As filed with the Securities and Exchange Commission on July 10, 2020
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, 2020
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, +81-3-5218-8666, 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan
(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, 2020, 13,581,995,120 shares of common stock (including 741,772,308 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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes È No ‘
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
‘
È
U.S. GAAP
Other
International Financial Reporting Standards as issued
by the International Accounting Standards Board
‘
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
5
Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
5
Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
5
Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
27
Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
72
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4A.
73
Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.
140
Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
162
Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
164
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
165
The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
165
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 10.
174
Quantitative and Qualitative Disclosures about Credit, Market and Other Risk . . . . . . . . . . . . .
Item 11.
203
Description of Securities Other than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
205
Item 13.
Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
205
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds . . . . . . . . . . . . .
205
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 “First Sentier Investors” are to First Sentier Investors Holdings Pty Ltd., as a single entity, as well as to First
Sentier Investors Holdings Pty Ltd. 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. Important factors that could cause such differences include, without limitation,
‰
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deterioration in economic conditions in Japan and around the world,
reduction in foreign currency funding liquidity,
significant unexpected increases in credit costs,
cyber-attacks and other information security threats,
problems with the proper functioning and development of information, communications and transaction
management systems,
failure to address regulatory or public concerns or to meet market or industry rules or standards,
customer protection requirements, or corporate behavior expectations,
external events, such as natural disasters, COVID-19 and other health pandemics or epidemics,
terrorism, and other political and social conflicts,
reforms of London Interbank Offered Rate and other interest rate benchmarks,
climate change and resulting physical damages and changes in the business environment,
competitive pressures resulting from regulatory and market changes,
failure to implement our business expansion strategy as planned and to manage new or expanded risks
that entail such strategy,
negative developments relating to our strategic alliance with Morgan Stanley,
adverse changes in the business of our overseas subsidiaries,
significant impairment losses on goodwill recognized in connection with our acquisitions,
failure to maintain our capital ratios and other regulatory ratios above minimum required levels,
financial difficulties of other financial institutions that affect the overall banking environment and their
borrowers,
3
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fluctuations in interest rates, foreign currency exchange rates and stock prices,
transactions with counterparties in countries designated by the U.S. Department of State as state
sponsors of terrorism,
changes in laws, regulations, rules, policies, accounting standards or methods, voluntary codes of
practices, and interpretations,
changes in the business and regulatory environment for consumer finance companies,
damage to our reputation resulting from our failure to prevent or properly address negative perceptions
held by customers, investors, regulators and the general public regarding us and our operations, and
other risks and uncertainties discussed 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 in this Annual Report.
Given these and other risks and uncertainties, you are cautioned not to place undue reliance on forward-
looking statements, which speak only as of the date of the filing of this Annual Report. 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.
4
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.
5
Fiscal years ended March 31,
2016
2017
2018
2019
2020
(in millions, except per share data and number of shares)
Statement of income data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
3,005,738
744,364
¥
2,990,767
769,639
¥
3,259,016
1,028,755
¥
3,813,379
1,517,981
¥
3,927,143
1,684,344
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . .
2,261,374
231,862
2,221,128
253,688
2,230,261
(240,847)
2,295,398
34,330
2,242,799
321,713
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
2,029,512
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
1,921,086
1,875,695
3,363,561
433,220
114,505
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
793,238
178,090
1,253,996
737,605
318,715
Net income (loss) attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,094)
(24,590)
25,836
18,960
12,760
Net income attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings applicable to common shareholders of
Mitsubishi UFJ Financial Group . . . . . . . . . . . . . .
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
¥
¥
¥
802,332
802,332
¥
¥
202,680
¥
1,228,160
202,680
¥
1,228,160
¥
¥
718,645
718,645
¥
¥
305,955
305,955
57.78
¥
14.93
¥
92.40
¥
55.03
¥
23.69
57.51
14.68
92.10
54.74
23.47
per common share (in thousands)
. . . . . . . . . . . . .
13,885,842
13,574,314
13,291,842
13,058,698
12,912,790
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,903,316
13,584,885
13,293,492
13,059,182
12,912,956
¥
$
18.00
0.15
¥
$
18.00
0.17
¥
$
18.00
0.16
¥
$
21.00
0.19
¥
$
23.50
0.22
2016
2017
2018
2019
2020
As of March 31,
Balance sheet data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for credit losses . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥292,557,355
121,679,828
277,709,088
181,438,087
20,524,615
14,848,267
2,090,270
¥297,185,019
117,032,784
282,420,311
190,401,623
26,131,527
14,764,708
2,090,270
(in millions)
¥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
¥331,753,283
117,377,199
316,008,767
203,954,528
27,926,763
15,744,516
2,090,270
6
Fiscal years ended March 31,
2016
2017
2018
2019
2020
(in millions, except percentages)
Other financial data:
Average balances:
Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥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
¥246,283,676
238,861,520
325,500,449
15,417,885
Return on equity and assets:
Earnings applicable to common shareholders as a
percentage of average total assets . . . . . . . . . . . . .
