30,070
154
—
(25,528)
215,414
12,006,917
8,674,623
3,000,252
226,781
34,432
70,829
3,176,962
482,172
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,320,001
¥12,505,211
¥
56,253
¥15,881,465
F-145
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019
Assets
Trading account assets:
Level 1
Level 2
Level 3
Fair Value
(in millions)
Trading securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12,821,328
¥13,725,079
¥ 785,326
¥27,331,733
Debt securities
Japanese national government and Japanese government
agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . .
Foreign government and official institution bonds . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,117,841
—
9,264,028
—
—
—
—
—
1,439,459
63,582
23,430
1,115
39,037
—
—
512,134
117,799
454,365
3,203,585
7,038,353
253,274
747
1,473,693
671,129
13,047,590
10,067,719
2,771,115
139,666
3,727
65,363
—
—
792
31,384
35,181
627,678
35,148
—
55,143
93,313
17,307
22,861
9,000
25,684
18,461
2,629,975
117,799
9,719,185
3,234,969
7,073,534
880,952
35,895
1,473,693
2,165,731
13,204,485
10,108,456
2,795,091
187,703
29,411
83,824
Investment securities:
Available-for-sale debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,550,086
10,684,983
283,434
33,518,503
Japanese national government and Japanese government agency
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . . . . . .
Foreign government and official institution bonds . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Nonmarketable equity securities(7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(3)(4)
20,635,872
—
1,914,214
—
—
—
—
—
5,982,629
5,982,629
—
807,193
3,441,824
2,226,566
707,959
1,126,535
1,615,336
128,917
1,371,467
66,379
375,914
375,914
—
42,184
— 24,077,696
2,226,566
—
2,641,419
19,246
1,130,731
4,196
1,615,351
15
130,955
2,038
1,502,922
131,455
192,863
126,484
6,386,363
27,820
6,358,543
—
27,820
27,820
881,755
32,378
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥42,224,818
¥37,875,750
¥1,222,271
¥81,322,839
Liabilities
Trading account liabilities:
Trading securities sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation to return securities received as collateral
. . . . . . . . . . . . . . . . . . .
Others(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
157,114
88,329
35,179
2,633
50,517
—
—
2,912,355
—
¥
5,796
12,701,110
9,839,618
2,663,347
126,737
2,916
68,492
174,671
426,368
¥
— ¥
57,143
21,496
4,670
6,138
24,735
104
—
65,648
162,910
12,846,582
9,896,293
2,670,650
183,392
27,651
68,596
3,087,026
492,016
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,157,798
¥13,307,945
¥ 122,791
¥16,588,534
Notes:
(1)
(2) Excludes certain investments valued at net asset value of private equity funds whose fair values were ¥21,517 million and
Includes securities measured under the fair value option.
¥40,400 million at March 31, 2018 and 2019, respectively. The amounts of unfunded commitments related to these private equity funds
were ¥61,463 million and ¥94,483 million at March 31, 2018 and 2019, respectively.
F-146
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(3) Mainly comprises securities received as collateral that may be sold or repledged under securities lending transactions, money in trust for
segregating cash deposited by customers on security transactions and derivative assets designated as hedging instruments.
(4) Excludes certain investments valued at net asset value of private equity funds, whose fair values at March 31, 2018 was ¥35 million, and
those at March 31, 2019 was nil, respectively. There was no amount of unfunded commitments related to these private equity funds at
March 31, 2018 and 2019.
Includes other short-term borrowings, long-term debt, bifurcated embedded derivatives carried at fair value and derivative liabilities
designated as hedging instruments.
(5)
(6) The table above reflects changes in presentation that were made to equity investment securities at March 31, 2018. See Note 1 for further
information.
(7) Excludes certain investments valued at net asset value of real estate funds and private funds, whose fair values at March 31, 2019 were
¥17,583 million, and ¥9,921 million, respectively. The amounts of unfunded commitments related to these real estate funds and private
funds at March 31, 2019 were ¥2,054 million, and nil, respectively.
F-147
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in Level 3 Recurring Fair Value Measurements
The following tables present a reconciliation of the assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) during the fiscal years ended March 31, 2018 and
2019. The determination to classify a financial instrument within Level 3 is based upon the significance of the
unobservable inputs to overall fair value measurement. However, Level 3 financial instruments typically include,
in addition to the unobservable or Level 3 input, observable inputs (inputs that are actively quoted and can be
validated to external sources). Accordingly, the gains and losses in the tables below include changes in fair value
due in part to observable inputs used in the valuation techniques.
Total gains (losses)
for the period
March 31,
2017
Included
in
earnings
Included
in other
comprehensive
income
Purchases
Issues
Sales
Settlements
(in millions)
Transfers
into
Level 3
Transfers
out of
Level 3
March 31,
2018
Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2018
Assets
Trading account assets:
Trading securities(1) . . . . . . . . . . . ¥ 799,493 ¥(25,944)(2)
¥
—
¥ 702,402 ¥ — ¥(281,927) ¥(376,333)
¥34,986
¥(25,184)
¥ 827,493
¥(26,391)(2)
Debt securities
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . .
Foreign government and
official institution
bonds . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . .
Residential mortgage-
backed securities . . . . . . .
Asset-backed securities . . . .
Other debt securities . . . . . .
Equity securities . . . . . . . . . . .
Trading derivatives—net . . . . . . .
Interest rate contracts—net
. . .
Foreign exchange
contracts—net
Equity contracts—net
Commodity contracts—net
Credit derivatives—net
. . . . . . . . . . .
. . . . . . .
. . .
. . . . . .
Investment securities:
Available-for-sale debt
securities . . . . . . . . . . . . . . . . .
Foreign government and
official institution bonds . . .
Corporate bonds . . . . . . . . . . . .
Residential mortgage-backed
—
(4)
1,836
25,521
720
(6,424)
47,914
654,814
35,552
33,856
37,245
28,551
1,014
(21,124)
(2,102)
1,976
3,912(2)
(4,730)
14,858
(6,312)
370
(222)
(2,434)
12,518
30
(1,472)
—
—
—
—
—
—
—
520
(42)
294
272
(4)
—
1,079
—
—
—
—
(1,075)
—
—
107,685
3,170
—
576,668
—
13,800
1,367
—
— (107,157)
(533)
—
(1,064)
(10,391)
—
34,885(5)
(973)
(23,136)(5)
1,047
23,092
(2)
(6,377)
—
—
— (172,324)
—
—
(1,913)
—
—
(1,518)
—
—
26
687
654
—
—
(1,154)
(364)
—
—
—
—
—
(7,787)
(353,397)
—
(3,694)
(23,699)
(8,810)
(67)
(17,302)
(3)
2,483
—
—
—
101
(466)
(2,433)
1,996(5)
(29)(5)
—
—
—
—
—
—
(5,242)
2,060
(7,937)
635(5)
—
—
41,141
684,637
33,450
44,126
12,119
14,596
6,736
(10,685)
683
789
829
(19,387)
(2,102)
648
(9,055)(2)
(3,908)
1,713
(5,446)
116
(1,530)
337,526
4,831(3)
(15,344)
319,092
20,099
36,932
—
150
—
securities . . . . . . . . . . . . . . .
15
Commercial mortgage-backed
securities . . . . . . . . . . . . . . .
Asset-backed securities . . . . . .
Other debt securities . . . . . . . .
Equity securities . . . . . . . . . . . . .
Nonmarketable equity
2,971
116,919
160,590
26,292
—
4,681
—
1,640(3)
securities . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . .
26,292
3,850
1,640
(426)(7)
(186)
(43)
—
4
(9,605)
(5,514)
—
—
(37)
621
521
—
—
306,680
11,270
3,930
3,930
5,584
—
—
—
—
—
—
—
—
—
—
(163)
(264,616)
93
(30,759)
350,660
(167)(3)
—
(52)
—
(342)
(805)
—
—
(545)
— (257,503)
(5,421)
(7)
(111)
(2,782)
(2,782)
(311)
(7)
—
—
93(5)
—
(30,759)(5)
20,192
6,037
—
(167)
—
—
—
—
—
—
—
—
—
—
—
(714)
(714)
—
15
—
2,430
161,172
160,814
28,359
28,359
8,660
—
—
—
300(3)
300
(592)(7)
Total
. . . . . . . . . . . . . . . . . . . . . . . . ¥1,204,406 ¥(15,987)
¥(14,861)
¥1,032,375 ¥ (1,518) ¥(285,183) ¥(664,655)
¥34,613
¥(61,899)
¥1,227,291
¥(35,905)
Liabilities
Others . . . . . . . . . . . . . . . . . . . . . . . . ¥
28,432 ¥ 4,508(4)
¥ (2,005)
Total . . . . . . . . . . . . . . . . . . . . . . . . . ¥
28,432 ¥ 4,508
¥ (2,005)
¥
¥
— ¥ 6,601
— ¥ 6,601
¥
¥
— ¥ (27,824)
¥ 1,056(6)
¥(31,290)(6) ¥
(25,528)
¥ 35,010(4)
— ¥ (27,824)
¥ 1,056
¥(31,290)
¥
(25,528)
¥ 35,010
F-148
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total gains (losses)
for the period
March 31,
2018
Included
in
earnings
Included
in other
comprehensive
income
Purchases
Issues
Sales
Settlements
(in millions)
Transfers
into
Level 3
Transfers
out of
Level 3
March 31,
2019
Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2019
Assets
Trading account assets:
Trading securities(1) . . . . . . . . . . . ¥ 827,493 ¥ 23,848(2)
¥ (1,341)
¥ 454,048 ¥ — ¥(316,384) ¥(213,944)
¥29,445
¥(17,839)
¥ 785,326
¥ 18,299(2)
Debt securities
Foreign government and
official institution
bonds . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . .
Residential mortgage-
backed securities . . . . . . .
Asset-backed securities . . . .
Other debt securities . . . . . .
Equity securities . . . . . . . . . . .
Trading derivatives—net . . . . . . .
Interest rate contracts—net
. . .
Foreign exchange contracts—
net
. . . . . . . . . . . . . . . . . . . .
. . . . . . .
. . .
. . . . . .
Equity contracts—net
Commodity contracts—net
Credit derivatives—net
Investment securities:
Available-for-sale debt
securities . . . . . . . . . . . . . . . . .
Foreign government and
official institution bonds . . .
Corporate bonds . . . . . . . . . . . .
Residential mortgage-backed
securities . . . . . . . . . . . . . . .
15
—
Commercial mortgage-backed
securities . . . . . . . . . . . . . . .
Asset-backed securities . . . . . .
Other debt securities . . . . . . . .
Equity securities . . . . . . . . . . . . .
Nonmarketable equity
2,430
161,172
160,814
28,359
—
6,760
—
(2,298)(3)
securities . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . .
28,359
8,660
(2,298)
(1,022)(7)
1,047
23,092
41,141
684,637
33,450
44,126
12,119
14,596
863
611
(282)
18,692
1,698
2,266
(5,871)(2)
12,397
6,736
(10,685)
683
789
(10,997)
18,756
32
(26,059)
—
—
—
(1,341)
—
—
(744)
57
(419)
(374)
6
(14)
117,619
2,040
—
315,865
—
18,524
787
—
— (118,377)
(1,798)
—
(317)
(4,188)
—
29,423(5)
(43)
(17,796)(5)
792
31,384
5
286
—
—
— (195,851)
—
—
(358)
—
—
(682)
—
(119)
(5,678)
(194,324)
—
(9,437)
37
(25,601)
—
—
—
22
20,192
(7,013)
—
—
—
—
10,332
1,494
210
13
564
—
—
(228)
(335)
—
—
—
—
—
(322)
(17,680)
(1)
43,641
27,230(5)
(25)(5)
—
—
(4,247)
13,085(5)
—
—
35,181
627,678
35,148
55,143
36,170
(4,189)
18,191
2,862
949
18,357
(289)
15,528
1,698
1,071
(25,241)(2)
11,507
(10,451)
(752)
795
(26,340)
350,660
6,415(3)
(9,791)
273,201
— (338,180)
1,456
(327)
283,434
(498)(3)
20,192
6,037
—
(345)
(715)
(6,078)
—
1,456(5)
—
(327)(5)
19,246
4,196
—
(498)
(876)
3
—
(135)
(5,016)
(3,767)
—
—
(20)
645
3,450
—
—
263,587
5,519
3,795
3,795
24,961
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(257)
—
— (295,048)
(36,082)
—
—
(1,418)
(1,418)
(206)
—
—
—
—
—
—
—
—
5
—
—
—
—
(618)
(618)
—
15
—
2,038
131,455
126,484
27,820
27,820
32,378
—
—
—
(3,060)(3)
(3,060)
(1,191)(7)
Total
. . . . . . . . . . . . . . . . . . . . . . . . ¥1,227,291 ¥ 21,072
¥(11,896)
¥ 756,792 ¥ (682) ¥(318,008) ¥(552,087)
¥51,098
¥ (8,452)
¥1,165,128
¥(11,691)
Liabilities
Others . . . . . . . . . . . . . . . . . . . . . . . . ¥
(25,528) ¥(19,629)(4)
¥ 6,670
Total . . . . . . . . . . . . . . . . . . . . . . . . . ¥
(25,528) ¥(19,629)
¥ 6,670
¥
¥
— ¥16,759
— ¥16,759
¥
¥
— ¥ (18,499)
¥44,727(6)
¥ 35,230(6)
— ¥ (18,499)
¥44,727
¥ 35,230
¥
¥
65,648
¥(10,778)(4)
65,648
¥(10,778)
Includes Trading securities measured under the fair value option.
Included in Trading account profits (losses)—net and in Foreign exchange losses—net.
Included in Investment securities gains (losses)—net.
Included in Trading account profits (losses)—net.
Notes:
(1)
(2)
(3)
(4)
(5) Transfers into Level 3 for Foreign exchange contract were mainly caused by the valuation using certain unobservable input. Transfers
into (out of) Level 3 for corporate bonds were caused by the decrease (increase) in liquidity or the availability of the quoted prices
provided by third-party venders and Equity contracts—net were mainly caused by the change of valuation model and the change cease
using certain unobservable input.
(6) Transfers into (out of) Level 3 for bifurcated embedded derivatives in Others were mainly caused by the decrease (increase) in the
observability of the key inputs to the valuation models and a corresponding increase (decrease) in the significance of the unobservable
inputs.
Included in Other non-interest income.
(7)
(8) The table above reflects changes in presentation that were made to equity investment securities at March 31, 2018. See Note 1 for further
information.
F-149
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Quantitative Information about Level 3 Fair Value Measurements
The following tables present information on the valuation techniques, significant unobservable inputs and
their ranges for each major category of assets and liabilities measured at fair value on a recurring basis and
classified in Level 3:
At March 31, 2018
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Weighted
Average(2)
(in millions)
Assets
Trading securities and
Investment securities:
Foreign government and
official institution
bonds . . . . . . . . . . . . . .
Residential mortgage-
backed securities,
Commercial mortgage-
backed securities and
Asset-backed
securities . . . . . . . . . . .
Other debt securities . . . .
¥ 20,192 Return on equity method Probability of default
Recovery rate
Market-required return on capital
0.0%~0.4%
60.0%~70.0%
8.0%~10.0%
0.2%
66.7%
9.5%
110,536 Discounted cash flow
684,586
Internal model(4)
Probability of default
Recovery rate
Asset correlations
Discount factor
Prepayment rate
Probability of default
Recovery rate
Liquidity premium
33,450 Discounted cash flow
149,759 Return on equity method Probability of default
Recovery rate
Market-required return on capital
1.2%~5.3%
60.0%~76.0%
9.0%
1.0%
37.2%
0.0%~91.3%
65.3%
0.5%~2.4%
0.0%~25.0%
40.0%~90.0%
8.0%~10.0%
4.5%
66.3%
9.0%
1.0%
37.2%
—(3)
65.3%
0.8%
0.3%
72.5%
9.7%
At March 31, 2018
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Trading derivatives—net:
Interest rate contracts—net . . . .
14,460
Option model
(in millions)
Foreign exchange
contracts—net . . . . . . . . . . . .
6,779
Option model
Equity contracts—net . . . . . . . .
(16,600) Option model
6,528
Discounted cash flow
F-150
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Volatility
Probability of prepayment
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Correlation between underlying assets
Volatility
Correlation between interest rate and
equity
Correlation between foreign exchange
rate and equity
Correlation between equities
Correlation between underlying assets
Term of litigation
0.0%~12.5%
34.1%~52.7%
19.7%~50.4%
41.0%~46.0%
13.4%~100.0%
100.0%
0.0%~12.5%
40.3%~74.0%
28.1%~50.7%
41.0%~46.0%
85.0%
10.3%~16.2%
37.1%~39.0%
7.0%~65.2%
20.6%~81.7%
76.0%
2.0 years
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Weighted
Average(2)
(in millions)
Assets
Trading securities and
Investment securities:
Foreign government and
official institution
bonds . . . . . . . . . . . . . .
Residential mortgage-
backed securities,
Commercial mortgage-
backed securities and
Asset-backed
securities . . . . . . . . . . .
Other debt securities . . . .
¥ 19,246 Return on equity method Probability of default
Recovery rate
Market-required return on capital
0.0%~0.4%
60.0%~70.0%
10.0%
0.3%
66.7%
10.0%
109,213 Discounted cash flow
587,577
Internal model(4)
Probability of default
Recovery rate
Loan price
Asset correlations
Discount factor
Prepayment rate
Probability of default
Recovery rate
Liquidity premium
35,148 Discounted cash flow
112,822 Return on equity method Probability of default
Recovery rate
Market-required return on capital
1.2%~5.3%
60.0%~76.0%
90.5%~100.3%
10.0%
1.0%~1.2%
22.7%
0.0%~90.1%
64.3%
1.0%~2.4%
0.0%~25.0%
40.0%~90.0%
8.0%~10.0%
5.0%
67.2%
95.4%
10.0%
1.2%
22.7%
—(3)
64.3%
1.3%
0.3%
78.0%
9.5%
At March 31, 2019
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Trading derivatives—net:
Interest rate contracts—net . . . .
(4,189)
Option model
(in millions)
Foreign exchange
contracts—net . . . . . . . . . . . .
18,198
Option model
Equity contracts—net . . . . . . . .
(2,727)
Option model
5,878
Discounted cash flow
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Volatility
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Correlation between underlying assets
Volatility
Correlation between foreign exchange
rate and equity
Correlation between equities
Correlation between underlying assets
Volatility
Term of litigation
0.0%~12.0%
29.2%~51.3%
22.8%~60.0%
41.0%~48.0%
11.0%~71.3%
0.0%~12.0%
35.0%~70.0%
14.8%~60.0%
41.0%~48.0%
65.0%
9.7%~18.2%
7.0%~64.1%
21.6%~80.3%
51.7%~82.0%
21.0%~30.0%
1.0 year
Notes:
(1) The fair value as of March 31, 2018 and 2019 excludes the fair value of investments valued using vendor prices.
(2) Weighted averages are calculated by weighing each input by the relative fair value of the respective financial instruments.
(3) See “Probability of default” in “Sensitivity to and range of unobservable inputs.”
(4) For further detail of Internal model, refer to the last paragraph of “Trading Account Assets and Liabilities—Trading Account Securities.”
F-151
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Sensitivity to and range of unobservable inputs
Probability of default—Probability of default is an estimate of the likelihood that the default event will
occur and the MUFG Group will be unable to collect the contractual amounts. A significant increase (decrease)
in the default rate would result in a significant decrease (increase) in a fair value through a decrease (increase) in
the estimated cash flows. Probability of default used in internal model of Residential mortgage-backed securities,
Commercial mortgage-backed securities and Asset-backed securities represents that of underlying assets,
whereas probability of default used in other valuation techniques represents the counterparty default risks,
determined through the MUFG Group’s credit rating system.
The wide range of probability of default used in the internal model of Residential mortgage-backed
securities, Commercial mortgage-backed securities and Asset-backed securities is mainly caused by Asset-
backed securities. Asset-backed securities have a large number of underlying loans, mainly corporate loans, in
several industries. The MUFG Group primarily makes investments in the senior tranches of such securities, with
no investments in the equity portion. Thus, the MUFG Group’s investments have higher priority of payments
than mezzanine and equity and even if some of underlying loans become default, the MUFG Group may still be
able to receive the full contractual payments.
For derivative contracts, the MUFG Group holds positions with a large number of counterparties with
various credit quality, which results in wider range of probability of default. However, the majority of
counterparties have higher ratings, categorized as “Normal” in the internal credit rating system, the inputs used to
estimate fair value of derivative contracts are concentrated in the lower end of the range.
Discount factor and Liquidity premium—Discount factor and liquidity premium are adjustments to
discount rates to reflect uncertainty of cash flows and liquidity of the instruments. When recent prices of similar
instruments are unobservable in inactive or less active markets, discount rates are adjusted based on the facts and
circumstances of the markets including the availability of quotes and the time since the latest available quotes.
A significant increase (decrease) in discount rate would result in a significant decrease (increase) in a fair value.
Recovery rate and Prepayment rate—Recovery rate is the proportion of the total outstanding balance of a
bond or loan that is expected to be collected in a liquidation scenario. For many debt securities (such as
asset-backed securities), there is no directly observable market input for recovery, but indications of recovery
levels are available from third-party pricing services. The assumed recovery of a security may differ from its
actual recovery that will be observable in the future. Prepayment rate represents the proportion of principal that is
expected to be paid prematurely in each period on a security or pool of securities. Prepayment rates change the
future cash flows for the investor and thereby change the fair value of the security. Recovery rate and prepayment
rate would affect estimation of future cash flows to a certain extent and changes in these inputs could result in a
significant increase or decrease in fair value.
Volatility—Volatility is a measure of the speed and severity of market price changes and is a key factor in
pricing. Typically, instruments can become more expensive if volatility increases. A significant increase
(decrease) in volatility would cause a significant increase (decrease) in the value of an option resulting in the
significant increase (decrease) in fair value.
The level of volatility generally depends on the tenor of the underlying instrument and the strike price or
level defined in the contract. Volatilities for certain combinations of tenor and strike price are not observable.
The volatility inputs used to estimate fair value of interest rate contracts are distributed throughout the range.
F-152
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Correlation—Correlation is a measure of the relationship between the movements of two variables (i.e. how
the change in one variable influences a change in the other variables). A variety of correlation-related
assumptions are required for a wide range of instruments including foreign government and official institution
bonds, asset-backed securities, corporate bonds, derivatives and certain other instruments. In most cases,
correlations used are not observable in the market and must be estimated using historical information. Changes in
correlation inputs can have a major impact, favorable or unfavorable, on the value of an instrument, depending
on its nature. In addition, the wide range of correlation inputs are primarily due to the complex and unique nature
of these instruments. There are many different types of correlation inputs, including cross-asset correlation (such
as correlation between interest rate and equity), and same-asset correlation (such as correlation between interest
rates). Correlation levels are highly dependent on market conditions and could have a relatively wide range of
levels within or across asset classes.
For interest rate contracts and foreign exchange contracts, the diversity in the portfolio held by the MUFG
Group is reflected in wide ranges of correlation, as the fair values of transactions with a variety of currencies and
tenors are determined using several foreign exchange and interest rate curves. For equity derivative contracts, the
wide range of correlation between interest rate and equity is primarily due to the large number of correlation
pairs with different maturities of contracts. For credit derivative contracts, the wide range of correlation between
underlying assets is primarily due to factors such as reference assets with different maturities, capital structure
subordinations, and credit quality.
Term of litigation—Term of litigation is the estimated period until the resolution of a certain litigation
matter that relates to an issuer’s restricted shares (“Covered Litigation”) that the MUFG Group purchased, which
is referenced in certain swap transactions.
These swaps are valued using a discounted cash flow methodology and are dependent upon the final
resolution of the Covered Litigation. The settlement timing of the Covered Litigation is not observable in the
market, therefore the estimated term is classified as a level 3 input.
The restricted shares which the MUFG Group purchased will be convertible to listed shares of the issuer at
the end of the Covered Litigation. The restricted shares will be diluted dependent upon the settlement amount of
the Covered Litigation and the dilution of the restricted shares is accomplished through an adjustment to the
conversion rate of the restricted shares. In order to hedge the reduction of the conversion rate, the MUFG Group
entered into certain swaps with the seller which references the conversion rate. The value generated by these
trades is subject to the ultimate term of the issuer’s litigation, subject to a minimum term referenced within the
trade contracts.
Market-required return on capital—Market-required return on capital is the return on capital expected by
the secondary market. A significant increase (decrease) in the market-required return on capital would result in a
significant decrease (increase) in a fair value of a financial asset.
Loan Price—Loan price refers to independent valuations which are supported by a number of third-party
quotes. A significant increase (decrease) in the loan price would result in a significant increase (decrease) in a
fair value of a financial asset.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities may be measured at fair value on a nonrecurring basis in periods subsequent to
their initial recognition. These assets are subject to fair value adjustments that result from the application of the
F-153
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
lower of cost or fair value accounting, write-downs of individual assets or the measurement alternative for
nonmarketable equity securities. The following table presents the carrying value of assets measured at fair value
on a nonrecurring basis by level within the fair value hierarchy as of March 31, 2018 and 2019:
2018
Total
2019
Level 1 Level 2
Level 3
carrying value Level 1
Level 2
Level 3
(in millions)
Assets
Investment
securities(1)(2) . . . . . . . ¥ — ¥ — ¥
1,984
3,458 8,329 239,653
¥
1,984
251,440
¥
— ¥ 80,779 ¥
4,208
9,104 250,678
2,656
Loans . . . . . . . . . . . . . .
Loans held for
Total
carrying value
¥ 84,987
262,438
sale . . . . . . . . . .
—
— 22,835
22,835
—
— 77,506
77,506
Collateral
dependent
loans . . . . . . . . .
Premises and
3,458 8,329 216,818
228,605
2,656
9,104 173,172
184,932
—
equipment . . . . . . . . .
Intangible assets . . . . . .
—
Other assets . . . . . . . . . . 92,223
— 34,326
— 9,402
— 6,196
34,326
9,402
98,419
—
—
136,528
— 35,352
— 19,635
9,774
49,756
35,352
19,635
196,058
Investments in
equity method
investees(1)
Other . . . . . . . . . . .
. . . . 92,223
—
—
—
— 6,196
92,223
6,196
136,528
—
49,756
— 9,774
— 186,284
9,774
Total . . . . . . . ¥95,681 ¥8,329 ¥291,561
¥395,571
¥139,184 ¥139,639 ¥319,647
¥598,470
Notes:
(1) Excludes certain investments valued at net asset value of ¥8,443 million and ¥8,866 million at March 31, 2018 and 2019, respectively.
The unfunded commitments related to these investments are ¥1,544 million and ¥12,242 million at March 31, 2018 and 2019,
respectively. These investments are in private equity funds and limited partnerships.
Includes certain nonmarketable equity securities that are measured at fair value on a nonrecurring basis, including impairment and
observable price change for nonmarketable equity securities measured under the measurement alternative.
(2)
The following table presents losses (gains) recorded as a result of changes in the fair value of assets
measured at fair value on a nonrecurring basis for the fiscal years ended March 31, 2018 and 2019:
2018
2019
(in millions)
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral dependent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
1,423
47,352
990
46,362
39,361
21,900
30,852
29,442
1,410
¥ (50,785)
30,153
4,762
25,391
31,345
118,108
59,557
51,645
7,912
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥140,888
¥188,378
F-154
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investment securities for the year ended March 31, 2018 primarily include impaired cost-method
investments which were written down to fair value during the period. The fair values are determined based on
recent net asset value and projected future cash flows of investees. Investment securities for the year ended
March 31, 2019 primarily include nonmarketable equity securities measured under the measurement alternative.
See Note 3 for the details of the measurement alternative.
Loans include loans held for sale and collateral dependent loans. Loans held for sale are recorded at the
lower of cost or estimated fair value. The fair value of the loans held for sale is based on secondary market
prices, recent transactions or discounted cash flows. These loans are principally classified in Level 3 of the fair
value hierarchy, and when quoted prices are available but not traded actively, such loans held for sale are
classified in Level 2 of the fair value hierarchy. Collateral dependent loans are measured at fair value of the
underlying collateral. Collateral is comprised mainly of real estate and exchange-traded equity securities. The
MUFG Group maintains an established process for internally determining the fair value of real estate, using the
following valuation techniques and assumptions. Collateral dependent loans that are measured based on
underlying real estate collateral are classified in Level 3 of the fair value hierarchy.
‰
‰
‰
Replacement cost approach. The replacement cost approach is primarily used for buildings and the land
they are built on. This approach calculates the fair value of the collateral using the replacement cost of
the property as of the valuation date. Replacement cost tables and useful life tables used for this
approach are developed by subsidiaries of MUFG.
Sales comparison approach. The sales comparison approach is mainly used for land. The fair value of
the collateral located in Japan is based on Japanese government official land prices and standard land
prices, considering the results of comparison analysis between the official roadside value which is used
for tax purposes and the related government official land and standard land prices.
Income approach. The income approach is, as a general rule, applied to all rental properties based on the
highest and best use concept. This approach calculates the fair value of the collateral using expected
future cash flows. In this approach, the expected annual net operating income is discounted using the
related capitalization yield. The significant assumptions within the income approach are the expected
annual net operating income and capitalization yield. The expected annual net operating income is
estimated based on rental income of the property. The capitalization yield is determined based on the
location and use of the property by subsidiaries of MUFG. The capitalization yield may be adjusted to
reflect the trends in locations, occupancy rates and rent level and other factors.
Premises and equipment consist of those assets which were written down to fair value. The fair values are
determined based on prices obtained from an appraiser or discounted cash flows. These impaired premises and
equipment are classified as Level 3 of the fair value hierarchy.
Intangible assets consist of those assets which were written down to fair value. The fair values are
determined based on discounted cash flows. These impaired intangible assets are classified as Level 3 of the fair
value hierarchy.
Other assets mainly consist of investments in equity method investees which were written down to fair value
due to impairment. When investments in equity method investees are marketable equity securities, the fair values
are determined based on quoted prices. Impaired investments in equity method investees which are marketable
equity securities are classified in either Level 1 or Level 2 of the fair value hierarchy. When investments in
equity method investees are nonmarketable equity securities, the fair values are determined using the same
methodologies as those for impaired nonmarketable equity securities described above. Impaired investments in
equity method investees which are nonmarketable equity securities are classified in Level 3 of the fair value
hierarchy.
F-155
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Option
The MUFG Group elected the fair value option for foreign currency-denominated debt securities and equity
securities held by MUFG Bank and Mitsubishi UFJ Trust and Banking. The election was made to mitigate
accounting mismatches related to fluctuations of foreign exchange rates by allowing the gains and losses on
translation of these securities to be included in current earnings. The gains and losses on translation of debt
securities without the fair value option, are included in OCI, while the gains and losses on translation of foreign
currency-denominated financial liabilities are included in current earnings. As a result of adopting the new
guidance issued in January 2016, as described in Note 1, the gains and losses on change in fair value of equity
securities with or without fair value option are included in current earnings.
The MUFG Group also elected the fair value option for certain financial instruments held by Mitsubishi UFJ
Securities Holdings’s foreign subsidiaries because those financial instruments are managed on a fair value basis,
and these exposures are considered to be trading-related positions. These financial assets are included in Other
assets. These financial liabilities are mainly included in Other short-term borrowings and Long-term debt.
Unrealized gains and losses on such financial instruments are recognized in the accompanying consolidated
statements of income.
The following table presents the gains or losses recorded for the fiscal years ended March 31, 2017, 2018
and 2019 related to the eligible instruments for which the MUFG Group elected the fair value option:
2017
2018
2019
Trading
account
profits (losses)
Foreign
exchange
gains (losses)
Total
changes in
fair value
Trading
account
profits (losses)
Foreign
exchange
gains (losses)
Total
changes in
fair value
Trading
account
profits (losses)
Foreign
exchange
gains (losses)
Total
changes in
fair value
(in millions)
Financial assets:
Trading account
securities(1)
. . . . . ¥(464,947)
¥(407,439) ¥(872,386) ¥(148,242)
¥(267,507) ¥(415,749) ¥208,952
¥186,578 ¥395,530
Total
. . . . . . . . ¥(464,947)
¥(407,439) ¥(872,386) ¥(148,242)
¥(267,507) ¥(415,749) ¥208,952
¥186,578 ¥395,530
Financial liabilities:
Other short-term
borrowings(2) . . . . ¥ (10,380)
(93,464)
Long-term debt(2)
. .
Total
. . . . . . . . ¥(103,844)
¥
¥
— ¥ (10,380) ¥
—
(93,464)
5,902
7,554
— ¥(103,844) ¥ 13,456
¥
¥
— ¥
—
5,902
7,554
¥ (5,559)
(8,322)
— ¥ 13,456
¥ (13,881)
¥
¥
— ¥ (5,559)
(8,322)
—
— ¥ (13,881)
Notes:
(1) Excludes Danamon’s equity securities. See Note 2 for reference.
(2) Change in value attributable to the instrument-specific credit risk related to those financial liabilities are not material.
F-156
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the differences between the aggregate fair value and the aggregate remaining
contractual principal balance outstanding as of March 31, 2018 and 2019 for long-term debt instruments for
which the fair value option has been elected:
2018
2019
Remaining
aggregate
contractual
amounts
outstanding
Fair value
Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding
Remaining
aggregate
contractual
amounts
outstanding
(in millions)
Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding
Fair value
Financial liabilities:
Long-term debt
. . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . .
¥347,002
¥347,002
¥333,985
¥333,985
¥(13,017)
¥(13,017)
¥358,730
¥358,730
¥325,808
¥325,808
¥ (32,922)
¥ (32,922)
Interest income and expense related to the assets and liabilities for which the fair value option is elected are
measured based on the contractual rates and dividend income related to these assets are recognized when the
shareholder right to receive the dividend is established. These interest income and expense and dividend income
are reported in the accompanying consolidated statements of income as either interest income or expense,
depending on the nature of the related asset or liability.
F-157
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Estimated Fair Value of Financial Instruments
The following is a summary of carrying amounts and estimated fair values by level within the fair value
hierarchy of financial instruments which are not carried at fair value on a recurring basis in the accompanying
consolidated balance sheets as of March 31, 2018 and 2019:
At March 31, 2018
Financial assets:
Carrying
amount
Estimated fair value
Total
Level 1
Level 2
Level 3
(in billions)
Cash and due from banks . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements . . . . . . . . . . .
Receivables under securities borrowing
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . .
. . . . . . . . . . . . . . . . . . . . .
Investment securities(1)(2)
Loans, net of allowance for credit losses(3)
Other financial assets(4)
¥ 32,648
43,210
896
5,726
¥ 32,648
43,210
896
5,726
¥32,648
—
—
—
9,269
3,684
116,272
7,000
9,269
3,797
117,753
7,000
—
1,197
3
—
¥
— ¥
43,210
896
5,726
9,269
1,051
330
7,000
—
—
—
—
—
1,549
117,420
—
Financial liabilities:
Deposits
Non-interest-bearing . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . .
Payables under repurchase agreements . . . . . . . . .
Payables under securities lending transactions . . .
Due to trust account . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . .
¥ 29,862
165,831
195,693
2,453
18,135
8,170
3,386
6,617
26,861
6,642
¥ 29,862
165,825
195,687
2,453
18,135
8,170
3,386
6,617
26,919
6,642
¥ — ¥ 29,862
— 165,825
— 195,687
2,453
—
18,135
—
8,170
—
3,386
—
6,617
—
26,919
—
6,642
—
¥
—
—
—
—
—
—
—
—
—
—
F-158
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019
Financial assets:
Carrying
amount
Total
Estimated fair value
Level 1
(in billions)
Level 2
Level 3
Cash and due from banks . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements . . . . . . . . . . .
Receivables under securities borrowing
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for credit losses(3)
. . . . . .
. . . . . . . . . . . . . . . . . . . . .
Other financial assets(4)
¥ 33,924
40,647
1,110
10,975
¥ 33,924
40,647
1,110
10,975
¥33,924
—
—
—
2,759
4,442
116,213
7,455
2,759
4,453
117,064
7,455
—
1,197
3
—
¥
— ¥
40,647
1,110
10,975
2,759
1,135
247
7,455
—
—
—
—
—
2,121
116,814
—
Financial liabilities:
Deposits
Non-interest-bearing . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . .
Payables under repurchase agreements . . . . . . . . .
Payables under securities lending transactions . . .
Due to trust account . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . .
¥ 30,443
168,846
199,289
2,450
25,225
913
2,736
6,441
27,790
6,781
¥ 30,443
168,899
199,342
2,450
25,225
913
2,736
6,441
27,968
6,781
¥ — ¥ 30,443
— 168,899
— 199,342
2,450
—
25,225
—
913
—
2,736
—
6,441
—
27,968
—
6,781
—
¥
—
—
—
—
—
—
—
—
—
—
Notes:
(1)
Includes impaired securities measured at fair value on a nonrecurring basis at March 31, 2018. Refer to “Assets and Liabilities Measured
at Fair Value on a Nonrecurring Basis” for the details of the level classification.
(2) Excludes cost-method investments of ¥437 billion at March 31, 2018, of which the MUFG Group did not estimate the fair value since it
(3)
was not practical and no impairment indicators were identified. See Note 3 for the details of these cost-method investments.
Includes loans held for sale and collateral dependent loans measured at fair value on a nonrecurring basis. Refer to “Assets and Liabilities
Measured at Fair Value on a Nonrecurring Basis” for the details of the level classification.
(4) Excludes investments in equity method investees of ¥2,219 billion and ¥2,487 billion at March 31, 2018 and 2019, respectively.
The fair values of certain off-balance sheet financial instruments held for purposes other than trading,
including commitments to extend credit and commercial letters of credit, are estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining terms of the agreements and the
credit quality. The aggregate fair value of such instruments at March 31, 2018 and 2019 was not material.
33. STOCK-BASED COMPENSATION
The following describes the stock-based compensation plans of MUFG, MUFG Bank, Mitsubishi UFJ Trust
and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ Morgan Stanley Securities and MUFG
Americas Holdings.
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and
Mitsubishi UFJ Morgan Stanley Securities
On May 16, 2016, MUFG introduced the Board Incentive Plan as a new incentive plan for officers of
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi
F-159
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
UFJ Morgan Stanley Securities. On November 14, 2016, MUFG expanded the Board Incentive Plan to officers
who hold unexercised Stock Acquisition Rights granted under the Stock Option Plan. As a result of this
transaction, the Stock Option Plan remains available to officers who are on overseas assignment as of the
transition date and hold unexercised Stock Acquisition Rights. This transition which consists of the exchange of
unexercised Stock Acquisition Rights for common share of MUFG under the Board Incentive Plan was treated as
modification of the Stock Option Plan for accounting purpose and incremental compensation cost resulting from
the modification was ¥2,028 million.