Earnings applicable to common shareholders as a
percentage of average total equity . . . . . . . . . . . . .
Dividends per common share as a percentage of
0.27%
5.25%
0.07%
1.35%
0.38%
7.96%
0.22%
4.47%
0.09%
1.98%
basic earnings per common share . . . . . . . . . . . . .
31.15%
120.56%
19.48%
38.16%
99.20%
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(3)
5.11%
0.89%
4.87%
0.93%
4.81%
0.93%
5.00%
0.95%
4.74%
0.91%
¥
1,111,130
¥
1,182,188
¥
764,124
¥
658,184
¥
809,540
0.90%
1.00%
0.65%
0.56%
0.68%
¥
1,725,150
¥
1,715,850
¥
1,331,123
¥
1,209,791
¥
1,306,829
1.40%
1.45%
1.14%
1.04%
1.11%
42.60%
51.42%
37.14%
32.33%
33.96%
¥
156,959
¥
169,809
¥
180,999
¥
129,924
¥
179,277
0.13%
0.85%
0.14%
0.91%
0.15%
0.92%
0.11%
0.93%
0.15%
0.88%
16.01%
15.85%
16.56%
16.03%
15.87%
Notes:
(1)
Includes the common shares that were potentially issuable upon exercise of stock acquisition rights. See “ Item 6.B. Directors, Senior
Management and Employees—Compensation.”
(2) 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, 2016 and 2017.
(3) 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.
7
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 Environment
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, 2020, 62.6% of our total assets
were related to Japanese domestic assets, including Japanese national government and Japanese government
agency bonds, which accounted for 56.1% of our total investment securities portfolio and 7.4% of our total
assets, respectively. Interest and non-interest income in Japan represented 27.5% of our total interest and
non-interest income for the fiscal year ended March 31, 2020. Furthermore, as of March 31, 2020, our loans in
Japan accounted for 55.0% 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 “—Market Risk—Fluctuations in interest rates, foreign
currency exchange rates and stock prices could adversely affect the value or the yield of our 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 COVID-19 pandemic and measures being implemented in response to the pandemic such as
restrictions on travel, store operations and other economic activities, 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. See “—Risk
Relating to Our Strategic Equity Portfolio—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.” 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
8
credit costs, as the credit quality of some borrowers could deteriorate, particularly borrowers in industries that are
adversely affected by the COVID-19 pandemic. 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.
Our results of operations may be materially affected by deterioration of economic conditions in Japan
and around the world.
Economic conditions in Japan and around the world may deteriorate significantly due to various factors such
as the COVID-19 pandemic and measures being implemented in response to the pandemic, including restrictions
on travel, store operations and other economic activities, in Japan and other countries and regions as well as
crude oil prices declining or remaining at low levels. Uncertainty over the Japanese and global economies still
remain not only because of the unpredictability of the timing of containment of COVID-19 but also because of
such other factors as concerns over political developments in the United States, the possible negative impact on
international trade resulting from shifts in the trade policies of various countries and regions, concerns relating to
the United Kingdom’s withdrawal from the European Union, and the slowing economic growth in China and the
economic stagnation in emerging countries and commodity-exporting countries, as well as the political turmoil in
various regions around the world. In addition, external events, such as earthquakes, typhoons, floods and other
natural disasters, terrorism and other political and social conflicts, abduction, and health pandemics or epidemics,
may cause deterioration in economic conditions and market instability in affected areas. As of March 31, 2020,
based principally on the domicile of the obligors, assets related to the United States accounted for approximately
18.3% of our total assets, assets related to Asia and Oceania excluding Japan accounted for approximately 9.3%
of our total assets, and assets related to Europe accounted for approximately 5.8% of our total assets. See
“Item 5. Operating and Financial Review and Prospects—Business Environment.”
Worsening economic conditions in Japan and around the world may result in, among other things,
impairment or valuation losses on securities and other assets that we hold due to declines in the market value of
such assets, an increase in our non-performing loans and credit costs due to deterioration in borrowers’ business
performance, a decrease in our profits due to deterioration in the creditworthiness of counterparties in market
transactions, a reduction in foreign currency funding liquidity, an increase in our foreign currency funding costs,
and an increase in the level of risk in the risk assets that we hold. Our profitability may be adversely affected by
various other factors, including a decline in our net interest income caused by such factors as changes in the
monetary policies of central banks in various jurisdictions. In addition, an economic downturn may result in a
decline in new investments and business transactions by customers due to stagnation in economic activity, weak
consumer spending, diminished investor appetite for making investments in uncertain financial markets, and a
decrease in our assets under custody or management.
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 ¥646.0 billion of
net losses from marketable equity securities, which reflected unrealized losses, or holding losses, on marketable
equity securities, and ¥4.8 billion of impairment losses on available-for-sale debt securities and other securities
for the fiscal year ended March 31, 2020. As of March 31, 2020, approximately 26.4% 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
9
method for financial instruments, see “Item 5. Operating and Financial Review and Prospects—Critical
Accounting Estimates.”
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, ATMs and other information technology systems, personnel, and facilities and other
physical assets are subject to the risks of earthquakes, typhoons, floods and other natural disasters, terrorism and
other political and social conflicts, abduction, health pandemics or epidemics, and other disruptions caused by
external events, which are beyond our control. Such external events may result in loss of facility and human and
other resources, suspension or delay in all or part of our operations, inability to implement business strategic
measures or respond to changes in the market or regulatory environment as planned, and other disruptions to our
operations. In addition, we may be required to incur significant costs and expenses, including those incurred for
preventive or remedial measures, to deal with the consequences of such external events. As a result, our business,
operating results and financial condition may be materially and adversely affected.
For example, the COVID-19 pandemic has required us to temporarily close some of our business locations,
resulted in reduction in our and our vendors’ operational capacity due to restrictions on mobility, and had other
negative impact on us. Although we have taken various measures designed to ensure the safety of our employees
and vendors as well as the continuity of our operations, if a large number or concentrated groups of employees of
us and our vendors become infected of the virus or if the pandemic continues to expand or is not sufficiently
controlled, we may be further adversely affected.
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 and
other areas where we have our important business functions may have a material adverse effect on our business,
operating results and financial condition.
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.
Reforms of London Interbank Offered Rate and other interest rate benchmarks could adversely affect
our business, financial condition and results of operations.
We have various transactions, including derivatives, loans, bonds, and securitized products, that reference
London Interbank Offered Rate, or LIBOR. In July 2014, the Financial Stability Board proposed reforms of
interest rate benchmarks and development of a risk-free rate as an alternative interest rate benchmark. In July
2017, the Chief Executive of the Financial Conduct Authority, or FCA, of the United Kingdom, which regulates
LIBOR, announced that it would not compel panel banks to quote rates in order to continue publishing LIBOR
beyond the end of calendar 2021 and, as a result, there are considerable uncertainties regarding the publication of
LIBOR after calendar 2021.
In anticipation of the discontinuation of the publication of LIBOR at the end of calendar 2021, we are taking
measures to deal with the reform of LIBOR and other interest rate benchmarks and the transition to an alternative
interest rate. However, such transition is complex and uncertain in many respects and may have various adverse
10
impacts on our business, financial position and operating results. In particular, such transition may, among other
things,
‰
‰
‰
‰
‰
adversely affect the price, liquidity, profitability, and tradability of a wide range of financial
instruments, such as loans and derivatives, included in our financial assets and liabilities that reference
LIBOR and other interest rate benchmarks;
require negotiations with our counterparties to modify contracts to replace the reference rate for existing
contracts based on or linked to LIBOR and other interest rate benchmarks with an alternative interest
rate;
result in disputes with customers and counterparties concerning the interpretation of affected contracts
or economic adjustments to the alternative interest rate adopted in connection with the reform of LIBOR
and other interest rates and the transition to alternative interest rates, or disputes concerning
inappropriate trade practices or abuse of a dominant bargaining position in transactions with customers;
require us to respond to regulatory authorities in connection with the reform of LIBOR and other
interest rates and the transition to an alternative interest rate; and
require us to develop risk management and other operational systems and processes necessary to
effectively deal with the reform of LIBOR and other interest rates and the transition to an alternative
interest rate, which may prove challenging or impossible, or incur significant system investment and
other costs in connection with such reform and transition.
Climate change could have a material adverse impact on us and our clients.
Physical damage caused by extreme weather conditions and natural disasters resulting from climate change,
as well as governments’ measures to strengthen climate-related regulations and the transition to a low-carbon
society, may adversely affect the business and financial condition of us and our clients, including our credit
portfolio.
We recognize the importance of appropriately understanding, evaluating and disclosing climate change-
related risks, and we intend to support the recommendations of the Climate Financial Disclosure Task Force, or
TCFD, which has been established by the Financial Stability Board. To be in line with the TCFD, we intend to
make a continued effort to improve our understanding and evaluation of the relevant risks and to enhance our
related disclosure. However, if our effort to address climate change-related risks or to make appropriate
disclosure proves or is deemed insufficient and, as a result, we are considered to fail to fulfill our responsibility
to society, our corporate value may be impaired and our business and results of operations may be adversely
affected.
Risks Related to Our Strategies
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.
Competition in the financial services industry may further intensify due to the increase in the number of
non-financial institutions entering the financial services industry with alternative services such as electronic
settlement services as a result of development of new technologies such as artificial intelligence, or AI, and
blockchain as well as significant changes in regulatory barriers. Competition may also further increase as other
global financial institutions enhance their competitive strength through development or adoption of such new
technologies as well as mergers, acquisitions, strategic alliances, and profit enhancement and other measures. See
“Item 4.B. Information on the Company—Business Overview—Competition.”