Stock Option Plan
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and
Mitsubishi UFJ Morgan Stanley Securities have the Stock Option Plan.
The Stock Acquisition Rights under the Stock Option Plan were normally issued and granted to officers
once a year until the fiscal year ended March 31, 2013. They were normally issued and granted to officers except
for outside directors and corporate auditors once a year from the fiscal year ended March 31, 2014.
The class of shares to be issued or transferred upon exercise of the Stock Acquisition Rights is common
shares of MUFG. The number of shares to be issued or transferred upon exercise of each Stock Acquisition Right
(“number of granted shares”) is 100 common shares of MUFG. In the event of a stock split or reverse stock split
of common shares of MUFG, the number of granted shares shall be adjusted in accordance with the ratio of the
stock split or reverse stock split. If any events occur that require the adjustment to the number of granted shares
(e.g., mergers, consolidations, corporate separations or capital reductions of MUFG), MUFG shall appropriately
adjust the number of granted shares to a reasonable extent.
The contractual term of the Stock Acquisition Rights is approximately 30 years from the date of grant. Some
of the Stock Acquisition Rights vest on the date of grant and the rest of the Stock Acquisition Rights granted vest
depending on the holders’ service periods as officers.
The Stock Acquisition Rights are only exercisable after the date on which the following conditions are met:
(1) holder as a director, a corporate executive or an executive officer is no longer a director, a corporate
executive and an executive officer, and (2) holder as a corporate auditor is no longer a corporate auditor, and
(3) holder as a senior fellow is no longer a senior fellow. The exercise price is ¥1 per share.
The following is a summary of the Stock Acquisition Rights transactions of MUFG, MUFG Bank,
Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley
Securities for the fiscal year ended March 31, 2019:
Number of
shares
Weighted average
exercise price
Weighted average
remaining
contractual term
(in years)
Aggregate
intrinsic value
(in millions)
Outstanding, beginning of fiscal year . . . . . . .
606,400
Transitioned to the Board
Incentive Plan(1) . . . . . . . . . . . . . . . . . .
(121,100)
Outstanding, end of fiscal year . . . . . . . . . . . .
485,300
Exercisable, end of fiscal year
. . . . . . . . . . . .
—
¥ 1
1
¥ 1
¥ —
22.86
—
¥266
¥ —
F-160
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notes:
(1) All shares transitioned to the Board Incentive Plan were granted and vested. See the explanation of the following item, The Board
Incentive Plan, for more information.
(2) There were no issuances under the Stock Option Plan during the fiscal years ended March 31, 2017, 2018 and 2019.
The MUFG Group recognized ¥252 million of compensation costs related to the Stock Acquisition Rights
with ¥77 million of the corresponding tax benefit for the fiscal year ended March 31, 2017.
Cash received from the exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2017
and 2018 was ¥4 million and ¥0 million, respectively. The actual tax benefit realized for the tax deductions from
exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2017 and 2018 was ¥651 million
and ¥2 million, respectively.
The Board Incentive Plan
On May 16, 2016, MUFG’s compensation committee approved the introduction of a Board Incentive Plan
as a new incentive plan for officers and covers the fiscal years corresponding to the medium-term business plan
of MUFG under which common shares of MUFG and cash equivalent to the liquidation value of the common
shares of MUFG together with dividends attributable to the common shares of MUFG are delivered and/or
provided as compensation. The Board Incentive Plan uses the trust structure called a Board Incentive Plan Trust
(“the BIP Trust”) and was authorized to purchase up to ¥15,800 million common shares of MUFG in the open
market. The BIP Trust initially consisted of the BIP Trust I and the BIP Trust II and started on May 17, 2016,
with the expiration date of August 31, 2018. These trusts period may be extended through the modification of the
trust agreement and additional contributions to the trust.
On November 14, 2016, MUFG’s compensation committee also approved the introduction of the BIP
Trust III, using the same structure as above for officers to implement the transition from the Stock Option Plan
under which Stock Acquisition Rights had previously been granted but have not been exercised by officers to the
Board Incentive Plan. The BIP Trust III was authorized to purchase up to ¥8,100 million common shares of
MUFG in the open market. In addition, on May 15, 2017, The BIP Trust III was also authorized to additional
purchase and was revised amount of trust money up to ¥9,600 million common shares of MUFG. The BIP Trust
III started on November 15, 2016 and will end on November 30, 2019. If any beneficiary under the BIP Trust III
remains as active officers at the initial expiration date, the trust period will be extended for additional three years.
The extension of the trust period will be made in the same manner up to 30 years.
On May 15, 2018, MUFG’s compensation committee approved to continue with the Board Incentive Plan
with amending it in part. As a result, the BIP Trust I and the BIP Trust II will be continued to August 31, 2021 by
extending the trust period as approved at the compensation committee’s meeting. MUFG also approved to revise
the limited amount of trust money for the BIP Trust I and the BIP Trust II up to ¥16,700 million from
¥15,800 million.
MUFG funded and established the BIP Trust, and from time to time, make contributions to the BIP Trust
whose beneficiaries are officers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ
Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities within the limit approved by MUFG’s
compensation committee. MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings
and Mitsubishi UFJ Morgan Stanley Securities also reimburse MUFG for its contributions to the BIP Trust. The
trustee of the BIP Trusts, Mitsubishi UFJ Trust and Banking, acquires common shares of MUFG in the open
market in accordance with the instructions from the trust administrator, who is a third party that does not have
any interest in MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and
Mitsubishi UFJ Morgan Stanley Securities.
F-161
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During the period of the BIP Trust, certain points are awarded to officers. The number of the points will be
determined based on each rank of officers, promotions to a higher rank in the BIP Trust I and based on single
year financial results and the degree to which the medium-term business plan has been achieved in the BIP Trust
II. At December 1, 2016, certain points were awarded to officers who have exchanged their unexercised stock
acquisition rights at the transition from the Stock Option Plan to the BIP Trust III. Points of the BIP Trust III are
awarded to officers who are on overseas assignment as of the transition date when the officers become domestic
residents and waive their unexercised Stock Acquisition Rights.
One point corresponds to one common share of MUFG, and if the number of common share of MUFG
owned by the BIP Trusts has increased or decreased due to a stock split, gratis allotment of shares, reverse stock
split, etc., the number of common share of MUFG to be delivered and/or provided for one point will be adjusted
accordingly.
Officers will receive common shares of MUFG in the number corresponding to a certain percentage of these
points and cash equivalent to the liquidation value of the common shares of MUFG corresponding to the
remaining points after they are liquidated within the BIP Trusts. As to the BIP Trust I and the BIP Trust III,
common shares of MUFG and cash will be delivered and/or provided upon resignation of the officers. As to the
BIP Trust II, common shares of MUFG and cash will be delivered and/or provided immediately following the
last day of the fiscal years corresponding to the medium-term business plan of MUFG. Dividends arising from
common share of MUFG will also be distributed to officers based on the number of the points or the beneficial
interest of officers.
The following is a roll-forward of common share of MUFG under the BIP Trust I and the BIP Trust II of
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi
UFJ Morgan Stanley Securities for the fiscal year ended March 31, 2019. For the BIP Trust III, all shares were
vested and there is no nonvested shares for the fiscal years ended March 31, 2017, 2018 and 2019:
Nonvested, beginning of fiscal year . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
The BIP Trust I
The BIP Trust II
Number of
Shares
2,085,633
6,959,500
(2,654,379)
(850,072)
Weighted—
average
grant—date
fair value
¥533.17
722.10
630.44
544.77
Number of
Shares
7,045,349
6,090,100
(1,825,882)
(6,566,937)
Weighted—
average
grant—date
fair value
¥524.43
722.10
659.75
527.37
Nonvested, end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . .
5,540,682
¥722.10
4,742,630
¥722.10
The weighted-average grant date fair value of the common shares of MUFG held by the BIP Trust I and the
BIP Trust II, that were granted during the year ended March 31, 2017 and 2018, were ¥521.60 and ¥721.50,
respectively. The total fair value of the common shares of MUFG held by the BIP Trust I and the BIP Trust II
that vested during the year ended March 31, 2017 were ¥1,940 million and ¥1,163 million, respectively, during
the year ended March 31, 2018 were ¥2,378 million and ¥1,668 million, respectively, and during the year ended
March 31, 2019 were ¥1,452 million and ¥900 million, respectively.
F-162
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is a summary of compensation costs, the corresponding tax benefit under the BIP Trust for
the fiscal year ended March 31, 2017, 2018 and 2019 and unrecognized compensation costs as of March 31,
2017, 2018 and 2019:
2017
2018
2019
The BIP
Trust I
The BIP
Trust II
The BIP
Trust III
The BIP
Trust I
The BIP
Trust II
The BIP
Trust III
The BIP
Trust I
The BIP
Trust II
The BIP
Trust III
(in millions)
Compensation costs . . . . . . . . . . . ¥1,238 ¥1,039 ¥2,112 ¥2,514 ¥1,452
Tax benefit
445
Unrecognized compensation
. . . . . . . . . . . . . . . . . .
318
385
379
770
¥218
67
¥1,601
490
¥723
221
¥520
159
costs . . . . . . . . . . . . . . . . . . . . .
1,617
346
—
396
360
— 2,604
182
—
Unrecognized compensation costs are expected to be recognized over a weighted-average period of
2.3 years for the BIP Trust I and 0.3 years for the BIP Trust II.
MUFG Americas Holdings
MUFG Americas Holdings adopted the MUAH Plan on June 8, 2015. Under the MUAH Plan, MUFG
Americas Holdings grants restricted stock units settled in ADRs representing shares of common stock of MUFG
to key employees at the discretion of the Human Capital Committee of the Board of Directors (“the Committee”).
The Committee determines the number of shares, vesting requirements and other features and conditions of the
restricted stock units. Under the MUAH Plan, MUFG ADRs are purchased in the open market upon the vesting
of the restricted stock units, through a revocable trust. There is no amount authorized to be issued under the
MUAH Plan since all shares are purchased in the open market. These awards generally vest pro-rata on each
anniversary of the grant date and become fully vested three years from the grant date, provided that the employee
has completed the specified continuous service requirement. Generally, the grants vest earlier if the employee
dies, is permanently and totally disabled, retires under certain grant, age and service conditions, or terminates
employment under certain conditions. MUFG Americas Holdings also issues a small number of off-cycle grants
each year, primarily for reasons related to recruitment of new employees. The weighted-average service period
for grants issued under the MUAH Plan with outstanding restricted stock units as of December 31, 2018 was
3.0 years.
Participants in the MUAH Plan are entitled to “dividend equivalent credits” on their unvested restricted
stock units when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the
participants would have received on the shares had the shares been issued to the participants when the restricted
stock units were granted. “Dividend equivalent credits” arising from grants under the MUAH Plan are paid to
participants in shares on an annual basis.
F-163
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table is a roll-forward of the restricted stock units under the MUAH Plan for the fiscal year
ended December 31, 2018:
Units outstanding, beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . .
Activity during fiscal year:
Restricted Stock Units
2018
Number of Units
Weighted Average Grant
Date Fair Value
27,838,414
$5.86
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,667,730
(13,198,540)
(864,534)
Units outstanding, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,443,070
5.89
5.88
5.97
5.86
The weighted-average grant date fair value of restricted stock units granted during the fiscal years ended
December 31, 2016 and 2017 were $4.63 and $6.53, respectively. The total fair value of RSUs that vested during
the fiscal years ended December 31, 2016, 2017, and 2018 were ¥5,333 million, ¥8,414 million, and
¥8,614 million, respectively.
The following table is a summary of MUFG Americas Holdings’ compensation costs, the corresponding tax
benefit for the fiscal years ended December 31, 2016, 2017 and 2018, and unrecognized compensation costs as of
December 31, 2016, 2017 and 2018:
Compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,292
2,830
11,183
(in millions)
¥ 7,405
2,917
12,543
¥ 8,503
2,209
12,210
2016
2017
2018
At December 31, 2018, approximately ¥12,210 million (pretax) of compensation expense related to
unvested grants had not yet been charged to net income. Unrecognized compensation costs as of December 31,
2018 are expected to be amortized into compensation expense over a weighted-average period of 1.4 years.
34. PARENT COMPANY ONLY FINANCIAL INFORMATION
Distributions of retained earnings of MUFG Bank and Mitsubishi UFJ Trust and Banking are restricted in
order to meet the minimum capital adequacy requirements under the Banking Law. Additionally, retained
earnings of these banking subsidiaries are restricted, except for approximately ¥5,819 billion and ¥6,077 billion,
in accordance with the statutory reserve requirements under the Companies Act at March 31, 2018 and 2019,
respectively. See Notes 19 and 22 for further information.
The Banking Law and related regulations restrict the ability of these banking subsidiaries to extend loans or
credit to the parent company. Such loans or credits to the parent company are generally limited to 15% of the
banking subsidiary’s consolidated total capital, as determined by the capital adequacy guidelines.
At March 31, 2018 and 2019, approximately ¥5,341 billion and ¥5,160 billion, respectively, of net assets of
consolidated subsidiaries may be restricted as to payment of cash dividends and loans to the parent company.
F-164
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the parent company only financial information of MUFG:
Condensed Balance Sheets
As of March 31,
2018
2019
(in millions)
Assets:
Cash and interest-earning deposits with banking subsidiaries . . . . . . . . . . . . . .
Investments in subsidiaries and affiliated companies . . . . . . . . . . . . . . . . . . . . .
Banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking subsidiaries and affiliated companies . . . . . . . . . . . . . . . . . .
Loans to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
114,784
16,720,286
12,638,315
4,081,971
5,072,330
4,885,830
186,500
166,514
¥
203,713
16,668,232
12,754,653
3,913,579
7,199,052
6,864,309
334,743
223,725
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,073,914
¥24,294,722
Liabilities and Shareholders’ equity:
Short-term borrowings from banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt from non-banking subsidiaries and affiliated companies . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,600,179
264,332
5,088,478
150,743
¥ 1,425,682
277,138
7,187,469
204,885
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,103,732
9,095,174
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,970,182
15,199,548
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,073,914
¥24,294,722
F-165
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Income
Fiscal years ended March 31,
2017
2018
2019
(in millions)
Income:
Dividends from subsidiaries and affiliated companies . . . . . . . . .
Banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking subsidiaries and affiliated companies . . . . . . .
Management fees from subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Interest income from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses)—net . . . . . . . . . . . . . . . . . . . . . .
Trading account losses—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on sales of investment in subsidiaries and affiliated
companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
¥
608,504
535,512
72,992
26,095
48,665
3,614
(41,279)
¥
576,332
487,491
88,841
26,073
80,670
24,726
(26,749)
—
1,427
—
1,508
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
647,026
682,560
Expense:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense to subsidiaries and affiliated companies . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,692
28,867
35,689
2,554
92,802
26,016
31,426
65,068
1,791
124,301
Equity in undistributed net income (loss) of subsidiaries and affiliated
companies—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(362,899)
672,421
Income before income tax expense (benefit)
Income tax expense (benefit)
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191,325
(11,355)
1,230,680
2,520
306,879
207,161
99,718
28,305
127,117
(20,598)
(8,078)
252,253
3,199
689,077
28,168
34,594
108,756
1,657
173,175
194,390
710,292
(8,353)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
202,680
¥ 1,228,160
¥
718,645
F-166
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Cash Flows
Fiscal years ended March 31,
2017
2018
2019
(in millions)
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .
202,680
371,901
574,581
¥ 1,228,160
(799,571)
¥
718,645
(351,775)
428,589
366,870
Investing activities:
Proceeds from sales of investment in subsidiaries and affiliated
companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,574
—
455,605
Purchase of equity investment in subsidiaries and an affiliated
company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in loans to subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(91,877)
(1,802,664)
(2,659)
(53,000)
(1,682,576)
(4,361)
(18,346)
(2,112,711)
(9,009)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,895,626)
(1,739,937)
(1,684,461)
Financing activities:
Net decrease in short-term borrowings from subsidiaries . . . . . .
Proceeds from issuance of long-term debt
. . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt to affiliated companies . . . . . . . . .
Proceeds from sales of treasury stock . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of treasury stock . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(32,412)
1,808,672
(20)
(1,136)
1
(200,028)
(246,564)
(9,333)
(41,402)
1,872,986
(112,184)
(1,090)
1
(200,038)
(241,067)
(9,677)
(194,300)
2,043,677
(314)
(500)
3
(150,277)
(276,279)
(15,490)
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . .
1,319,180
1,267,529
1,406,520
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . .
(1,865)
160,468
(43,819)
158,603
88,929
114,784
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . .
¥
158,603
¥
114,784
¥
203,713
35. SUBSEQUENT EVENTS
Approval of Dividends
On June 6, 2019, the shareholders approved the payment of cash dividends of ¥11 per share of Common
stock, totaling ¥142,552 million, that were payable on June 28, 2019, to the shareholders of record on March 31,
2019.
Announcement to redeem “Non-dilutive” Preferred Securities Issued by a Special Purpose Company
On May 27, 2019, the Board of Directors of MUFG approved to redeem in total ¥90 billion of non-
cumulative and non-dilutive perpetual preferred securities issued by MUFG Capital Finance 8 Limited, a special
purpose company established in the Cayman Islands. MUFG plans to redeem these securities on July 25, 2019.
The securities were previously accounted for as part of MUFG’s Tier 1 capital at March 31, 2019 under its
capital adequacy requirements, subject to certain limitations.
F-167
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Acquisition of shares in Bank Danamon in Indonesia
On April 29, 2019, MUFG Bank acquired an additional 54.0% equity interest in Danamon from AFI and
other shareholders, based on a price of IDR 9,590 (approximately ¥77(1)) per share, for an investment amount of
IDR 50 trillion (approximately ¥397 billion). As a result, equity interest in Danamon increased to 94.0%, and
Danamon became a consolidated subsidiary of MUFG Bank. In addition, MUFG Bank acquired an additional
92.1% equity interest in PT Bank Nusantara Parahyangan, Tbk. (“BNP”) from ACOM CO., LTD., an equity
method investee of MUFG, and other shareholders, based on a price of IDR 4,088 (approximately ¥33(1)) per
share, for an investment amount of IDR 3 trillion (approximately ¥24.1 billion). As a result, equity interest in
BNP increased to 99.9%, and BNP became a consolidated subsidiary of MUFG Bank.
On May 1, 2019, MUFG Bank made BNP merged into Danamon, acquiring an additional equity interest in
Danamon in exchange for its equity interest in BNP, which resulted in MUFG Bank holding 94.1% equity
interest in Danamon.
The initial accounting for the business combination is incomplete and supplemental pro forma information
of this acquisition could not be disclosed in the accompanying consolidated financial statements because this
transaction occurred near the time of the issuance of such consolidated financial statements and the MUFG
Group is still in the process of determining the fair value of assets acquired, liabilities assumed, and non-
controlling interest.
See Note 2 for further information on the Acquisition of shares in Danamon.