Under such circumstances, although we have been implementing various business strategies on a global
basis designed to strengthen our competitive position and profitability, our business, financial condition and
11
results of operations may be adversely affected if these strategies fail to produce the results we expect or if we
are required to delay or otherwise change these strategies and result in the decline in our competitiveness because
of various factors, including:
‰
‰
‰
‰
‰
‰
the volume of loans made to borrowers does not increase as anticipated;
our income from interest spreads on the existing loans does not improve as anticipated;
our loan interest spread further narrows as a result of the “quantitative and qualitative monetary easing
with yield curve control” program being maintained in Japan for an extended period or the negative
interest rate being lowered from the current level;
our fee income does not increase as much or quickly as we aim to do;
our strategy to build a business infrastructure for new services and products through digitalization or
otherwise does not proceed as planned;
clients and business opportunities are lost, costs and expenses significantly exceed our expectations, or
our strategies to improve financial and operational efficiency or system integration plans are not
achieved as expected, because of delays or other changes in the ongoing or planned intra-group
integration, reorganization or streamlining of our operations;
‰ we are unable to hire or retain sufficient human resources;
‰
our foreign currency funding becomes limited or unavailable; and
‰ we are restricted in agility or flexibility in investing in non-financial institutions under applicable laws
and regulations in and outside of Japan.
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.
As we expand our business operations, we may become exposed to new and increasingly complex risks. We
may not be able to establish appropriate internal controls or risk management systems or to hire or retain
necessary human resources to effectively deal with compliance, regulatory, market and other risks entailing the
expanded scope of our operations, products and services in all cases and, as a consequence, our financial
condition and results of operations may be adversely affected.
As a strategic measure implemented in an effort to become the world’s most trusted financial group, we
acquire businesses, make investments and enter into capital alliances globally. We may continue to pursue
opportunities to acquire businesses, make investments and enter into capital alliances. However, our acquisition,
investments and capital alliances may not proceed as planned or may be changed or dissolved, we may not
achieve the synergies or other results that we expected, or we may incur impairment or valuation losses on
securities acquired or intangible assets, including goodwill, recorded in connection with such business
acquisitions, investments or business alliances, because of changes in the strategies or financial condition of our
acquirees, investees or alliance partners that are inconsistent with our interests, unanticipated changes in the
industry or business environment affecting our acquirees, investees or alliance partners, stagnation of the
economy, changes in the laws, regulations or accounting standards applicable to our acquirees, investees or
alliance partners, or inability to obtain regulatory approvals. These and other similar circumstances may
adversely affect our business strategies, financial condition and results of operations.
Our efforts to offer new products and services or penetrate new markets may not succeed due to any of the
foregoing reasons or other reasons, including 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, regulatory limitations or changes in our business
12
environment, if our planned acquisitions, investments or capital alliances are not approved by regulators or do
not proceed as planned, or if our acquisitions, investments or capital alliances fail to achieve the synergies or
other results that we expect. For more information on our recent acquisition and investment transactions, see
“Item 5. Operating and Financial Review and Prospects—Recent Developments.”
Risks Related to Our Major Investees
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 23.9% of the voting rights in Morgan Stanley as of March 31,
2020 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
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.
Any adverse changes in the business of MUFG Americas Holdings Corporation, Krungsri or Bank
Danamon could significantly affect our results of operations.
Our major overseas subsidiaries include MUFG Americas Holdings, a wholly owned subsidiary in the
United States, Krungsri, an indirect subsidiary in Thailand, and Bank Danamon, an indirect subsidiary in
Indonesia. These subsidiaries engage in retail and commercial banking primarily in their respective local
markets. Adverse changes in the business and financial performance of any of these subsidiaries may
significantly affect our financial condition and results of operations. Factors that can negatively impact these
13
subsidiaries include deterioration in the local economy or economic prospects or the credit quality of their loan
portfolio, fluctuations in the stock, interest rate, foreign currency exchange, commodities or real estate market,
political or social instability, changes in the regulatory or competitive environment, natural disasters, pandemics
or epidemics of infectious or contagious diseases, geopolitical conflicts, losses from legal proceedings, as well as
the business performance of companies investing in or entering into the local market and the condition of
economies, financial systems, laws and financial markets in the markets where such companies primarily
operate. Costs incurred due to weaknesses in the internal controls or the regulatory compliance systems of the
subsidiaries may also adversely affect their business and financial performance. For more information, see
“Item 4.B. Information on the Company—Business Overview—Global Commercial Banking Business Group”
and “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—United
States.”
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,
2020, the total balance of goodwill was ¥517.6 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 year ended March 31, 2020, we recognized ¥241.4 billion, ¥80.3 billion and ¥62.2 billion,
respectively, in impairment of goodwill relating to Bank Danamon, MUFG Americas Holdings and Krungsri
within Global Commercial Banking Business Group and Global Corporate & Investment Banking Business
Group. We consolidate MUFG Americas Holdings based on financial information for the fiscal year ended
December 31 as this date and our fiscal year which ended on March 31 have been treated as coterminous. For the
fiscal year ended March 31, 2020, the effect of recording a goodwill impairment as an intervening event
primarily due to economic environment triggered by COVID-19 pandemic for the three-month period ended
March 31, 2020 would have been approximately ¥80 billion to ¥110 billion. This intervening event occurring
during the three-month period ended March 31, 2020, however, was not recognized for the fiscal year ended
March 31, 2020. See “Item 5.A. Operating and Financial Review and Prospects—Operating Results—
Impairment of goodwill” and Note 6 to our audited consolidated financial statements included elsewhere in this
Annual Report.