Note:
(1) Calculated based on the exchange rate of IDR1 = ¥0.008
* * * * *
F-168
Exhibit
EXHIBIT INDEX
Description
1(a)
1(b)
1(c)
1(d)
1(e)
1(f)
1(g)
1(h)
2(a)
2(b)
2(c)
8
11
12
13
15(a)
15(b)
99(a)
99(b)
Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on July 6, 2018
(English translation)*
Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015 (English translation)*
Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
July 1, 2018 (English translation)*
Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 25,
2015 (English Translation)**
Charter of the Audit Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)*
Charter of the Compensation Committee of Mitsubishi UFJ Financial Group, Inc., as amended
on July 1, 2018 (English translation)*
Charter of the Nominating and Governance Committee of Mitsubishi UFJ Financial Group,
Inc., as amended on July 1, 2018 (English translation)*
Charter of the Risk Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)*
Form of American Depositary Receipt*
Form of Deposit Agreement, amended and restated as of December 22, 2004, among Mitsubishi
Tokyo Financial Group, Inc. (subsequently renamed Mitsubishi UFJ Financial Group, Inc.), The
Bank of New York Mellon and the holders from time to time of American Depositary Receipts
issued thereunder*
Description of Securities
Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational
Structure.”
MUFG Group Code of Conduct, Compliance Rules, Compliance Manual, and Rules of
Employment of Mitsubishi UFJ Financial Group, Inc. applicable to its principal executive
officer, principal financial officer, principal accounting officer and persons performing similar
functions (English translation of relevant sections)
Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a)
(17 CFR 240.15d-14(a))
Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b)
(17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code
(18 U.S.C. 1350)
Consent of independent registered public accounting firm (Deloitte Touche Tohmatsu LLC)
Consent of independent registered public accounting firm (Deloitte & Touche LLP)
Capitalization and Indebtedness of Mitsubishi UFJ Financial Group, Inc. as of March 31,
2019***
Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ
Financial Group, Inc. as of and for the fiscal year ended March 31, 2019****
99(c)
Financial Statements and Supplementary Data of Morgan Stanley*****
101.INS
XBRL Instance Document
Exhibit
Description
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
Notes:
*
**
***
****
*****
Incorporated by reference to our annual report on Form 20-F (File No. 000-54189) filed on July 12, 2018.
Incorporated by reference to our registration statement on Form S-8 (File No. 333-230590) filed on March 29, 2019.
Deemed to be incorporated by reference into the registration statement on Form F-3 (No. 333-229697) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Deemed to be incorporated as Annex A to the registration statement on Form F-3 (No. 333-229697) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Incorporated by reference to Morgan Stanley’s annual report on Form 10-K (File No. 001-11758) filed on February 26, 2019.
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this Annual Report on its behalf.
Signature
MITSUBISHI UFJ FINANCIAL GROUP, INC.
By:
Name:
Title:
/s/ KANETSUGU MIKE
Kanetsugu Mike
President & Group Chief Executive Officer
Date: July 10, 2019
DESCRIPTION OF SECURITIES
Exhibit 2(c)
Common Stock
We summarize below the material provisions of our Articles of Incorporation, our share handling
regulations and the Companies Act as they relate to a type of joint stock company known as kabushiki kaisha,
within which we fall. Because it is a summary, this discussion should be read together with our Articles of
Incorporation and share handling regulations, each attached as an exhibit to our annual report on Form 20-F.
General
A joint stock company is a legal entity incorporated under the Companies Act. The investment and rights of
the shareholders of a joint stock company are represented by shares of stock in the company and shareholders’
liability is limited to the amount of the subscription for the shares. Our authorized common share capital is
comprised of 33,000,000,000 shares of common stock with no par value.
We may issue shares from our authorized but unissued share capital following a resolution to that effect by
our board of directors. An increase in our authorized share capital is only possible by amendment of our Articles
of Incorporation, which generally requires shareholders’ special approval.
In order to assert shareholder rights against us, a shareholder must have its name and address registered on
our register of shareholders, in accordance with the Companies Act and our share handling regulations. The
registered holder of deposited shares underlying the ADSs is the depositary for the ADSs, or its nominee.
Accordingly, holders of ADSs will not be able to assert shareholder rights other than as provided in the
agreement among us, the depositary and the holders of the ADSs.
Under the Act on Book-Entry Transfer of Company Bonds, Shares, etc., the shares of all Japanese
companies listed on any Japanese stock exchange, including our shares, are traded without share certificates
through entry in the books maintained under a central clearing system.
Dividends
Dividends are distributed in proportion to the number of shares owned by each shareholder on the record
date for the dividend. Dividends for each financial period may be distributed following shareholders’ approval at
a general meeting of shareholders.
Payment of dividends on common stock is subject to the preferential dividend rights of holders of preferred
stock.
Under the Banking Law and our Articles of Incorporation, our financial accounts are closed on March 31 of
each year, and dividends, if any, are paid to shareholders of record as of March 31 following shareholders’
approval at a general meeting of shareholders. In addition to year-end dividends, our board of directors may by
resolution declare an interim cash dividend to shareholders of record as of September 30 of each year. Under the
Companies Act, distribution of dividends will take the form of distribution of surplus (as defined below). We will
be permitted to make distributions of surplus to our shareholders any number of times per fiscal year pursuant to
resolutions of our general meetings of shareholders, subject to certain limitations described below. Distributions
of surplus are in principle required to be authorized by a resolution of a general meeting of shareholders.
Distributions of surplus would, however, be permitted to be made pursuant to a resolution of our board of
directors if:
(a) our Articles of Incorporation so provide (our Articles of Incorporation currently contain no such
provisions);
1
(b)
the normal term of office of our directors is one year; and
(c)
certain conditions concerning our non-consolidated annual financial statements and certain documents
for the latest fiscal year as required by an ordinance of the Ministry of Justice are satisfied.
In an exception to the above rule, even if the requirements described in (a) through (c) are not met, we are
permitted to make distributions of surplus in cash to our shareholders by resolutions of the board of directors
once per fiscal year as mentioned above concerning interim cash dividend.
Under the Companies Act, distributions of surplus may be made in cash or in kind in proportion to the
number of shares of common stock held by each shareholder. A resolution of a general meeting of shareholders
or our board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of
the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date of the
distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general
meeting of shareholders or (as the case may be) our board of directors, grant to our shareholders the right to
require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the
relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders.
See “Common Stock—Voting Rights” below.
Under the Companies Act, we may make distributions of surplus to the extent that the aggregate book value
of the assets to be distributed to shareholders does not exceed the distributable amount (as defined below) as of
the effective date of such distributions of surplus. The amount of surplus (the “surplus”) at any given time shall
be the amount of our assets and the book value of our treasury stock after subtracting the amounts of items (1)
through (5) below as they appear on our non-consolidated balance sheet as of the end of our last fiscal year, and
after reflecting the changes in our surplus after the end of our last fiscal year, by adding the amounts of items (6),
(7) and (8) below and/or subtracting the amounts of items (9), (10) and (11) below:
(1) our liabilities;
(2) our stated capital;
(3) our additional paid-in capital;
(4) our accumulated legal reserve;
(5) other amounts as are set out in an ordinance of the Ministry of Justice;
(6)
(7)
(8)
(if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our
treasury stock after subtracting the book value thereof;
(if we decreased our stated capital after the end of the last fiscal year) the amount of decrease in our
stated capital (excluding the amount transferred to additional paid-in capital or legal reserve);
(if we decreased our additional paid-in capital or legal reserve after the end of the last fiscal year) the
amount of decrease in our additional paid-in capital or legal reserve (excluding the amount transferred
to stated capital);
(9)
(if we cancelled our treasury stock after the end of the last fiscal year) the book value of the cancelled
treasury stock;
(10) (if we distributed surplus to shareholders after the end of the last fiscal year) the amount of the assets
distributed to shareholders by way of such distribution of surplus; and
(11) other amounts as are set out in an ordinance of the Ministry of Justice.
A distributable amount (the “distributable amount”) at any given time shall be the aggregate amount of
(a) the surplus, (b) the amount of profit as recorded for the period after the end of our last fiscal year until the
date of an extraordinary settlement of account (if any) as is set out in an ordinance of the Ministry of Justice and
2
(c) the transfer price of our treasury stock in the same period, after subtracting the amounts of the following
items:
(1)
the book value of our treasury stock;
(2)
(3)
(if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our
treasury stock;
the losses recorded for the period after the end of our last fiscal year until the date of an extraordinary
settlement of account (if any) as set out in an ordinance of the Ministry of Justice; and
(4) other amounts as set out in an ordinance of the Ministry of Justice.
In Japan, the “ex-dividend” date and the record date for any dividends precede the date of determination of
the amount of the dividend to be paid. The market price of shares generally becomes ex-dividend on the third
business day prior to the record date. Under our Articles of Incorporation, we are not obligated to pay any
dividends which are left unclaimed for a period of five years after the date on which they first became payable.
Capital and Reserves
Under the Companies Act, we may reduce our additional paid-in capital or legal reserve (without limitation
as to the amount of such reduction) as mentioned previously, generally by resolution of a general meeting of
shareholders and, if so resolved in the same resolution, may account for the whole or any part of the amount of
such reduction as stated capital. We may also reduce our stated capital generally by special resolution of a
general meeting of shareholders and, if so resolved in the same resolution, such reduction may account for the
whole or any part of the amount of such reduction as additional paid-in capital or legal reserve. Conversely, we
may reduce our surplus and increase either (i) stated capital or (ii) additional paid-in capital and/or legal reserve
by the same amount, in either case by resolution of a general meeting of shareholders.
Stock Splits
Stock splits of our outstanding stock may be effected at any time by resolution of the board of directors.
When a stock split is to be effected, we may increase the authorized share capital to cover the number of shares
to be increased by the stock split by amending our Articles of Incorporation by resolution of the board of
directors without approval by special resolution of the general meeting of shareholders, unless more than one
class of stock is issued and outstanding. We must give public notice of the stock split, specifying a record date at
least two weeks prior to the record date.
Unit Share (tan-gen kabu) System
We have adopted a unit share system, where 100 shares of either common or preferred stock shall each
constitute a unit.
Under the unit share system, each unit is entitled to one voting right. A holder of less than one unit has no
voting right. Our Articles of Incorporation provide that the holders of shares constituting less than a full unit will
not have shareholder rights except for those specified in the Companies Act or an ordinance of the Ministry of
Justice, including rights (i) to receive dividends, (ii) to receive cash or other assets in case of consolidation or
split of shares, stock-for-stock exchange or stock-for-stock transfer, corporate split or merger or (iii) to be
allotted rights to subscribe for free for new shares and stock acquisition rights when such rights are granted to
shareholders. Shareholders may require us to purchase shares constituting less than a unit at the current market
price. In addition, holders of shares constituting less than a unit may require us to sell them such number of
shares, which, when combined with the number of shares already held by such holder, shall constitute a whole
unit of share; provided that we will be obliged to comply with such request only when we own a sufficient
number of shares to accommodate the desired sale and purchase. The board of directors may reduce the number
3
of shares constituting a unit or cease to use the unit share system by amendments to the Articles of Incorporation
without shareholders’ approval even though amendments to the Articles of Incorporation generally require a
special resolution of the general meeting of shareholders.
General Meeting of Shareholders
The ordinary general meeting of our shareholders is usually held in June of each year in Tokyo. In addition,
we may hold an extraordinary general meeting of shareholders whenever necessary by giving at least two weeks’
advance notice to shareholders who are entitled to vote at the relevant general meeting of shareholders. The
record date for ordinary general meetings of our shareholders is March 31.
Any shareholder holding at least 300 voting rights or 1% of the total number of voting rights for six
consecutive months or longer may propose a matter to be considered at a general meeting of shareholders by
submitting a written request to a director at least eight weeks prior to the date of the meeting. The number of
minimum voting rights, minimum percentage and time period necessary for exercising the minority shareholder
rights described above may be decreased or shortened if our Articles of Incorporation so provide. Our Articles of
Incorporation currently contain no such provisions.
Voting Rights
A holder of shares of our common stock is generally entitled to one voting right for each unit of common
stock held. The following shares of common stock are not entitled to voting rights even when such shares
constitute a whole unit, and such shares of common stock are not considered when determining whether a
quorum exists for a shareholders’ meeting:
‰
‰
‰
treasury stock;
shares held by a company in which we and/or our subsidiaries own 25% or more of the total voting
rights; and
shares issued after the record date as a result of conversion of convertible stock, exercise of stock
acquisition rights, and fractional shareholders becoming a shareholder of a whole unit share.
On the other hand, holders of certain class of preferred stock shall be entitled to a voting right for each unit
of preferred stock held under certain conditions provided for by relevant laws or regulations and our Articles of
Incorporation, for example, when a proposal to pay the full amount of preferential dividends on any class of
preferred stock in compliance with the terms of such preferred stock is not included in the agenda of the relevant
shareholders meeting. See “Preferred Stock” below.
Under our Articles of Incorporation, except as otherwise provided by law or by other provisions of our
Articles of Incorporation, a resolution can be adopted at a shareholders’ meeting by the holders of a majority of
the voting rights represented at the meeting. The Companies Act and our Articles of Incorporation require a
quorum of not less than one-third of the total number of voting rights for election of our directors.
The Companies Act and our Articles of Incorporation provide that a quorum of not less than one-third of
outstanding voting rights, excluding those owned by our subsidiaries and affiliates of which we own, directly or
indirectly, 25 percent or more, must be present at a shareholders’ meeting to approve specified corporate actions,
such as:
‰
‰
‰
the amendment of our Articles of Incorporation, except in some limited cases;
the repurchase of our own stock from a specific shareholder other than our subsidiary;
the consolidation of shares;
4
‰
‰
‰
‰
‰
‰
‰
‰
‰
the offering to persons other than shareholders of stock at a specially favorable price, or of stock
acquisition rights or bonds or notes with stock acquisition rights with specially favorable conditions;
the exemption from liability of a director or corporate auditor, with certain exceptions;
a reduction in stated capital with certain exceptions in which a shareholders’ resolution is not required;
a distribution of in-kind dividends which meets certain requirements;
the transfer of the whole or an important part of our business, except in some limited circumstances;
the acquisition of the whole business of another company, except in some limited circumstances;
a dissolution, merger or consolidation, except for certain types of mergers;
a stock-for-stock exchange (kabushiki-kokan) or stock-for-stock transfer (kabushiki-iten), except in
some limited circumstances; and
a corporate split, except in some limited circumstances.
A special resolution representing at least two-thirds of the voting rights represented at the meeting is
required to approve these actions.
Our Articles of Incorporation do not include any provision that grants shareholders cumulative voting rights
at elections of directors.
Subscription Rights
Holders of our shares have no preemptive rights under our Articles of Incorporation. Under the Companies
Act, however, our board of directors may determine that shareholders be given subscription rights in connection
with a particular issue of new shares. In this case, these subscription rights must be given on uniform terms to all
shareholders, and if a specified record date is set, it must be announced in a public notice at least two weeks prior
to the record date. A notification to each individual shareholder must also be given at least two weeks prior to the
subscription date.
Under the Companies Act, rights to subscribe for new shares may not be transferred; however, we may allot
stock acquisition rights to shareholders without consideration, and such rights will be transferable.
Stock Acquisition Rights
We may issue stock acquisition rights (shinkabu yoyakuken), which in the United States are often in the
form of warrants, or bonds with stock acquisition rights that cannot be detached (shinkabu yoyakuken-tsuki
shasai), which in the United States are often in the form of convertible bonds or bonds with non-detachable
warrants. Except where the issuance would be on “specially favorable” conditions, the issuance of stock
acquisition rights or bonds with stock acquisition rights may be authorized by a resolution of our board of
directors. Upon exercise of the stock acquisition rights, the holder of such rights may acquire shares by paying
the applicable exercise price or, if so determined by a resolution of our board of directors, by making a substitute
payment, such as having the convertible bonds redeemed for no cash in lieu of the exercise price.
Liquidation Rights
Upon our liquidation, the assets remaining after payment of all debts, liquidation expenses, taxes and
preferred distributions to holders of shares of our preferred stock will be distributed among the holders of shares
of our common stock in proportion to the number of shares they own.
5
Transfer Agent
Mitsubishi UFJ Trust and Banking is the transfer agent for our common stock. The office of Mitsubishi UFJ
Trust and Banking for this purpose is located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan.
Mitsubishi UFJ Trust and Banking maintains our register of shareholders.
Reports to Shareholders
We furnish to our shareholders notices, in Japanese, of shareholders’ meetings, annual business reports,
including our financial statements, and notices of resolutions adopted at our shareholders’ meetings.
Record Dates
As stated above, March 31 is the record date for the payment of annual dividends (if any), the determination
of shareholders entitled to vote at ordinary general meetings of our shareholders, and the determination of class
shareholders entitled to vote at meetings of our class shareholders if any matter to be resolved at an ordinary
general meeting of our shareholders requires a resolution by our class shareholders in addition to a resolution by
our shareholders. September 30 is the record date for the payment of interim dividends, if any. In addition, by a
resolution of our board of directors and after giving at least two weeks’ prior public notice, we may at any time
set a record date in order to determine the shareholders who are entitled to the rights pertaining to our shares.
Repurchase of Our Shares
We may repurchase our own shares:
‰
‰
‰
‰
‰
through the Tokyo Stock Exchange or other stock exchanges on which our shares are listed, if
authorized by a resolution of a general meeting of shareholders or our board of directors;
by way of a tender offer, if authorized by a resolution of a general meeting of shareholders or our board
of directors;
from a specific party, if authorized by a special resolution of a general meeting of shareholders and we
give notice thereof to shareholders prior to such general meeting, in general;
from all shareholders of a specific class of shares offering to sell their shares, if authorized by a
resolution of a general meeting of shareholders or our board of directors and we give a public notice or
notice thereof to all of the shareholders (if we repurchase any class of preferred stock, notices to all
shareholders of the relevant class of preferred stock); or
from our subsidiaries, if authorized by a resolution of the board of directors.
When the repurchase is made by us from a specific party, as authorized by a special resolution of a general
meeting of shareholders, any shareholder may make a demand to a director, five days or more prior to the
relevant shareholders’ meeting, that we also repurchase the shares held by that shareholder. However, no such
right will be available if the shares have a market price, and if the purchase price does not exceed the then market
price calculated in a manner set forth in an ordinance of the Ministry of Justice.
Repurchase of our own shares described above must satisfy various specified requirements. In general, the
same restrictions on the distributable amount as described in the seventh paragraph under “—Common Stock—
Dividends.” are applicable to the repurchase of our own shares, so the total amount of the repurchase price may
not exceed the distributable amount.
We may hold our own shares so repurchased without restrictions. In addition, we may cancel or dispose of
our repurchased shares by a resolution of our board of directors.
6
American Depositary Shares
The Bank of New York Mellon will issue ADRs. Each ADR will represent ownership interests in ADSs.
Each ADS represents one share of our common stock. Each ADS is held by MUFG Bank, acting as custodian, at
its principal office in Tokyo, on behalf of The Bank of New York Mellon, acting as depositary. Each ADS will
also represent securities, cash or other property deposited with The Bank of New York Mellon but not distributed
to ADS holders. The Bank of New York Mellon’s corporate trust office is located at 240 Greenwich Street,
New York, New York 10286 and its principal executive office is located at 225 Liberty Street, New York,
New York 10286.
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you
hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. If you hold
the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the
rights of ADS holders described herein. You should consult with your broker or financial institution to find out
what those procedures are.
The Bank of New York Mellon will actually be the registered holder of the common stock, so you will have
to rely on it to exercise your rights as a shareholder. Our obligations and the obligations of The Bank of
New York Mellon are set out in a deposit agreement among us, The Bank of New York Mellon and you, as an
ADS holder. The deposit agreement and the ADSs are governed by New York law.
The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does
not contain all the information that may be important to you. For more complete information, you should read the
entire deposit agreement and the form of ADR. each attached as an exhibit to our annual report on Form 20-F.
Share Dividends and Other Distributions
The Bank of New York Mellon has agreed to pay to you the cash dividends or other distributions it or the
custodian receives on shares of common stock or other deposited securities, after deducting its fees and expenses.
You will receive these distributions in proportion to the number of shares your ADSs represent.
Cash. The Bank of New York Mellon will convert any cash dividend or other cash distribution we pay on
our common stock into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the
United States. If that is not possible or if any approval from the Japanese government is needed and cannot be
obtained, the deposit agreement allows The Bank of New York Mellon to distribute the Japanese yen only to
those ADS holders to whom it is possible to do so. The Bank of New York Mellon will hold the Japanese yen it
cannot convert for the account of the ADS holders who have not been paid. It will not invest the Japanese yen
and it will not be liable for any interest.
Before making a distribution, any withholding taxes that must be paid under Japanese law will be deducted.
The Bank of New York Mellon will distribute only whole U.S. dollars and cents and will round fractional cents
to the nearest whole cent. If the relevant exchange rates fluctuate during a time when The Bank of New York
Mellon cannot convert the Japanese currency, you may lose some or all of the value of the distribution.
Shares. The Bank of New York Mellon may distribute new ADSs representing any shares we may distribute
as a dividend or free distribution, if we furnish The Bank of New York Mellon promptly with satisfactory
evidence that it is legal to do so. The Bank of New York Mellon will only distribute whole ADSs. It will sell
shares which would require it to issue a fractional ADS and distribute the net proceeds in the same way as it
distributes cash dividends. If The Bank of New York Mellon does not distribute additional ADSs, each ADS will
also represent the new shares.
Rights to receive additional shares. If we offer holders of our common stock any rights to subscribe for
additional shares of common stock or any other rights, The Bank of New York Mellon may, after consultation
7
with us, make those rights available to you. We must first instruct The Bank of New York Mellon to do so and
furnish it with satisfactory evidence that it is legal to do so. If we do not furnish this evidence and/or do not give
these instructions, and The Bank of New York Mellon decides that it is practical to sell the rights, The Bank of
New York Mellon will sell the rights and distribute the proceeds in the same way as it distributes cash dividends.
The Bank of New York Mellon may allow rights that are not distributed or sold to lapse. In that case, you will
receive no value for them.
If The Bank of New York Mellon makes rights available to you, upon instruction from you it will exercise
the rights and purchase the shares on your behalf. The Bank of New York Mellon will then deposit the shares and
issue ADSs to you. It will only exercise the rights if you pay it the exercise price and any other charges the rights
require you to pay.
U.S. securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after the
exercise of the rights. For example, you may not be able to trade the ADSs freely in the United States. In this
case, The Bank of New York Mellon may issue the ADSs under a separate restricted deposit agreement which
will contain the same provisions as the deposit agreement, except for changes needed to put the restrictions in
place. The Bank of New York Mellon will not offer you rights unless those rights and the securities to which the
rights relate are either exempt from registration or have been registered under the U.S. Securities Act with
respect to a distribution to you. We will have no obligation to register under the Securities Act those rights or the
securities to which they relate.
Other distributions. The Bank of New York Mellon will send to you anything else we distribute on
deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that
way, The Bank of New York Mellon has a choice. It may decide to sell what we distributed and distribute the net
proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case
ADSs will also represent the newly distributed property.
The Bank of New York Mellon is not responsible if it decides that it is unlawful or impractical to make a
distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other
securities under the Securities Act. We also have no obligation to take any other action to permit the distribution
of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions
we make on our shares or any value for them if it is illegal or impractical for us or The Bank of New York
Mellon to make them available to you.
Deposit, Withdrawal and Cancellation
The Bank of New York Mellon will issue ADSs if you or your broker deposits shares or evidence of rights
to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as
stamp taxes or stock transfer taxes or fees, The Bank of New York Mellon will register the appropriate number of
ADSs in the names you request and will deliver the ADSs at its corporate trust office to the persons you request.
In certain circumstances, subject to the provisions of the deposit agreement, The Bank of New York Mellon
may issue ADSs before the deposit of the underlying shares. This is called a pre-release of ADSs. A pre-release
is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs
instead of the shares to close out a pre-release. The depositary may pre-release ADSs only under the following
conditions:
‰ Before or at the time of the pre-release, the person to whom the pre-release is made must represent to
the depositary in writing that it or its customer, as the case may be, owns the shares to be deposited;
‰
‰
The pre-release must be fully collateralized with cash or collateral that the depositary considers
appropriate; and
The depositary must be able to close out the pre-release on not more than five business days’ notice.
8
The pre-release will be subject to whatever indemnities and credit regulations that the depositary considers
appropriate. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a
result of a pre-release.
You may turn in your ADSs at the Corporate Trust Office of The Bank of New York Mellon’s office. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees,
The Bank of New York Mellon will deliver (1) the underlying shares to an account designated by you and
(2) any other deposited securities underlying the ADS at the office of the custodian. Or, at your request, risk and
expense, The Bank of New York Mellon will deliver the deposited securities at its Corporate Trust Office.
The ADSs may only be presented for cancellation and release of the underlying shares of common stock or
other deposited securities in multiples of 100 ADSs. Holders of ADRs evidencing less than 100 ADSs are not
entitled to delivery of any underlying shares or other deposited securities unless ADRs, together with other ADRs
presented by the same holder at the same time, represent in the aggregate at least 100 ADSs. If any ADSs are
surrendered but not cancelled pursuant to the preceding sentence, The Bank of New York Mellon will execute
and deliver an ADR or ADRs evidencing the balance of ADSs not so cancelled to the person or persons
surrendering the same.
Voting Rights
If you are an ADS holder on a record date fixed by The Bank of New York Mellon, you may instruct The
Bank of New York Mellon to vote the shares underlying your ADSs at a meeting of our shareholders in
accordance with the procedures set forth in the deposit agreement.
The Bank of New York Mellon will notify you of the upcoming meeting and arrange to deliver our voting
materials to you. The notice shall contain (a) such information as is contained in such notice of meeting, (b) a
statement that as of the close of business on a specified record date you will be entitled, subject to any applicable
provision of Japanese law and our Articles of Incorporation, to instruct The Bank of New York Mellon as to the
exercise of the voting rights, if any, pertaining to the amount of shares or other deposited securities represented
by your ADSs, and (c) a brief statement as to the manner in which such instructions may be given, including an
express indication that instructions may be given to The Bank of New York Mellon to give a discretionary proxy
to a person designated by us. Upon your written request, received on or before the date established by The Bank
of New York Mellon for such purpose, The Bank of New York Mellon shall endeavor in so far as practicable to
vote or cause to be voted the amount of shares or other deposited securities represented by your ADSs in
accordance with the instructions set forth in your request. So long as Japanese law provides that votes may only
be cast with respect to one or more whole shares or other deposited securities, The Bank of New York Mellon
will aggregate voting instructions to the extent such instructions are the same and vote such whole shares or other
deposited securities in accordance with your instructions. If, after aggregation of all instructions to vote received
by The Bank of New York Mellon, any portion of the aggregated instructions constitutes instructions with
respect to less than a whole share or other deposited securities, The Bank of New York Mellon will not vote or
cause to be voted the shares or other deposited securities to which such portion of the instructions apply. The
Bank of New York Mellon will not vote or attempt to exercise the right to vote that attaches to the shares or other
deposited securities, other than in accordance with the instructions of the ADS holders. If no instructions are
received by The Bank of New York Mellon from you with respect to any of the deposited securities represented
by your ADSs on or before the date established by The Bank of New York Mellon for such purpose, The Bank of
New York Mellon shall deem you to have instructed The Bank of New York Mellon to give a discretionary
proxy to a person designated by us with respect to such deposited securities and The Bank of New York Mellon
shall give a discretionary proxy to a person designated by us to vote such deposited securities, provided that no
such instruction shall be given with respect to any matter as to which we inform The Bank of New York Mellon
(and we have agreed to provide such information as promptly as practicable in writing) that (1) we do not wish
such proxy given, (2) substantial opposition exists or (3) such matter materially and adversely affects the rights
of holders of shares.
9
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct The
Bank of New York Mellon to vote your shares. In addition, The Bank of New York Mellon is not responsible for
failing to carry out voting instructions or for the manner of carrying out voting instructions as long as it has acted
in good faith. This means that you may not be able to exercise your right to vote and there may be nothing you
can do if your shares are not voted as you requested.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the
deposited securities underlying your ADSs. The Bank of New York Mellon may refuse to transfer your ADSs or
allow you to withdraw the deposited securities underlying your ADSs until those taxes or other charges are paid.
It may apply payments owed to you or sell deposited securities underlying your ADSs to pay any taxes owed and
you will remain liable for any deficiency. If it sells deposited securities, it will, if appropriate, reduce the number
of ADSs to reflect the sale and pay to you any property remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
If we:
‰
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reclassify, split up or consolidate any of our shares or the deposited securities;
recapitalize, reorganize, merge, liquidate, consolidate or sell all or substantially all of our assets or take
any similar action; or
distribute securities on the shares that are not distributed to you, then,
(1)
the cash, shares or other securities received by The Bank of New York Mellon will become deposited
securities and each ADS will automatically represent its equal share of the new deposited securities
unless additional ADSs are issued; and
(2) The Bank of New York Mellon may, and will if we request, issue new ADSs or ask you to surrender
your outstanding ADSs in exchange for new ADSs, identifying the new deposited securities.
Amendment and Termination
We may agree with The Bank of New York Mellon to amend the deposit agreement and the ADSs without
your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other
governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such
expenses, or prejudices an important right of ADS holders, it will only become effective three months after The
Bank of New York Mellon notifies you of the amendment. At the time an amendment becomes effective, you are
considered, by continuing to hold your ADS, to agree to the amendment and to be bound by the ADSs and the
deposit agreement as amended. However, no amendment will impair your right to receive the deposited securities
in exchange for your ADSs.
The Bank of New York Mellon will terminate the deposit agreement if we ask it to do so, in which case it
must notify you at least 30 days before termination. The Bank of New York Mellon may also terminate the
deposit agreement if The Bank of New York Mellon has told us that it would like to resign and we have not
appointed a new depositary bank within 60 days.
If any ADSs remain outstanding after termination, The Bank of New York Mellon will stop registering the
transfers of ADSs, will stop distributing dividends to ADS holders and will not give any further notices or do
anything else under the deposit agreement other than:
(1) collect dividends and distributions on the deposited securities;
(2)
sell rights and other property offered to holders of deposited securities; and
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(3) deliver shares and other deposited securities in exchange for ADSs surrendered to The Bank of New
York Mellon.
At any time after one year following termination, The Bank of New York Mellon may sell any remaining
deposited securities. After that, The Bank of New York Mellon will hold the money it received on the sale, as
well as any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS holders that
have not surrendered their ADSs. It will not invest the money and has no liability for interest. The Bank of
New York Mellon’s only obligations will be to account for the money and other cash and with respect to
indemnification and to retain depositary documents. After termination, our only obligations will be with respect
to indemnification and to pay certain amounts to The Bank of New York Mellon.
Limitations on Obligations and Liability to ADS Holders
The deposit agreement expressly limits our obligations and the obligations of The Bank of New York
Mellon. It also limits our liability and the liability of The Bank of New York Mellon. We and The Bank of
New York Mellon:
‰
‰
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are only obligated to take the actions specifically set forth in the deposit agreement without negligence
or bad faith;
are not liable if either is prevented or delayed by law, any provision of our Articles of Incorporation or
circumstances beyond our control from performing our obligations under the deposit agreement;
are not liable if either exercises or fails to exercise discretion permitted under the deposit agreement;
have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the
deposit agreement on your behalf or on behalf of any other party unless indemnified to their satisfaction;
and
‰ may rely upon any advice of or information from legal counsel, accountants, any person depositing
shares, any ADS holder or any other person believed in good faith to be competent to give them that
advice or information.
In the deposit agreement, we and The Bank of New York Mellon agree to indemnify each other for
liabilities arising out of acts performed or omitted by the other party in accordance with the deposit agreement.
Requirements for Depositary Actions
Before The Bank of New York Mellon will issue or register transfer of an ADS, make a distribution on an
ADS, or permit withdrawal of shares, it may require:
‰
‰
‰
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees
charged by third parties for the transfer of any shares or other deposited securities;
production of satisfactory proof of the identity and genuineness of any signature or other information it
deems necessary; and
compliance with regulations it may establish, from time to time, consistent with the deposit agreement,
including presentation of transfer documents.
The Bank of New York Mellon may refuse to deliver, transfer, or register transfers of ADSs generally when
its transfer books are closed, when our transfer books are closed or at any time if it or we think it advisable to do
so.
You have the right to cancel your ADSs and withdraw the underlying shares at any time except:
‰ when temporary delays arise because: (1) The Bank of New York Mellon has closed its transfer books
or we have closed our transfer books; (2) the transfer of shares is blocked to permit voting at a
shareholders’ meeting; or (3) we are paying a dividend on the shares;
11
‰ when you or other ADS holders seeking to withdraw shares owe money to pay fees, taxes and similar
charges; or
‰ when it is necessary to prohibit withdrawals in order to comply with any laws or governmental
regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Reports and Other Communications
The Bank of New York Mellon will make available for your inspection at its corporate trust office any
reports and communications, including any proxy soliciting material, that it receives from us, if those reports and
communications are both (a) received by The Bank of New York Mellon as the holder of the deposited securities
and (b) made generally available by us to the holders of the deposited securities. If we ask it to, The Bank of
New York Mellon will also send you copies of those reports it receives from us.
Inspection of Transfer Books
The Bank of New York Mellon will keep books for the registration and transfer of ADSs, which will be
open for your inspection at all reasonable times. You will only have the right to inspect those books if the
inspection is for the purpose of communicating with other owners of ADSs in connection with our business or a
matter related to the deposit agreement or the ADSs.
Preferred Stock
The following is a summary of information concerning the shares of our preferred stock, including brief
summaries of the relevant provisions of our Articles of Incorporation, the share handling regulations and the
Companies Act as currently in effect. The detailed rights of our preferred stock are set out in our Articles of
Incorporation and the resolutions of our board of directors relating to the issuance of the relevant stock.
General
We are authorized under our Articles of Incorporation to issue four classes of preferred stock totaling
800,000,000 shares of preferred stock, including 400,000,000 shares of each of the second to fourth series of
class 5 preferred stock (provided the aggregate number of shares authorized to be issued with respect to the three
series of class 5 preferred stock does not exceed 400,000,000 shares), 200,000,000 shares of each of the first to
fourth series of class 6 preferred stock (provided the aggregate number of shares authorized to be issued with
respect to the four series of class 6 preferred stock does not exceed 200,000,000 shares), and 200,000,000 shares
of each of the first to fourth series of class 7 preferred stock (provided the aggregate number of shares authorized
to be issued with respect to the four series of class 7 preferred stock does not exceed 200,000,000 shares).
Our preferred stock has equal preference over our shares of common stock with respect to dividend
entitlements and distribution of assets upon our liquidation. However, holders of shares of our preferred stock are
not entitled to vote at general meetings of shareholders, subject to the exceptions provided under our Articles of
Incorporation.
We may acquire shares of second to fourth series of class 5 and first to fourth series of class 6 preferred
stock at our discretion pursuant to the terms and conditions provided by our Articles of Incorporation and the
resolution of our board of directors. The provisions for acquisition of shares of second to fourth series of class 5
and first to fourth series of class 6 preferred stock will be determined by the board of directors at the time of
issuance of such preferred stock. When issued, any holder of shares of first to fourth series of class 6 preferred
stock or first to fourth series of class 7 preferred stock may request acquisition of shares of such preferred stock
in exchange for shares of our common stock during the period determined by resolution of the board of directors
adopted at the time of issuance of such shares of preferred stock. Any shares of first to fourth series of class 6
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preferred stock or first to fourth series of class 7 preferred stock for which no request for acquisition in exchange
for shares of our common stock is made during such period will be mandatorily acquired on the day immediately
following the last day of such period (the “Mandatory Acquisition Date”) in the number obtained by dividing an
amount equivalent to the subscription price per each relevant share of preferred stock by the average
daily closing price of our common stock as reported by the Tokyo Stock Exchange for the 30 trading days
commencing on the 45th trading day prior to the Mandatory Acquisition Date.
Additionally, in order to enable the relevant preferred stock to meet the criteria for Additional Tier 1 capital
under Basel III requirements as adopted by the Financial Services Agency of Japan, the terms of the second to
fourth series of class 5 as well as all the series of class 6 and class 7 preferred stock have mandatory acquisition
provisions. When newly issuing these preferred stock, the board of directors will determine events that will
require us to acquire the relevant preferred stock pursuant to the capital adequacy requirements applicable to us.
Upon the occurrence of such events, we will acquire all the relevant preferred stock on an acquisition date, which
is a date determined by the board of directors either at the time of the issuance or after the occurrence of such
event. We shall acquire the relevant preferred stock in exchange for common stock or for no consideration as
determined by the board of directors at the time of the issuance, considering certain factors including the market
conditions. The formula to be used in exchanging the preferred stock for common stock will also be determined
by the board of directors at the time of the issuance.
Preferred Dividends
In priority to the payment of dividends to holders of our common stock, the amount of preferred dividends
payable each fiscal year for each class of our preferred stock is set forth below:
‰
‰
‰
second to fourth series of class 5 preferred stock: to be set by resolution of our board of directors at the
time of issuance, up to a maximum of ¥250.00 per share;
first to fourth series of class 6 preferred stock: to be set by resolution of our board of directors at the
time of issuance, up to a maximum of ¥125.00 per share; and
first to fourth series of class 7 preferred stock: to be set by resolution of our board of directors at the
time of issuance, up to a maximum of ¥125.00 per share.
In the event that our board of directors decides to pay an interim dividend to holders of record of our
common stock as of September 30 of any year, we will, in priority to the payment of that interim dividend, pay a
preferred interim dividend in the amount specified in our Articles of Incorporation to holders of record of our
preferred stock as of September 30 of the same year. The amount of any preferred interim dividend will be
deducted from the preferred dividend payable on the relevant class of our preferred stock for the same fiscal year.
No preferred dividend will be paid on any of our preferred stock converted into our common stock for the
period from the date following the record date for the preferred dividend or preferred interim dividend last
preceding the relevant conversion date to the relevant conversion date, but the common stock issued upon
conversion will be entitled to receive any dividend payable to holders of record of common stock upon the next
succeeding record date for common stock dividends.
No payment of dividends on our preferred stock or any other shares can be made unless we have a sufficient
distributable amount and a resolution to distribute such distributable amount is obtained at the relevant ordinary
general meeting of shareholders, in the case of annual preferred dividends, or at the board of directors, in the case
of preferred interim dividends.
Dividends on our preferred stock are non-cumulative. If the full amount of any dividend is not declared on
our preferred stock in respect of any fiscal year, holders of our preferred stock do not have any right to receive
dividends in respect of the deficiency in any subsequent fiscal year, and we will have no obligation to pay the
13
deficiency or to pay any interest regardless of whether or not dividends are paid in respect of any subsequent
fiscal year. The holders of our preferred stock are not entitled to any further dividends or other participation in or
distribution of our profits.
Liquidation Rights
In the event of our voluntary or involuntary liquidation, record holders of our preferred stock are entitled,
equally in rank as among themselves, to receive before any distribution out of our residual assets is made to
holders of our common stock, a distribution out of our residual assets of:
‰
‰
‰
¥2,500 per share of second to fourth series of class 5 preferred stock;
¥2,500 per share of first to fourth series of class 6 preferred stock; and
¥2,500 per share of first to fourth series of class 7 preferred stock.