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—Impairment on
Goodwill and Intangible Assets.”
Risks Related to Our Ability to Meet Regulatory Capital Requirements
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
14
the Basel III framework. As of March 31, 2020, our total risk-adjusted capital ratio was 15.87% compared to the
minimum risk-adjusted capital ratio required of 12.01%, our Tier 1 capital ratio was 13.56% compared to the
minimum Tier 1 capital ratio required of 10.01%, and our Common Equity Tier 1 capital ratio was 11.90%
compared to the minimum Common Equity Tier 1 capital ratio required of 8.51%, each including a capital
conservation buffer of 2.50%, a G-SIB surcharge of 1.50% and a countercyclical buffer of 0.01%. As of the same
date, our leverage ratio was 4.42% compared to the minimum leverage ratio required of 3.00%. Basel III risk
measurement reforms are expected to be phased in from 2023. 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. G-SIBs are currently expected to become subject to a leverage ratio surcharge in 2023.
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 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:
‰
‰
‰
‰
‰
‰
‰
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.
Capital raising instruments issued in or prior to March 2013 can be included, as a capital item when
calculating capital ratios to the extent permitted by a transitional measure. Such capital raising instruments may
require refinancing under the current FSA guidelines. 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 above capital adequacy 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. 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
15
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, 2020, we maintained 18.62% of
External TLAC on a risk-weighted assets basis compared to the required minimum ratio of 16.00% and 7.38% 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.”
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, 2020, the average balance of our foreign interest-earning assets was ¥101,024.8 billion and
the average balance of our foreign interest-bearing liabilities was ¥65,982.7 billion, representing 41.0% of our
average total interest-earning assets and 27.6% 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. For recent market trends in foreign currency exchange rates, see “Item 5.
Operating and Financial Review and Prospects—Business Environment.” For information on foreign exchange
gains and losses and foreign currency translation gains and losses, see “Item 5.A. Operating and Financial
Review and Prospects—Operating Results—Results of Operations—Non-Interest Income” and
“Item 5.A. Operating and Financial Review and Prospects—Operating Results—Effect of Change in Exchange
Rates on Foreign Currency Translation.”
For a discussion of a potential impact of foreign currency exchange rate fluctuations on our capital ratios
and other regulatory ratios, see “—Risks Related to Our Ability to Meet Regulatory Capital Requirements—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.”
16
Credit Risk
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,
2020, impaired loans were ¥1.31 trillion, representing 1.11% of our total outstanding loans. If the economic
conditions in Japan or other parts of the world, including emerging countries, or in particular industries,
including the energy and real estate industries, to which we have significant credit risk exposure, or the air
transportation and other industries that may be adversely affected by the COVID-19 pandemic, worsen, or if
emerging market currencies depreciate against major currencies, 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 collateral, guarantee and 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 other reasons. For more
information on our credit derivative transactions, see Note 23 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
¥321.7 billion of provision for credit losses, including ¥46.4 billion of estimated impact of the COVID-19
pandemic on the Commercial segment of our loan portfolio, for the fiscal year ended March 31, 2020. We
consolidate certain foreign subsidiaries based on financial information for the fiscal year ended December 31 as
this date and our fiscal year which ended on March 31 have been treated as coterminous. For the fiscal year
17
ended March 31, 2020, the effect of recording a provision for credit losses and a provision for off-balance sheet
credit instruments, including commitments to extend credit, financial guarantees and standby letters of credit, as
an intervening event primarily due to the economic environment triggered by COVID-19 pandemic for the three-
month period ended March 31 2020 would have been approximately ¥84 billion and would have resulted in a
decrease of ¥58 billion to net income attributable to Mitsubishi UFJ Financial Group. This intervening event
occurring during the three-month period ended March 31, 2020, however, was not recognized for the fiscal year
ended March 31, 2020. See Note 4 to our audited consolidated financial statements included elsewhere in this
Annual Report. While we closely observe conditions of our individual borrowers and industry trends, we may
need to provide for additional allowance for credit losses due to deterioration in domestic and global economic
conditions as well as commodity price fluctuations or other conditions specific to certain borrowers.
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. For example, as a result of our adoption on April 1, 2020 of an accounting
methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and
supportable information to inform credit loss estimates, we estimated that our allowance for credit losses and our
allowance for off-balance sheet credit instruments increased by an aggregate of approximately ¥380 billion to
¥450 billion as of the opening balance sheet date. See Note 1 to our consolidated financial statements included
elsewhere in this Annual Report.