The holders of our preferred stock are not entitled to any further dividends or other participation in or
distribution of our residual assets upon our liquidation.
Voting Rights
No holder of our preferred stock has the right to receive notice of, or to vote at, a general meeting of
shareholders, except as otherwise specifically provided under our Articles of Incorporation or other applicable
law. Under our Articles of Incorporation, holders of our preferred stock will be entitled to receive notice of, and
have one voting right per unit of preferred stock at, our general meetings of shareholders:
‰
‰
from the commencement of our ordinary general meeting of shareholders if an agenda for approval to
declare a preferred dividend is not submitted to such meeting; or
from the close of any ordinary general meeting of shareholders if a proposed resolution to declare a
preferred dividend is not approved at such meeting.
In each case, holders of our preferred stock will be entitled to receive notice of and vote at the relevant
general meetings of shareholders unless and until such time as a resolution of an ordinary general meeting of
shareholders declaring a preferred dividend is passed.
14
Exhibit 11
M UF G Group Code of Conduct 2019
01 If someone asked you wha t M UF G’s most precious asset is, what would you say? I w ould say t rust. Why? Bec ause banking is built on trust – it’s a s simple as that. T hink about w ha t our c ustomers and societ y demand from fina nc ial institutions. They expect us to be strong enough to mai nta in a ste ady suppl y of funding e ve n w hen the e conomic c lima te is tre acherous. They expect us to provide reliable financial services after a cata strophic na tural disaster. T hey expe ct us to be a reliable source of he lp a nd advice in times of individual or institutiona l economic struggle . T his is w hy MU FG has alw ays va lue d a rela tionship of trust with our custome rs above all else. Building on the princ iple s of those w ho ca me be fore us, we w ork to mainta in, improve, and prote ct our reputation by exemplifying stre ngth and dependability – the building blocks of reputation. They’re the qua lities people look for when choosing a n institution to safeguard one of their most prized posse ssi ons: financi al securi ty. Of course, re puta tion must be sustained by quality servic e. If w e let the customer down, our reputation will colla pse instantly. There’s a sa ying: If a clock ever strikes thirte en, it w ill fore ve r be doubted, even when it show s the c orre ct time. Once a reputation ha s bee n damaged, it is not ea sily restored. The refore trust is a matte r of life-and-death for a compa ny like ours, with a massive impa ct on our business results – and even our survival . So: How do we prote ct it? T hrough a rigorous code of consist ent, trustworthy be ha vi or. T he Corporate Vision a nd the Code of Conduct express the values we consider essential to be ing a strong and de pe ndable c ompany. The Corporat e Vision repre sents our basic sta nce and the guiding princ iple s be hind all our acti vitie s. T he Code of Conduc t lays forth a set of standards that guide how w e should all make decisions and a ct in our day-to-day work. Together, they’re our guideposts help us do the right t hing at all times. Le ad with your hea rt M essage from the G roup CE O
02 But the truest standards are within our ow n hea rts. When struggling to make a dec ision at w ork, w e should look to our c onsci ence and ask, “ Could I explain my c onduct to my fa mil y and friends w ith pride?” T hat answer should lead in t he right direction. Likew ise, if you notice anything around you that you suspe ct might contra ve ne the Code of Conduc t e ven slightly, ple ase do not he sitate. Report it to your supervisor or whistleblowing system right aw ay. Re porting these matte rs is pa rt of doing the right thing a nd is the responsibility of eve ry colleague who re presents MU FG. O ur Group entities will a pprecia te your c ourage and be responsible for ca rrying out an appropria te re sponse. No re pe rcussions w ill ever be ta ke n a ga inst a c olle ague who ma ke s a since re a nd hone st report to protect w hat’s right. If every one of us t horoughly unde rsta nds the Code of Conduc t, a nd w orks to put it into da ily practic e, we w ill be be tter-equippe d to be the strong a nd dependable financia l institution tha t soc iety and our customers c an trust. Be comi ng the worl d’s most trusted fina nc ial group depends on ea ch of us – all of us – doing the right thing, every ste p of the w ay. April 2019 Ka ne tsugu Mike M ember of the Boa rd of Directors, President & G roup CE O
03 Conte nts M essage from t he G roup CE O 01 Introduction Corporate Vi sion and Code of Conduct 04 Corporate V ision 05 About the Code of Conduct 07 Fa ilure to Abide by the Code of Conduct 08 Role s a nd Responsibilitie s of M anagers 09 Code of Conduct Struc ture of the Code of Conduct 10 Chapter 1. Custome r Focus 11 H onesty and Integri ty 12 Ensuring Q uality 13 Exc eeding Custome r E xpe ctations 15 Chapter 2. Responsibility as a Corporate Ci tizen 17 A dherence to L aws and Rule s 18 Pre vention of Financia l Crime 19 Contri buting t o Socie ty 20 Cha pte r 3. Attitudes and Be ha viors in the Workplac e 21 Challenge Ourselves to G row 22 Colla borative and Professiona l W orking E nvironment 23 Protecting MU FG’s A ssets and P roperty 25 Re porting Proble m Sit ua tions and Seeking A dvic e 26
04 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Corporate V ision and Code of Conduc t The diagra m below illustrates the relationship betw een our Corporate V ision a nd Code of Conduct. Our V isi on Our M ission O ur Value s Custome r Focus Responsibility as a Corporate Citizen Attitudes in the Workpla ce A cting to ac hie ve the Corporate V ision Code of Conduct Corporate Vision Chapter 1 Chapter 2 Chapte r 3
05 Corporate Vision T he corpora te vision serve s a s the basic policy in conducting our business activitie s, a nd provide s guidelines for all group a ctivities. The corporate vision a lso is the founda tion for management de cisions, including formulating manage me nt strategies and management plans, a nd serve s a s the c ore value for all staff. To be a foundation of strength, committed to me eting the nee ds of our customers, serving society, and fostering sha re d and susta ina ble growth for a be tter w orld. Be the world’s most trusted financia l group Work toge ther to exce ed the e xpec tations of our c ustomers Strive to understand a nd respond to the diverse ne eds of our cust omers. M ainta in and expect the highe st le vels of profe ssionalism and expe rtise, supported by our consolidate d strength. Provide reliable a nd constant support to our c ustomers Give the highest pri ority t o protec ting the interests of our custome rs. Promote healthy, sustaina ble e conomic grow th. M aintain a robust organization that is effecti ve , professiona l, a nd responsive. Expand and strengthe n our globa l presence L everage our stre ngths and c apabilities to attract a loyal globa l c ustomer ba se. Adapt rapidly to c ha nges in the global e conomy and their impa ct on the needs of our customers. Our M ission O ur Vision
06 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Integrity a nd Responsibility Stri ve to be fa ir, transpa rent, and honest. Alw ays a ct re sponsibly in the best inte re sts of c ustomers a nd society, building long-t erm stakeholder relationships and giving back to our c ommuniti es. P rofe ssionalism and Tea mwork Respect the diversity of our fellow worke rs and foster a st rong spirit of te amwork. Expec t t he highest levels of professiona lism. Challenge Ourselves to G row A dopt a globa l pe rspective to anticipa te tre nds and opportunities for grow th. Create and sustain a re sponsive and dynamic workplac e where everyone c an focus on providing outsta nding cust omer servic e and e mbrace new challenges. Our V alues
07 About the Code of Conduct T he Code of Conduc t encapsulates the standards that guide sta ff conduct and de cision-making in our day-to-da y busine ss a ctivities under the MU FG Corpora te Vision. It is de signed to provi de guidance in times of doubt, or when we find it difficult to know if we are making the right c hoice . (In some cases, the Code of Conduct may be supplemented by additional entity or loc ation spec ific guidelines, which provide further spe cific guidance .) In situations w here you fee l unce rta in or find it difficult to rea ch a judgeme nt w ith respect to conduct or a conte mpla ted course of conduc t, you should c onsider the following: Is the conduct in line with the lette r, intent, a nd spirit of the la w and regulations a nd of the rule s, protocols, procedure s, a nd other guidelines de termine d by M UF G entities? Is the conduct al igned with the Corpora te Vision a nd the Code of Conduct? A m I telling myself “this i s for the good of the compa ny” merely as an excuse for the conduct? Is the conduct equivalent to “looking the other way”? Is there any possibili ty that others might regard t he c onduct as inappropriate or une thic al? Is the re any possibility tha t the conduct might dama ge or ne ga tive ly impac t my re puta tion or the reputa tion of the c ompany? Could I ta ke pride in the c onduct if it w as reporte d in the media, or othe rw ise made public, including on soci al me dia? All sta ff must undergo training on the Code of Conduc t once a ye ar, as a general rule . In a ddition, eac h member of sta ff must make an atte sta tion in a form det ermined by the relevant Group entity, tha t he or she w ill abide by the M UFG Code of Conduct . Phrases to Watch Out For Be c are ful if you c atch yourse lf or others using la nguage such as: “Just this once” “ Everyone e lse is doing it” “Don’t a rgue” “It’s urgent so we need to ma ke an exception” “It w ouldn’t be mature to rock the boat” D o not fa ll into the trap of failing to t hink cri tically. Ta ke t he ti me t o think c are fully, and do the right thing.
08 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Failure to A bide by the Code of Conduc t All staff must a bide by the Code of Conduc t, a s w ell as applica ble l aws and regulations, a nd rule s, protocols, and procedures, and othe r guidel ine s dete rmined by G roup M UFG entities. Any c onduct that fa ils to mee t t he se standa rds ma y result in disciplinary me asures, up to and inc luding termination of employment, in accorda nce with the employme nt regul ations and othe r rule s e stablishe d se pa rate ly by individual MU FG c ompanies. Staff may be held pe rsona lly responsible for conduc t that dama ge s the reputation a nd trust of a n M UFG company or damages the compa ny’s i nte rests. Staff may also be he ld responsible for the acti on or inaction of others if the y fail to take action despite knowing about inappropria te behavior or conduc t on the part of others tha t is likely to have a serious negative impact on the trust or inte rests of a ny Group entity, or if they ignore any such conduc t de spite bei ng in a position of responsibilit y requiring them to know a bout it. In addit ion, staff conduc t may be re ported to the releva nt authoritie s, w hi ch c ould re sult in a fine , loss of the qua lific ation to work in the financi al industry, and/or even imprisonme nt. What happens if I ca nnot exce ed c ustomer expe ctations or achieve grow th a nd new c ha llenges? Does that mea n I will be subje ct to disciplinary me asures for fai ling to abide by the Code of Conduct? T he code of conduct contains a mixture of different guidelines. It ems like “ Acting with honesty and int egrity,” and “Prevention of fina ncial crime” must be follow ed at all times. Others, inc luding “Exc eeding c ustomer e xpe ctations” and “growth and challenges” are more like ta rgets that you should aim toward. But no member of staff will be subj ect to disc ipli na ry me asure s merely for failing to mee t the se targe ts. M ee ting Growing S oc ial Expec tations Socie ty ma ke s increa singly high demands of c ompanies in our line of work. Even in cases w he re there is no cle ar infringement of the law , regulations, or rules, prot oc ols, and procedure s dec ide d by individual MU FG c ompanies, there ma y be serious consequences for conduct that goes against soc ial norms, c ontravenes the prac tices of fair trading or ma rket norms, or i s dee me d inappropria te in the light of the commonly ac cepted values of soc iety—this is pa rtic ula rly true in ca ses where the re has bee n a failure to c onsider the c ustomer’s point of view . We must be aw are of the expe ctations of soc iety at all times.
09 Roles and Re sponsibili ties of Ma na ge rs M anagers have several additional roles and re sponsibi lities. (“M anager” here re fers primari ly to Ma na ging Directors, D ire ctors, and ge ne ral, chief and se nior ma na gers wit h responsibility for le ading a tea m.) 1 L ea d by e xample . Y ou should be acute ly a ware of the behavior expecte d of someone in your posi tion, and should be proa ctive about a cting e thic ally in a ccorda nc e with the Corporate Vision a nd the Code of Conduct. 2 Create a workplace environment and atmosphere in which all staff, re gardless of position or job title, can engage in frank a nd constructive discussion in line with the Corporate Vision a nd the Code of Conduct when they are struggling to reac h a w ork-relat ed dec ision. 3 Work t o ensure t ha t sta ff under your supervision understa nd the content of the MU FG Corporate Vision and the Code of Conduct, and ensure that they take responsibility for unde rstanding a nd ac ting in acc ordance wit h these sta ndards. 4 Stri ctly avoid any conduct that could be c onstrue d a s a misuse of your position or influence a s a ma nager. (For example, by plac ing inappropriate pressure on a subordinate for the sake of your own int ere sts or a ctivities.) P roperly overse e the conduct and activitie s of sta ff under your supervision to ensure tha t the y follow a ll applicable law s and regulations, as w ell as rules, protocols, procedure s, and othe r gui de line s de termined by M UFG entities. Ta ke a ppropriate, timely ac tion whe n a problem has arisen or the re a re grounds for concern, e ithe r addre ssing the issue directl y or e sc alating appropriat ely. T he Importance of Liste ning As a supe rvisor, how do you respond when one of your tea m c ome s to you w ith a problem? D o you give them your attention, or simply ask w hat they w ant without e ve n looking up from your de sk? When someone c ome s to you for advice, it is importa nt to take the time to listen carefully a nd with an ope n mind t o w ha t t he y have to say. P artic ularly in the case of a proble m that might t ouch on the Code of Conduct, it is vit al to ta ke appropriate me asures promptly before the problem gets out of hand. Remembe r: the bette r you are as a listene r, the more effec tive you will be as a manage r.
10 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Structure of the Code of Conduct The Code of Conduct is organize d into three c ha pters. Chapter 1 deals w ith the at titude w e should adopt w ith our customers. Ac ting w ith honesty a nd integrit y and pursui ng the best inte re st s of our c ustomers is a c ore component of our busine ss pra ctice s. H one sty and Integrity E nsuring Q ua lity E xcee ding Customer Expecta tions Chapter 2 prese nts a se t of st anda rds de signed to he lp us fulfill our responsibilitie s a s a good corporate citize n. M UFG ’s re puta tion depends upon the trust a nd confidence of our c ustomers and other sta ke holders, inc luding loc al communities, and we are responsible to soc iety on a globa l level. Adhere nc e to Law s and Rules Prevention of Fi na nc ial Crime Contributing to Societ y Chapter 3 describes the actions and mindset that will crea te a stimula ting and supportive w orking environment as MU FG continues to grow . O ur success depends on building and maintaining a dynamic w orkplace w he re a ll staff can re ach their full potentia l i n w ays that support our cust omers and make a val ua ble contributi on to soci ety a s a whole. Cha llenge Oursel ve s to Grow Collaborative a nd Professional Working E nvironment Prot ecting MU FG’s A ssets and Prope rty Reporting Problem Situations a nd Se eking Advice
11 Chapter 1. Customer Foc us O ur custome rs are at the ce nte r of everything we do, and should al ways be the focus of our thoughts. Our aim should be to win the trust and confidence of our c ustomers a t all times. MU FG exists toda y bec ause of the trust and c onfidence that customers have place d in us over ma ny years. Our role is to increase a nd stre ngthen this bedroc k of t rust and c onfide nc e. Our a ctivities are not drive n by t he prospec t of short-te rm ga ins. Inste ad, w e look to build ongoing relat ionships w ith our c ustomers to support their long-term grow th.
12 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Our customers a re a t the c enter of everything w e do. We c arry out fa ir and tra nsparent corpora te activitie s w ith honesty and integrity. We trea t c ustomer assets with care and re spe ct and strive alw ays to ensure that our ac tions do not unjustly damage our custome rs’ interests. Act ing with Honesty and Integrity E ve ry single piec e of work that a ny one of us does is rela ted to our customers. We plac e our custome rs at the cente r of everything we do. Our thoughts are alwa ys of how best to he lp our customers, and we w ork fairly and honestly to support our c ustomers’ long-term sustained growth. Safegua rding Customer A sse ts (Inc luding Informa tion) Our customers e ntrust us with important assets, such a s c ash and sec urities as w ell as informa tion. They place trust and c onfide nc e in us to safe gua rd the se important assets. The loss, le akage, or misuse of our c ustomers’ informa tion ca n not only ca use se rious damage to customer interests, but ca n a lso seriously unde rmine the trust and c onfidence that M UFG has built up over many ye ars. We treat our c ustomers’ assets wit h the utmost c are , a nd ensure that they are properly safeguarde d at a ll time s. Protecting Customer Interests Properly We act wi th hone sty a nd integrity to ensure that our conduct does not unjustly damage c ustomer inte rests. M UFG is an integra ted financia l group made up of diverse business entitie s. When conducti ng business wit h customers, we are se nsit ive t o the possibility of conflic ts of inte re st that may exist betwe en customers or betwe en a custome r and a Group entity. We act appropria tely at all times, in line with the guidelines on ma na ging conflicts of interest. About P erformance O bjectives H ave you ever felt a c onflict of interest betwe en achieving your targets and mai nta ining the custome r’s trust? As a company, w e ha ve a re sponsibi lity to ac hie ve our objec tive s. But these must be a chieved by doing the right thing and earning trust and reputation from our customers. If you ever fee l any c onflict betwe en achieving a n objecti ve a nd maintaining the c ustomer’s trust, alw ays prioritiz e the customer’s trust a bove everything else. Remind yourse lf that achie ving obje ctives is only meaningful if it is achieved by following the c orre ct procedure s. H one sty and Integrity
13 To build la sti ng re lationships of trust and confidence w ith our c ustomers, w e listen carefully to what our custome rs are telling us, and maintain thoroughgoing qual ity control of a ll our products and service s, from planning and de ve lopment to provision and subseque nt revisions, wit h a view to further e nha nc ing quality. Be st P ossible Products and Services for Customers O ur custome rs expect trustw orthiness and honesty in our conduc t. In orde r to earn trust from custome rs and build lasting positive busine ss relationships wi th them, it is importa nt to maintain thorough qua lity c ontrol a t all stages in t he deve lopment and de live ry of our produc ts a nd servi ces. Quality control means developi ng and providing the be st possible products a nd servic es for c ustomers, a nd ensuring accuracy and sa fe ty in all our business deali ngs. To this e nd, it is import ant to alw ays ke ep in mind the follow ing princ ipl es: 1 When planning and de ve loping product s a nd servic es, we cle arly define the custome rs for w hom they are inte nde d, and ascertain a cle ar se nse of c ustomer ne eds. 2 E nsure tha t the na ture of products and se rvices a re unde rstood by the customers and that a ny associat ed risks a re w ithin a ccepta ble le vels for the customers. 3 Ensure that products and service s proposed and provided to customers ma tch their purposes, ne eds, know ledge, experie nc e, financia l capabilitie s, and othe r re levant conditi ons. 4 We should be equipped w ith t he knowledge and skil ls nec essary to propose a nd provide our products a nd servic es. Give cle ar a nd acc urate e xpla na tions that allow c ustomers to unde rstand the nature a nd risks of our produc ts a nd services as we ll as to understa nd and acc ept the risks a ssoc iated with them. Be fair-minded, courteous, a nd sincere in all dealings w ith our c ustomers. T ake customer c omments, wishes, and c omplaints seriously and share them appropriate ly w ith the rele va nt divisions wit hin M UFG to improve qua lity. E nsuring Quali ty
14 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Unending Work to Improve Quality We regularly confirm tha t our products and service s are me eting the nee ds of our customers, and work constantly to review a nd improve the qualit y of a ll our products and service s. What does qua lity c ontrol mea n in fina nc ial servic es? Qua lity c ontrol is a te rm often used in manufac turing businesses, but w ha t does it. mean for us in the financial se rvices industry? The financial products and se rvice s w e provide are diffe rent from t angible products that ca n be inspe cted by e ye and held in the ha nd. But w e must a lways keep in mind the ide a of qua lity c ontrol i n assessing our se rvice s the sa me w ay as physica l products. Do they meet customer nee ds, and are our se rvices ac cessible and easy to use ? Because our products and se rvice s c annot be chec ke d by the eye, it i s vital to monitor quality control through the “li fe cyc le ba se,” from the planning a nd developme nt sta ge to sale s a nd beyond to aft er-servic e care. If there is a problem, it will often be a ppa rent from our interact ions with the custome r. Often, staff at the compa ny wi ll be a ware of the problem before anyone e lse . It is important alwa ys to be awa re of w hat custome rs are thinking in te rms of the ir perceptions of se rvice .
15 We aim to me et the dive rse nee ds of our customers w orldwide, and to provide servic es excee ding their e xpec tations through the highest standards of professiona lism, by le vera ging our global netw ork and the consolida ted strengths of the entire G roup. Improving Expertise Customer ne eds a re bec oming more dive rse a nd sophistica ted all the time. To provide our c ustomers with the be st possibl e produc ts a nd servic es, every one of us w orks to improve our profe ssional know ledge and expe rtise. L evera ging the Consolidated Strengths of M UFG Our customers have high e xpec tations of the consolidated strengths of M UFG , a s a group that brings together dive rse busi ne ss e ntitie s. For our c ustomers, M UF G is a single c ompany. W e me et those expe ctations not by focusing on our c ontributions as individua ls but through te amwork. We will c ontinue to provide services that exce ed customer expecta tions by bri nging our strengths and capabilitie s together and a cting a s a n inte grated group. U sing Our G loba l Netw ork As our custome rs become incre asingly globa l in their business act ivitie s, they choose financia l products and servic es ba sed on a ca reful comparison w ith those availa bl e around the w orld. We use M UF G’s global ne twork to provide outstanding products and se rvice s that a re truly w orld c lass. Exce eding Customer Expect ations
16 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Le ssons Lea rned Reports on c orporate sc anda ls a ppe ar in the media almost on a daily basis. Y ou must ne ve r think that these sca nda ls a re something that doesn’t concern us. What has ha ppe ne d a t other compa nie s c ould happe n here too. Sc andals ha ve affect ed M UF G compa ni es as well. We must analyze the reasons for these failure s, discuss ways of ensuring the y do not happen a gain, a nd then imple me nt these me asures thoroughly. Being humble enough t o lea rn from our own mistakes and t hose of others is a key part of w hat it takes to build a good, strong company.
17 Chapter 2. Responsibility as a Corporate Cit izen As we de ve lop our business globa lly, w e comply with all the domestic and inte rnational law s and rules tha t ma y a pply. We do all w e ca n to maintain stability a nd confidenc e in the global financia l syste m, and contribute to the sound and healthy growth of soc iety. Awa re of the responsibility eac h of us has as a member of M UFG , we ca rry out fa ir and transparent corporat e activitie s w ith honesty a nd integrity, in a manne r that supports a nd stre ngthens the trust and confidence M UFG ha s e arned from soci ety over ma ny years.
18 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 In addition to adhering stric tly to all dome stic and i nte rnational law s a nd rule s, w e strive to do the right thing base d on our strict code of et hic s. V iola tions of la ws or rules damage the vital social infrastructure of the financial system and lead to a loss of trust in MU FG. We strictly abide by all la ws and rules re lating to our business, including the followi ng areas: Prohibition of Insider T ra ding Insider trading is ille ga l in many countries and i s strictly re gulate d, regardle ss of the a mount of money involved. We manage material information rigorously and ha ve no involvement in activitie s that use mate rial nonpublic informa tion to gain illegal profits. Ban on U nfair Trading Practic es As a participant in a fair, transparent, a nd free compet itive ma rket, we ha ve no involvement with unfair tra ding prac tices (inc luding cartels, abuse of dominant position, a nd marke t ma nipulati on). We a bi de strictly with all the law s and rules in plac e to prot ect fair trading, including firew all regula tions and the arm’s length rule . A nti-bribery and Corrupt ion Bribery is a se rious proble m a round the world, and ma ny countrie s have strict law s prohibiting all forms of bribe ry. We ha ve zero tolerance for bribery of all kinds. Appropria te Disclosure To ensure that M UFG is properly understood and e va lua ted in the w ide r society, it is inc umbent on us to e nsure that compa ny informa tion is disclosed in a time ly and appropriat e ma nne r, including financi al re ports. Concea lme nt or nondisc losure of informa tion damages our trust and reputation. We will not be involved in any inaccurate or inappropria te disclosure of informa tion, or in any a ttempt to c once al informa tion. Adherence to La ws and Rules
19 We have ze ro tol era nc e for financial c rime or a ny atte mpt to circ umvent the rule s a nd proce dures aimed at preventing financia l crime . We ta ke all re asona ble steps possibl e to prevent our products and servic es be ing used by indi viduals or entitie s involve d in illegal or improper activitie s such as mone y laundering and terrorist fina nc ing. Prevention of M one y L aunde ring and O the r M isuse of Financial Se rvices O ur custome rs place their trust in us beca use the y a re confi de nt that the fina nc ial servi ces we provide contri bute to healthy soc ioe conomic development. We re ma in a lert to the possibility that the financia l se rvice s provided by M UFG on a globa l ba sis ma y be misuse d to fa cilita te financia l crime s such as money laundering, terrorist financing, investment fraud, and illegal w ithdrawa ls using counterfe it or stol en c ards, and do everything in our power to prevent illicit ac tivities involving our products and se rvices. No Rela tionships w ith Criminal Ele ments A ll rel ationships with any c riminal ele me nts a re strictly forbidden. We work closely with the police, legal counsel, and other rele va nt e xte rnal orga niz ations to protec t the sa fety of all our staff. What Is F ina nc ial Crime ? In addition to money laundering, which aims to give an appearance of le git ima cy to income from ta x e va sion, smuggling, organiz ed c rime, ille ga l a rms dealing, a nd other c riminal ac tivitie s, financial c rime covers te rrorist financ ing, economic sanctions, bribery, a nd corruption, as we ll as fraud, counterfeiting, impe rsona tion, and ot he r atte mpts to illicitly obta in financial asse ts from a custome r or financial institution. Prevention of Fi na nc ial Crime
20 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 We re spe ct the history, c ultures, a nd customs of diffe rent countrie s a nd re gions around the w orld, and w ork to contribute to the developme nt of loca l and global communities and the protecti on of the environment throughout our corporate ac tivities and t he socia l volunteer efforts of our staff. Giving Ba ck to Communitie s A s a good c orporate citize n, M UFG is proa ctively enga ge d w ith loc al communities and contributes to thei r developme nt. A s members of regional communities a nd the global c ommuni ty, we volunteer actively to take part in ac tivit ies tha t ma ke a meaningful contribut ion to soc iety. Commitment to the E nvironment We w ork to minimize the environmental impact of our corporate ac tivit ies, a s well as striving to de ve lop and supply products and servic es tha t contribut e to e nvironmental c onservation a nd protec tion, thus contributing to making a susta ina ble soc iety a rea lity. Sustaina ble G row th H ave you ever he ard of “E SG ” or “SD Gs”? E SG sta nds for “Environment, Soc ial and Governance ”; thre e essential ele ments for the long-term grow th of a company. SDG s (“Sustainable D evelopme nt G oals”) a re the bluepri nt for coope rati ve inte rac tions betw een na tiona l governments and private c ompanies to tackle social issues, such a s c lean energy a nd economic growth, to a chieve a better global future. Our c ustomers a nd investors now ha ve a strong te nde nc y to view companies from such perspec tives. Wi th the development of the ‘informa tion societ y’, i nc luding the i ntroduction of social netw orking services, our soc iety ha s bec ome a pla ce whe re good and ba d c onduct can be qui ckly a nd easily reveale d to the public. Inc rea singly, a compa ny that engages in prope r conduc t as a corpora te citiz en c an win more trust from c ustomers a nd rece ive positive evaluations from investors. Howe ve r, the re ve rse is also true. With conside ra tion of the public na ture of fina nc ial servi ces and our position in the industry, we must assume that soc ial expecta tions towa rds MU FG are very high and it is the refore e sse ntial that eac h member of staff and e xe cutive engages in proper conduct w ith a n understa nding of those e xpec tations. Contributing to Society
21 Chapter 3. Attitudes and Be haviors in the Workplac e We stri ve to respond and a da pt promptly to the diversifying and evolving needs of our customers and the rapidly c ha nging environme nt in which we w ork. The worki ng environment at MU FG foste rs mutual respect, ena ble s individua ls to make the most of the ir abilities a s professiona ls, a nd maximizes the power of teamw ork a cross re gi ons and diffe rent areas of busine ss, e nc ouraging all sta ff to embra ce new c ha llenges. We work alw ays to prote ct and ma inta in the ta ngible and intangible a sse ts and property tha t M UF G has acc umulate d.
22 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 We strive to enhance our know ledge, expe rtise, and pote nti al and maximize the powe r of te amwork. We believe that the cha nging business environme nt repre se nts opportunit y and are alwa ys ready to e mbrace new challenges in ne w fi elds. Pe rsonal Grow th A s the ne eds a nd busine sse s of our c ustomers continue to evolve , it is essentia l t ha t w e too c ontinue to grow profe ssi onally so as to provide the best possible products and se rvices for custome rs. We endeavor to improve our individua l skills, abilitie s, and pote ntia l, t hrough our work and by taking a dvanta ge of training and e duca tiona l opportunities both inside a nd outside of MU FG. We proac tively support the efforts of a ll M UF G staff toward pe rsonal growth. Tea mwork We share d information, skills, and e xpertise, working in te ams to a ccompl ish goals tha t individuals working a lone c ould not have a chieved. W e are committe d to maximizing the powe r of tea mw ork in pursuit of our business. Openness to New Chal lenge s We work to adapt adroitly to c ha nges in our customers and in society, taking on ne w challe nge s. M onitoring developme nt s in society and change s in the busine ss environment with ever greate r vigilance, w e embrac e new challe nge s in the belief that change re presents opportunity. G row th and Challenges Le arning and e xperience a re importa nt aspec ts of how w e grow as people. But sometimes chall enge s a re nec essary too. P artic ularly when major c ha nges a re happening, ac cepting a challenge without fea r of failure c an lead to ma jor growth. This applies not only to individuals but to entire organizat ions. There is no grow th w ithout challe nges, and no succe ss w ithout growth. Cha llenge Ourse lve s t o G row
23 We respe ct the huma n rights and diversity of all M UFG sta ff. We do not e ngage in or tolerate any form of discrimina tion or harassment or any other be ha vior tha t infri nges these belie fs. Respect for Human Rights and Diversit y A s a global group, our workforc e is highly diverse in te rms of ra ce, national origin, bel ief, religion, disabilities, fa mily origin, ge nde r, sexua l orientation, ge nder identity, a ge , a nd health status. Diversity is one of MU FG’s st rengths. We do not tolerate discrimina tion or infringement of the rights of any individua l, a nd re spe ct a diversity of values. Open Communication We stri ve to creat e an open and vibrant workplace in w hic h sta ff dea l with one a nother with sinc erity a nd honesty, re ga rdless of posi tion, helping and re spec ting e ach ot he r. Prohibition of H arassme nt H arassment undermines the dignit y of the recipient and seriously da ma ge s t he smooth running of the organization. W e do not c ommit or tolerate a ny sexual hara ssme nt, power ha rassment, or other thre atening or hostile behavior, including harassment from exte rnal sources. Collaborat ive a nd Professional Working E nvironme nt
24 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 Harassment in the Workplac e Workplace se xua l harassment is de fined as unw elcome sexual advance s or c onduct of a sexual nature ma de against a nother pe rson in the w orkpla ce, whether of the same or opposite sex. Sexual harassment ma y be “quid pro quo” hara ssme nt, in which there is a t hreat of dismissal, demotion, pa y reduction, or loss of othe r benefit if the advances are refused. In “hostile work environment” harassment, c onduct of a sexual nature unreasonably interfe res w ith the performa nc e of a person’s job or create s a hostile or offensive work environment. Power ha rassment is when a person abuses a position in the w orkpla ce hierarchy to cause mental or physical suffering to anot he r person in the w orkplace through c onduct that goe s be yond w hat is appropriate for work-related reasons, crea ting a negative w ork environme nt. M UFG c ompanies take strict disciplinary mea sures to dea l with any a nd all a cts of incidents of ha rassment.
25 We protec t the tangible a nd intangibl e assets and prope rty of MU FG a nd individual Group entitie s, and do not tole rat e any behavior that might da ma ge the se assets. The ta ngible and intangible a sse ts tha t MU FG has acc umulate d through it s c orporate a ctivities play an importa nt role in our business operations. We c ontinue to cont ribute to the a ccumulation of c orporate assets, support their proper protecti on and ma na ge ment, a nd do not tolera te any pe rsonal misuse of these a ssets. Protec ting M UFG ’s Assets and Property
26 Introduction Code of Conduc t Cha pte r 1 Cha pte r 2 Cha pte r 3 If you be come awa re of c onduct that contra ve ne s the la w, compa ny regula tions, or the provisions of this Code of Conduc t, or any other proble m situations, you should promptly report the matte r and seek advice from a supervisor or issue a report via M UFG ’s w histle blow ing system. V iolations of la ws, re gulations and M UF G polic ies, protoc ol s a nd proce dures cannot only se riously damage the trust a nd confidenc e tha t we have built up among our customers a nd the wider soc iety, but may also c ause losse s to M UFG a s a whole. If you suspect there is any proble m w ithin the company, you should promptly report the matte r to an appropriate person, for example a supe rvisor or senior manager, or you should use the various w histle blow ing arra ngeme nts in pl ace a cross the Group or othe r means availa ble loc ally. Whe the r the whistle blowi ng arrangements are used or not, the person who rece ives the report or information a bout any proble m w ill tre at it in the strictest confi de nc e and M UF G is committe d to ensuring tha t reporting staff do not suffe r re talia tion or other negative c onsequence s. Spea k U p If you have conce rns or questions about conduct that you think might c ontravene the law , c ompany regulations, or t his Code of Conduct, be sure to report the matte r promptly to the appropria te person or seek advice from a supervisor or person in c ha rge of compliance issues, or use the whistleblowing system esta blished wit hin ea ch M UF G compa ny. Ne ve r worry that you might be making a fuss a bout some thing minor. T rust your se nse tha t something i s w rong. T he re w ill never be any re pe rcussions for re porting a matt er through the w histle blow ing system. Manage me nt w ill be responsible for ca rrying out full a nd proper i nvestigation into the matte r you have brought to our attention. By speaking up, you help t he c ompany to prevent scandals and violations be fore the y happen, and minimize the damage ca use d by infri ngements that have already taken pl ace. Reporting Problem Situations and Se eking A dvice
M itsubishi U FJ F ina nc ial Group, Inc. Complia nce Division Corporate Pla nning Division A pril 2019 establishme nt
Excerpts from MUFG’s Compliance Rules
(English Translation)
(Objective)
Article 1.
These rules prescribe basic matters relating to compliance with laws and regulations.
(Revision and abolition)
Article 2.
These rules may be revised or abolished by decision of the Executive Committee; provided, however, that
any material revision or abolishment of rules relating to the duties and responsibilities of the Board of Directors
or Member of the Board of Directors shall be made pursuant to a resolution of the Board of Directors.
(Definitions)
Article 4.
(1)
(2)
(3)
In these rules, “laws and regulations” mean laws and government ordinances to be strictly observed by
MUFG personnel when carrying out business operations, as well as MUFG’s Articles of Incorporation,
Code of Ethics, and other rules and regulations established according to the laws and government
ordinances above.
In these rules, “compliance” means understanding the purpose and contents of laws and regulations
properly, and behaving in an appropriate manner so as not to violate applicable laws and regulations.
In these rules, “affiliates” is a general term for MUFG’s consolidated subsidiaries and affiliated companies
accounted for by the equity-method.
(4)
In these rules, “MUFG Group” means MUFG and its affiliates.
(Fundamental Policy)
Article 5.
The MUFG Ethical Framework and Code of Conduct are the foundations of compliance at MUFG.
(Responsibilities of Members of the Board of Directors, Corporate Executives (Shikko Yaku), Executive officers
(Shikko Yakuin) and Board of Directors)
Article 6.
(1)
In accordance with the “Ethical Framework and Code of Conduct”, MUFG Members of the Board of
Directors, corporate executives (shikko yaku) and executive officers (shikko yakuin) must carry out their
responsibilities with the recognition that compliance is one of the most important objectives of management.
(2) The board of directors must establish systems necessary for compliance and seek to achieve and maintain
compliance.
(Responsibility of MUFG Managing Directors)
Article 7.
Managing Directors must implement compliance within their division.
(Responsibility of MUFG Employees)
Article 8.
(1) MUFG employees must ensure compliance while performing their duties, and act in accordance with the
“Ethical Framework and Code of Conduct”.
(2) MUFG employees must strive to acquire adequate knowledge of the laws and regulations which are
necessary to their business operations.
(Directors in charge of the Global Compliance Division and the Global Financial Crimes Division)
Article 10.
(1) The Directors in charge of the Global Compliance Division and the Global Financial Crimes Division must
report matters concerning compliance to the Board of Directors or Executive Committee as necessary.
(2) When there is a risk of an unavoidable conflict of interest with a different division that the director in charge
of the Global Compliance Division is also in charge of, to insure the independence of the Global
Compliance Division, the managing director of the Global Compliance Division shall report to the President
and CEO. The President and CEO will report to the Board of Directors or Executive Committee as
necessary. Appropriate action shall also be taken to avoid conflicts of interest in cases other than those
mentioned above.
(Office in Charge of Compliance)
Article 11.
(1) The Global Compliance Division is in charge of overseeing the overall compliance framework.
*
*
*
(4) When the Global Compliance Division receives reports of problems or possible problems relating to
compliance, or when it discovers such problems itself, it must take necessary actions.
Article 11. ii
The Global Financial Crimes Division is in charge of overseeing the Group’s measures and management
systems concerning global financial crimes, including money laundering prevention, economic sanctions
measures, and bribery and corruption prevention.
(Compliance Officers Responsible)
Article 12.
The head of each business group is the compliance officer responsible for that business group. The
compliance officer responsible oversees their business group and is responsible for any compliance related
planning and supervision within their jurisdiction.
(Group Chief Compliance Officer)
Article 13.
(1) A Group Chief Compliance Officer (CCO) (primarily the responsibility of the Global Compliance Division
and the Global Financial Crimes Division) will be appointed based on Article 19 Paragraph 2 of the
Organizational Regulations. When there is no appointed Group CCO, the director overseeing the Global
Compliance Division will act as CCO.
(2) The Group CCO (or in cases where there is no Group CCO, the CCO) shall oversee the coordination of
division compliance officers (defined in Article 14), the chief compliance officer of each company in the
MUFG Group, and any persons filling both those roles, as well as provide necessary guidance, advice and
instruction based on the management agreement.
(3) The Group CCO (or in cases where there is no Group CCO, the CCO) can request reports on compliance
matters from the specified compliance officers responsible (defined in Article 12).
(Division Compliance Officers)
Article 14.
*
*
*
(1) A chief manager in each division will serve as division compliance officer. Each managing director may
appoint a person equivalent to a chief manager as division compliance officer. In such cases, the managing
director should report to the Global Compliance Division in the Corporate Center, the compliance officer
responsible for each business group (defined in Article 12), or the Global Compliance Division.