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, 2020, we recorded ¥1.0 billion of reversal of credit
losses for the Residential segment of our loan portfolio, while recording a total of ¥322.7 billion of provision for
credit losses for the other segments. 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 all of the segments of our loan portfolio or to a larger extent for some or all of our loan portfolio
segments.
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.”
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 and other financial problems may exist, arise or worsen at some domestic and
foreign financial institutions, including banks, non-bank lending and credit institutions, securities companies and
insurance companies. Financial difficulties relating to financial institutions may not only lead to liquidity and
insolvency problems for such financial institutions but also result in systemic problems adversely affecting the
financial market and the wider economy.
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
18
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, 2020, with the percentage being 14.3% as of March 31, 2020. 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 ¥3.93 trillion as of March 31, 2020. In addition, we may be adversely
affected because:
‰ we are shareholders of financial institutions;
‰
financial institutions that face difficulties may terminate or reduce financial support to borrowers,
putting such borrowers under financial stress and causing our loans to such borrowers to be impaired;
‰ we may be requested to participate in providing support to distressed financial institutions;
‰
the government may elect to provide regulatory, tax, funding or other benefits to financial institutions
under its supervision or control to strengthen their capital or increase their profitability or for other
purposes, causing our competitiveness against such financial institutions to weaken;
‰
‰
‰
our deposit insurance premiums may rise if deposit insurance funds prove to be inadequate;
bankruptcies or government control or other intervention of financial institutions may generally
undermine the confidence of depositors in, or adversely affect the overall business environment for,
financial institutions; and
negative media coverage of the financial industry or system, regardless of its accuracy and applicability
to us, may harm our reputation as well as market confidence in the financial industry and system.
Risk Relating to Our Strategic Equity Portfolio
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 domestic marketable equity securities that
we hold, which accounted for 10.8% of our total investment securities portfolio, and 1.4% of our total assets, as
of March 31, 2020. Our strategic equity investments in Japan accounted for a vast majority of our total domestic
marketable equity securities of ¥4.74 trillion as of March 31, 2020. A decline in stock prices may also reduce our
regulatory capital ratios because unrealized gains and losses on the equity securities we hold are reflected in the
calculation of such ratios. Weakening or stagnant economic conditions in Japan, the United States, China, the
Eurozone and Asian countries may have a significant negative impact on Japanese companies, which in turn will
cause their stock prices to decline. Japanese stock prices 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 these countries and regions. 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.
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.”
Market Risk
Fluctuations in interest rates, foreign currency exchange rates and stock prices could adversely affect the
value or the yield of our portfolio.
We undertake extensive financial market operations involving a variety of financial instruments, including
derivatives, and hold large volumes of such financial instruments. As a result, our financial condition and results
19
of operations are subject to the risks relating to these operations and holdings. The primary risks are fluctuations
in interest rates, foreign currency exchange rates and stock prices in and outside of Japan.
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, 2020 was 8.7% of our total assets. In particular, the
Japanese national government and Japanese government agency bonds accounted for 7.4% of our total assets as
of March 31, 2020. If market interest rates decline due to such factors as changes in the monetary policies of
central banks in various jurisdictions, the yield on the Japanese government bonds and foreign government bonds
that we hold may also decline. Furthermore, if short-term interest rates rise to a larger extent than long-term
interest rates, our interest income may be adversely affected. If interest rates in and outside of Japan rise, we may
incur significant losses on sales of, and valuation losses on, our bond portfolio. For more information on our
bond portfolio, see “Selected Statistical Data—Investment Portfolio.”
Appreciation of the Japanese yen against the U.S. dollar and other major currencies causes the
yen-converted value of our foreign currency-denominated investments to decline and may cause us to recognize
significant losses on sales of, or valuation losses on, such investments in our financial statements. Furthermore, if
stock prices decline, the value of marketable equity securities and trading account securities that we hold also
declines, we may incur significant losses on sales of, and valuation losses on, our equity securities and trading
account securities portfolios.
In addition, the derivative financial instruments in our trading portfolio may cause us to record significant
gains or losses, when sold or marked to market, and may fluctuate from period to period due to numerous factors
that are beyond our control, including interest rate levels, foreign currency exchange rates, stock price
fluctuations, the credit risk of our counterparties, and general market volatility.
For information on fluctuations in interest rates, foreign currency exchange rates and stock prices, see
“Item 5. Operating and Financial Review and Prospects—Business Environment.”
Our assessment and management of market risks, including those related to fluctuations in interest rates,
foreign currency exchange rates and securities prices, may prove insufficient and, as a result, our actual losses in
the future may exceed our estimated market risk exposure. See “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Market Risk Management.”
Funding Liquidity Risk
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.
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 as of March 31, 2020 by one-notch
on the same date, we estimate that MUFG and its three main subsidiaries would have been required to provide of
approximately ¥58.8 billion of additional collateral under their derivative contracts. Assuming a two-notch
downgrade by all of the same credit rating agencies occurring on the same date, we estimate that the additional
collateral requirements for the same MUFG group companies under their derivative contracts would have been
approximately ¥87.0 billion.
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
20
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 April 2020, Fitch downgraded the long-term credit ratings of MUFG, MUFG Bank,
Mitsubishi UFJ Trust and Banking by one-notch from A to A-. In addition, in April 2020, Standard and Poor’s
changed the credit rating outlook for MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking from
“Positive” to “Stable”.
For additional information, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and
Capital Resources—Financial Condition—Sources of Funding and Liquidity.”
Operational Risk
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
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. Our controls may be found
insufficient in addressing regulatory or public concerns relating to money laundering, economic sanctions,
bribery, corruption, financial crimes, or unfair or inappropriate business practices, or in meeting market or
industry rules or standards, customer protection requirements, or corporate behavior expectations.
In November 2017, MUFG Bank agreed to the entry by the U.S. Office of the Comptroller of the Currency,
or 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 the New York Department of Financial
Services in 2013 and 2014 pertaining to compliance with OFAC sanctions requirements. The consent order was a
condition for the conversion of MUFG Bank’s branches and agencies in the United States from state-licensed
branches and agencies under the supervision of state regulatory agencies to federally licensed branches and
agencies under the supervision of the OCC. 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. The consent
order requires MUFG Bank and its U.S. branches to implement various remedial measures to address the
deficiencies found in the OCC examination, including a comprehensive action plan satisfactory to the OCC,
implementation of measures to ensure effective compliance management and qualified staffing, the adoption of
comprehensive Bank Secrecy Act/Anti-Money Laundering risk assessment policies and procedures, and other
remedial actions. MUFG Bank is undertaking necessary actions relating to the consent orders.
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.
21
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. Our
ability to obtain regulatory approvals for future strategic initiatives may also be adversely affected. 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.
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.
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. 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, particularly in the current business environment with increasing
dependence on remote or online networks and our strategy to promote digitization.
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
22
technological advances and new systems and tools introduced in response to industry, regulatory and other
developments, could cause disruptions to, and malfunctions of, information, communications and transaction
management systems and result in fraud or other misconduct, unintended releases of confidential and proprietary
information stored in or transmitted through the systems, interruptions in the operations of our clients, customers,
counterparties and service providers, 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.
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 and processing payments to or from entities in or
affiliated with these countries on behalf of 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
23
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.
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, accounting standards or methods, 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. See “Item 4.B. Information
on the Company—Business Overview—Supervision and Regulation.”
Future developments or changes in laws, regulations, rules, policies, accounting standards or methods,
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. We may be unable to enhance our compliance management programs and systems, which, in some cases,
are supported by third-party service providers, as required or planned. Our failure or inability to comply fully
with applicable laws and regulations may lead to penalties, fines, public reprimands, damage to reputation,
issuance of business improvement and other administrative orders, enforced suspension of operations, our ability
to obtain regulatory approvals for future strategic initiatives or, in extreme cases, withdrawal of authorization to
operate, adversely affecting our business and results of operations.
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
¥565.6 billion as of March 31, 2020, compared to ¥578.5 billion as of March 31, 2019.
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-
24
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.
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, 2018, 2019 and 2020,
we had ¥23.7 billion, ¥25.0 billion and ¥29.4 billion of allowance for repayment of excess interest, respectively.
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
are engaged in consumer lending, which in turn may affect the value of our related shareholdings and loan
portfolio.
Damage to our reputation could harm our businesses.
We are one of the leading financial institutions in Japan and one of the handful G-SIBs in the world, and we
aim to be the world’s most trusted financial group. Our ability to conduct business is indispensably dependent on
the trust and confidence of our customers, as well as regional and global communities. Our reputation is critical
in maintaining our relationships with customers, investors, regulators and the general public. Our reputation may
be damaged by their negative perceptions of us and our operations in light of their concerns over human rights,
the environment, public health and safety, or other corporate social responsibilities, or by our transactions or
operations if they are deemed repugnant to the intent and policy underlying applicable laws and regulations such
as anti-money laundering, economic sanctions and competition laws as well as the prohibition on dealing with
anti-social forces. Failure to prevent or properly address these issues may result in impairment of our corporate
brand, loss of our existing or prospective customers or investors, or increased public or regulatory scrutiny, and
may adversely affect our business, financial condition and results of operations.
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
25
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;
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.
26
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, 2020, we held approximately 23.9% 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.
27
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 August 2, 2019, Mitsubishi UFJ Trust and Banking completed its acquisition of 100% of the shares in
each of nine subsidiaries of Colonial First State Group Limited which collectively represent the global asset
management business known as Colonial First State Global Asset Management, or CFSGAM, from Australian
financial group Commonwealth Bank of Australia and its wholly-owned subsidiary Colonial First State Group
Limited. As a result of the acquisition, the nine subsidiaries became our consolidated subsidiaries. In September
2019, CFSGAM was rebranded as First Sentier Investors.