(2) The division compliance officer is responsible for the strengthening of compliance in each division and for
planning and supervising compliance related issues regarding business matters under their jurisdiction.
Furthermore, the compliance officer will carry out duties including the management and compliance
checking of documents, gathering information concerning the establishment and revision of laws relating to
the duties of each division, working to improve general compliance conditions, and will play a central role
in implementing compliance measures in each division.
(Responsibilities of Managing Directors)
Article 15.
When the managing director receives reports of problems or possible problems relating to compliance from
the division compliance officer, or when they discover such problems themselves, they must consult with the
managing director of the Global Compliance Division as well as provide orders and instructions to the division
compliance officer. Furthermore, in each business group, they must report to the compliance officer responsible.
(Compliance Reporting System)
Article 16.
(1) When a MUFG employee discovers problems or possible problems relating to compliance, they must report
directly to their senior managers and the division compliance officer as stipulated in Article 14.
(2) A person receiving such report must treat the report with appropriate care in working towards a resolution.
Furthermore, the information relating to any reporting person must be treated with appropriate caution.
(3) When the compliance officers receive reports of or otherwise detect violations of laws and regulations, or
possible violations, they must report directly to the Global Compliance Division or the Global Financial
Crimes Division and the managing director of their division. In cases where the managing director is
involved in inappropriate conduct or behavior (including cases where such involvement is suspected or
where a determination as to such involvement is difficult to make), such reports must be made to the Global
Compliance Division or the Global Financial Crimes Division.
(4) When a MUFG employee does not wish to report to their senior managers and the division compliance
officer due to said officer being complicit in a violation of laws and regulations or the possibility thereof, or
when no response or remediation is made despite an employee having made a report, the employee can
report directly to the Global Compliance Division. In each business group, reports can be made to necessary
parties other than those mentioned above, based on the instructions of the compliance officer responsible
(defined in Article 12).
(5) When a report of a problem or possible problem relating to compliance are made, it shall be prohibited to
take any action to seek or identify the person who made the report or take any adverse employment action
against such person for making the report.
Excerpts from MUFG’s Compliance Manual
(English Translation)
I.
Legal issues regarding Management
(3) Board Director and Corporate Executive
(4) Transactions involving a conflict of interest
When a Board Member or a Corporate Executive engages in a transaction involving a conflict of
interest, the Board Member or the Corporate Executive must receive the approval of the Board of
Directors.
III. Specific issues
5. Conflicts of interest
When a conflict of interest arises in connection with an operation involving any of the MUFG Group
companies, Directors or employees, on one hand, and a customer or other third-party, the Director or
employee, the MUFG Group company to which such Director or employee belongs, or any other
MUFG Group company, on the other, the MUFG Group company, Director or employee must perform
the operation in a proper manner.
Excerpts from MUFG’s Rules of Employment
(English Translation)
(Disciplinary Action)
Article 40.
The company will take disciplinary action when employees take the following prohibited actions:
(17) If an employee violated the rules of employment or any other applicable internal rules.
CERTIFICATION
Exhibit 12
I, Kanetsugu Mike, certify that:
1.
I have reviewed this annual report on Form 20-F of Mitsubishi UFJ Financial Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that
occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the company’s auditors and the audit committee of the
company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the company’s internal control over financial reporting.
July 10, 2019
/s/ Kanetsugu Mike
Name: Kanetsugu Mike
Title: President & Group Chief Executive Officer
CERTIFICATION
I, Muneaki Tokunari, certify that:
1.
I have reviewed this annual report on Form 20-F of Mitsubishi UFJ Financial Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that
occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the company’s auditors and the audit committee of the
company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the company’s internal control over financial reporting.
July 10, 2019
/s/ Muneaki Tokunari
Name: Muneaki Tokunari
Title: Group Chief Financial Officer
Exhibit 13
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CERTIFICATION REQUIRED BY
RULE 13a-14(b) OR RULE 15d-14(b)
AND 18 U.S.C. Section 1350
In connection with the Annual Report of Mitsubishi UFJ Financial Group, Inc. (the “Company”) on
Form 20-F for the fiscal year ended March 31, 2019 as filed with the US Securities and Exchange Commission
on the date hereof (the “Report”), I, Kanetsugu Mike, President & Group Chief Executive Officer of the
Company, hereby certify, pursuant to 18 U.S.C. Section 1350 that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: July 10, 2019
/s/ Kanetsugu Mike
Name: Kanetsugu Mike
Title: President & Group Chief Executive Officer
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CERTIFICATION REQUIRED BY
RULE 13a-14(b) OR RULE 15d-14(b)
AND 18 U.S.C. Section 1350
In connection with the Annual Report of Mitsubishi UFJ Financial Group, Inc. (the “Company”) on
Form 20-F for the fiscal year ended March 31, 2019 as filed with the US Securities and Exchange Commission
on the date hereof (the “Report”), I, Muneaki Tokunari, Group Chief Financial Officer of the Company, hereby
certify, pursuant to 18 U.S.C. Section 1350 that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: July 10, 2019
/s/ Muneaki Tokunari
Name: Muneaki Tokunari
Title: Group Chief Financial Officer
Exhibit 15(a)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No. 333-230590 on Form S-8
and the Registration Statement No. 333-229697 on Form F-3 of our reports dated July 10, 2019, relating to the
consolidated financial statements of Mitsubishi UFJ Financial Group, Inc. (“MUFG”) and subsidiaries (together,
the “MUFG Group”) (which report expresses an unqualified opinion and includes an explanatory paragraph
relating to the change in accounting principle for its method of accounting for unrealized holding gains and
losses on equity investment securities due to the adoption of Financial Accounting Standards Board Accounting
Standards Update 2016-01, Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement
of Financial Assets and Financial Liabilities as discussed in Note 1 to the consolidated financial statements), and
the effectiveness of the MUFG Group’s internal control over financial reporting, appearing in the Annual Report
on Form 20-F of the MUFG Group for the year ended March 31, 2019.
/s/Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 10, 2019
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-229697 on Form F-3 and in
Registration Statement No. 333-230590 on Form S-8 of Mitsubishi UFJ Financial Group, Inc. of our reports
dated February 26, 2019, relating to the consolidated financial statements of Morgan Stanley, and the
effectiveness of Morgan Stanley’s internal control over financial reporting, appearing in the Annual Report on
Form 10-K of Morgan Stanley for the year ended December 31, 2018.
Exhibit 15(b)
/s/ Deloitte & Touche LLP
New York, New York
July 10, 2019
CAPITALIZATION AND INDEBTEDNESS
The following table presents our capitalization and indebtedness at March 31, 2019:
Total short-term borrowings(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit 99(a)
At March 31,
2019
(in millions)
¥38,055,064
Long-term debt:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation under sale-and-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under loan securitization transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,536
40,732
22,468,006
4,832,772
641,850
(15,353)
Total long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,990,543
Shareholders’ equity:
Capital stock, with no stated value (common stock authorized: 33,000,000,000 shares;
common stock issued: 13,667,770,520 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings:
Appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost: 745,921,774 common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,090,270
5,577,186
239,571
8,094,026
(284,269)
(517,236)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,199,548
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
785,200
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,984,748
Total capitalization and indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥43,975,291
Note:
(1) Total short-term borrowings consist of call money and funds purchased, payables under repurchase agreements, payables under securities
lending transactions, due to trust account and other short-term borrowings.
UNAUDITED REVERSE RECONCILIATION OF
SELECTED FINANCIAL INFORMATION
Exhibit 99(b)
Our consolidated financial statements are prepared in accordance with U.S. GAAP as described in the notes
thereto. The basis of our consolidated financial statements prepared under U.S. GAAP is significantly different
from Japanese GAAP in certain respects. Under Japanese banking regulations and Tokyo Stock Exchange rules,
we are required to report our annual and quarterly results prepared in accordance with Japanese GAAP. We
present below a reverse reconciliation of total equity under U.S. GAAP to net assets under Japanese GAAP as of
March 31, 2019 and net income before attribution of noncontrolling interests for the fiscal year ended March 31,
2019.
Total equity in accordance with U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Differences arising from different accounting for:
1. Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Derivative financial instruments and hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Goodwill
11. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax effects, when applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
March 31, 2019
(in millions)
¥15,984,748
77,262
(11,499)
151,564
391,857
(13,524)
233,526
44,066
(271)
362,025
213,079
(8,940)
616,445
(598,176)
(180,485)
Net assets in accordance with Japanese GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥17,261,677
Net income before attribution of noncontrolling interests in accordance with U.S. GAAP . . . . .
Differences arising from different accounting for:
1. Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Derivative financial instruments and hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax effects, when applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the fiscal year
ended
March 31, 2019
(in millions)
737,605
¥
176,130
418
85,365
(30,706)
(29,614)
(92,415)
4,669
(3,963)
94,392
(17,431)
4,670
70,580
(404)
(49,538)
Net income before attribution of noncontrolling interests in accordance with Japanese
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
949,758
Explanation of Differences between U.S. GAAP and Japanese GAAP
Major factors which explain the differences shown in the above table are as follows:
1. Investment securities
The cost basis of certain securities is different under U.S. GAAP and Japanese GAAP due primarily to the
following:
‰ On October 1, 2005, Mitsubishi Tokyo Financial Group, Inc. (“MTFG”) merged with UFJ Holdings,
Inc. (“UFJ Holdings”), with MTFG being the surviving entity, and was renamed “Mitsubishi UFJ
Financial Group, Inc.” Under U.S. GAAP, in accordance with the guidance on accounting for business
combinations, the assets and liabilities of companies acquired in purchase transactions are recorded at
fair value at the date of acquisition. Therefore, the new cost basis of investment securities, including
available-for-sale and other investment securities, of UFJ Holdings was established and they were
recognized at fair value as of October 1, 2005. Under Japanese GAAP, which was effective as of
October 1, 2005, the new cost basis was not established for such investment securities and they were
carried over at their historical cost basis.
‰ Under U.S. GAAP, other-than-temporary impairment is recognized in earnings for a debt security if an
entity has intent to sell such a debt security or if it is more likely than not that the entity will be required
to sell such a debt security before recovery of its amortized cost basis. If not, the credit component of
other-than-temporary impairment on the debt security is recognized in earnings, but the noncredit
component is recognized in other comprehensive income. In determining whether a decline in fair value
below cost is other-than-temporary, in addition to the ability and positive intent to hold the investments
for a period sufficient to allow for any anticipated recovery in fair value, factors such as the extent of
decline in fair value below cost and the length of time that the decline has continued are considered. In
addition, marketable equity securities are measured at fair value with unrealized gains or losses reflected
in net income. Under Japanese GAAP, significant declines in the fair value of securities below cost are
recorded in earnings for both debt security and marketable equity security. In determining a significant
decline, the extent of the decline in fair value below cost and credit standing of the issuers are
considered.
‰ Under U.S. GAAP, measurement alternative is elected for nonmarketable equity securities, and these
securities are primarily measured at cost minus impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for an identical or similar investment of the same
issuer. Under Japanese GAAP, these securities are measured at cost minus impairment, but changes
resulting from observable price changes are not recognized.
‰ U.S. GAAP requires accounting for the transactions at fair value when investments in acquired
companies are exchanged for investments in the surviving companies in accordance with the guidance
on accounting for nonmonetary exchange of cost-method investments, while these transactions have
been accounted for at cost under Japanese GAAP.
‰ Under U.S. GAAP, changes in the fair value of foreign securities held by MUFG Bank and Mitsubishi
UFJ Trust and Banking are recognized in earnings since the fair value option was elected for these
foreign securities in accordance with the guidance on accounting for fair value options for financial
assets and financial liabilities. Under Japanese GAAP, only the changes attributable to movements in
foreign currency exchange rates are recognized in earnings and the other changes in the fair value are
recognized in other comprehensive income.
2. Loans
Under U.S. GAAP, loan origination fees, net of certain direct origination costs, are deferred and recognized
as income over the contractual life of the loans, while under Japanese GAAP, they are primarily recognized in
earnings at the time of origination.
3. Allowance for credit losses
Under U.S. GAAP, the credit loss allowance for impaired loans is calculated primarily based on the present
value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market
price, or the fair value of the collateral if the loan is collateral dependent, in accordance with the guidance on
accounting by creditors for the impairment of a loan. Under Japanese GAAP, an allowance is provided for certain
types of impaired loans based on historical loss experience. This difference between U.S. GAAP and Japanese
GAAP generally results in a larger amount of allowance for credit losses under U.S. GAAP.
4. Fixed assets
The differences between Japanese GAAP and U.S. GAAP principally consist of (1) Premises and
equipment, and (2) Land revaluation.
(1) Premises and equipment
Under U.S. GAAP, a nonmonetary asset acquired in exchange for another nonmonetary asset is generally
recorded at the fair value of the asset surrendered or that of the asset received, and a gain or loss is recognized on
the exchange. Under Japanese GAAP, the asset received is recorded at the cost of the asset surrendered in
relevant types of exchange transactions, resulting in no gain or loss.
(2) Land revaluation
U.S. GAAP does not allow revaluation of operating assets and requires land to be recorded at cost. Under
Japanese GAAP, land used for business operations of domestic subsidiaries was revalued as of March 31, 1998
for Bank of Tokyo-Mitsubishi, as of March 31, 2002 for The Mitsubishi Trust and Banking Corporation and as of
December 31, 2001 for other domestic subsidiaries of MTFG with the corresponding impact recorded directly in
equity as well as related deferred tax assets/liabilities, pursuant to the Law concerning Revaluation of Land.
Accordingly, land held on the revaluation dates are recorded at different values.
5. Pension liability
Under both U.S. GAAP and Japanese GAAP, the funded status of defined benefit plans is recognized as
assets or liabilities in a consolidated balance sheet, and actuarial gains or losses and prior service costs or benefits
that have not yet been recognized through earnings as net periodic benefit cost are recognized in other
comprehensive income, net of tax, until they are amortized as a component of net periodic benefit cost. Actuarial
gains or losses are amortized based on corridor approach under U.S. GAAP, while they are amortized over a
specified number of years under Japanese GAAP.
6. Derivative financial instruments and hedging activities
MUFG utilizes derivatives to manage its exposures to fluctuations in market factors such as interest rates
and foreign exchange rates arising from mismatches in the risk profiles of assets and liabilities. Under U.S.
GAAP, most derivatives used by MUFG are accounted for as trading assets or liabilities because they do not
qualify for hedge accounting under the criteria prescribed in the guidance on accounting for derivative
instruments and hedging activities. Japanese GAAP permits hedge accounting for certain derivative hedging
activities, including portfolio hedges, using less restrictive hedging criteria.
In addition, bifurcation requirements are different between U.S. GAAP and Japanese GAAP. Under U.S.
GAAP, if the economic characteristics and risks of the embedded derivatives are deemed “clearly and closely
related” to the economic characteristics and risks of the host contracts, the embedded derivatives are not
bifurcated from their host contracts. Under Japanese GAAP, the embedded derivatives may be bifurcated from
their host contracts if the risk of the embedded derivatives and host contracts are managed separately.
7. Compensated absences
Under U.S. GAAP, in accordance with the guidance on accounting for compensated absences, an employer
is required to accrue a liability for employees’ rights to receive compensation for future absences such as unused
vacations and holidays when certain conditions are met (for example, unexpired vacation benefits that employees
have earned but have not yet taken). Under Japanese GAAP, employers are not required to recognize liabilities
and accordingly, no liabilities are recognized for such short-term employee benefits.
8. Long-term debt
Under U.S. GAAP, in accordance with the guidance on accounting for business combinations, the new cost
basis of long-term debt of UFJ Holdings was established and it was recognized at fair value as of October 1,
2005. Under Japanese GAAP, which was effective as of October 1, 2005, the new cost basis was not established
and the long-term debt was recorded at its historical cost basis.
9. Consolidation
The scope of consolidation is different under U.S. GAAP and Japanese GAAP primarily because, under
U.S. GAAP, the primary beneficiary must consolidate variable interest entities based on variable interests, which
resulted in additional consolidation of certain variable interest entities. Japanese GAAP does not have a concept
of variable interest entities.
On the other hand, certain variable interest entities including funding vehicles, which are consolidated under
Japanese GAAP due to the majority ownership of the voting rights, are not consolidated under U.S. GAAP
because MUFG and its consolidated subsidiaries are not their primary beneficiaries.
The breakdown of the impact of the difference on total equity is as follows.
Consolidation
under
U.S. GAAP
Deconsolidation
under
U.S. GAAP
Total
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,626,879
(2,726,932)
(1,651,750)
2,302,565
600,687
(477,976)
(in millions)
¥(147,470)
911,425
(24,616)
(28,531)
156,254
(178,510)
¥ 1,479,409
(1,815,507)
(1,676,366)
2,274,034
756,941
(656,486)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (326,527)
¥ 688,552
¥
362,025
The breakdown of the impact of the difference on net income before attribution of noncontrolling interests is
as follows.
Consolidation
under
U.S. GAAP
Deconsolidation
under
U.S. GAAP
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
20,705
(52,739)
6,733
42,182
10,370
14,142
(in millions)
(6,988)
¥
174,024
(268)
(121)
26,901
(140,549)
¥
Total
13,717
121,285
6,465
42,061
37,271
(126,407)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
41,393
¥ 52,999
¥
94,392
10. Goodwill
Under U.S. GAAP, in accordance with the guidance on accounting for business combinations, identifiable
assets acquired, liabilities assumed, and any noncontrolling interest in an acquired company are recorded at fair
value at the date of acquisition. Goodwill is the excess of the fair value of noncontrolling interest and
consideration transferred, over the fair value of identifiable assets acquired and liabilities assumed. Goodwill is
not amortized, but is subject to an annual impairment test at the reporting unit level, and also reviewed more
frequently if events or changes in circumstance indicate that the goodwill might be impaired. Under Japanese
GAAP, goodwill is the difference between the purchase price consideration and the acquirer’s share of fair value
of the net assets acquired. Goodwill is amortized by straight-line method over the estimated period not exceeding
20 years, and an impairment test is required only if indication of impairment is identified.
In addition, the acquisition of UFJ Holdings has been accounted for by a method similar to
pooling-of-interests, and consequently goodwill has not been recognized in accordance with Japanese GAAP,
which was effective as of October 1, 2005.
11. Intangible assets
Under U.S. GAAP, in accordance with the guidance on accounting for business combinations, all
identifiable intangible assets acquired in purchase transactions are recorded at fair value at the date of
acquisition. Intangible assets with definite useful lives are amortized over their estimated useful life and reviewed
for impairment whenever events or changes in circumstance indicate that their carrying amount may not be
recoverable. Intangible assets with indefinite useful lives are tested for impairment at least annually, and also
reviewed more frequently if events or changes in circumstance indicate that the assets might be impaired. Under
Japanese GAAP, which was effective as of October 1, 2005, intangible assets have not been recognized in
connection with the acquisition of UFJ Holdings.
12. Investments in equity method investees
Under U.S. GAAP, a portion of a difference between the cost of an investment and the amount of
underlying equity in net assets of an investee is not amortized. A loss in value of an investment that is other than
a temporary decline is recognized as an impairment loss. Under Japanese GAAP, goodwill which is included in
investments in equity method investees is amortized by straight-line method. If a decline in the market value
below the cost is substantial, based on the extent of decline in market value and the credit standing of the issuers,
an impairment loss is recognized within the limit of the amount of unamortized goodwill.