On November 18, 2019, MUFG Bank completed its acquisition from DVB Bank SE in Germany of DVB
Bank’s aviation finance lending portfolio, employees and related operating infrastructure, based on an agreement
entered into among the two banks and BOT Lease Co., Ltd., a consolidated subsidiary of MUFG Bank, in March
2019. In addition, under this agreement, MUFG Bank and BOT Lease are expected to acquire DVB Bank’s
aviation investment management and asset management businesses during the first half of the fiscal year ending
March 31, 2021, subject to applicable regulatory approvals and certain other conditions.
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
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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.
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.”
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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.”
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
Amsterdam.
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
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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. For more information on our joint venture securities companies, see “—B. Business Overview—
Global Strategic Alliance with Morgan Stanley.”
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, agreed on a merger whereby Mitsubishi
UFJ Morgan Stanley Securities will be the surviving company. The merger is currently expected to be completed
on August 1, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—Recent
Developments.”
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 ¥331.75 trillion
as of March 31, 2020. 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, 2020. In addition, as of the same date, the
Group had the largest overseas network among Japanese banks, consisting of approximately 2,100 business
locations in more than 50 countries, including MUFG Union Bank in the United States, Krungsri in Thailand and
Bank Danamon in Indonesia.
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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The impact of the COVID-19 pandemic is rippling through the real economy. COVID-19 is expected to
have a long-term impact and irreversible effects on the structure of society, including global values and the
behavior patterns of customers. Prior to the pandemic, we worked to identify the changes that had manifested in
the social environment before the pandemic. To address the changes, we adopted the new integrated group-based
management approach, leveraged digital strategies to promote the core framework of structural reforms,
completed transactions designed to benefit from future overseas growth and implemented other strategies. Going
forward, we believe it will be necessary to focus on trends such as the digital shift in society, the rising awareness
of solving social issues and social contributions, the changes and diversification of work styles and values, and
the creation of new supply chains, in addition to the changes to the social environment we identified and began to
address prior to the pandemic. In particular, we believe the digital shift in society presents significant
opportunities for redefining and refining our vision on MUFG’s role in society. We will work to implement
corporate operation reforms, including customer contact points and employee work styles. Furthermore, we aim
to contribute to sustainable growth of the society by providing solutions to social issues. By integrating our social
issue solutions and management strategies, we will strive to achieve sustainable growth for MUFG. Based on
these new measures, we will promote the digitalization of transaction contact points and work styles, seek to
achieve sound business performance (with a focus on robustness and resilience in our operations), and promote
an engagement-focused management approach that is attractive to employees and fosters greater motivation for
employee participation.
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
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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 other major local
commercial banking subsidiaries and affiliates that are our 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.
Taking the impact of the COVID-19 pandemic into consideration, we will implement core strategies based
on our enhanced management policy. These core strategies include (1) digitalization of our domestic retail
business , taking the digital shift in society as an opportunity , (2) restructuring of our global strategy through
identification of the growth potentials and strengths of each region, optimal allocation of management resources,
and collaboration with Grab, which provides various digital financial and non-financial services in Southeast
Asia and into which we agreed to invest up to $706 million, or ¥78.3 billion, to take on the challenges of next-
generation financial services , (3) implementation of further operational foundation and process reforms,
including streamlining of administrative work by switching to paperless methods, and (4) creation of a work
environment and operational infrastructure that reflect and support the diverse values of employees and work
style reforms. Although the progress on some of our measures may be delayed due to the impact of the
COVID-19 pandemic and further developments relating to the pandemic, we will carefully assess the extent of
the impact on such measures. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business
Environment.”
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
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.
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(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.
(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.
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(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.
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.
For customers affected by the COVID-19 pandemic, the Group seeks to provide flexible and prompt
financing support through a dedicated lending program and Biz Lending, a non-face-to-face financing service.
The Group has created a dedicated help desk.
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.
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‰ 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, which is expected to be raised in 2024 to
1.22 million yen per year consisting of a 0.2 million yen cap on investments similar to those qualifying
for “Tsumitate NISA” and a 1.02 million yen cap on broader types of investment. 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.
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 investment,
business 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 738 branches in
Japan as of March 31, 2020. 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 other locations and third-party ATMs located at convenience stores and other locations. As part of
our branch network streamlining plan, by the end of the fiscal year ending March 31, 2024, we intend to reduce
MUFG Bank’s branches by 40% compared to the number of branches as of March 31, 2018.
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
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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. For customers affected by the COVID-19 pandemic, we intend to provide flexible and prompt
financing support through a dedicated lending program.
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.
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 UFJ 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
38
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 expansion
strategy include not only our existing strategic alliances through minority investments, including our alliances
with AMP Capital Holdings Limited in Australia and SWS MU FUND MANAGEMENT in China, but also First
Sentier Investors, which was newly added to our Group through the acquisition of 100% of the shares in nine
subsidiaries of Colonial First State Group Limited, an Australian asset management firm, in August 2019.
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, MUFG Investor Services(US), LLC and MUFG Investor Services FinTech Limited 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. We continue to work to strengthen the strategic alignment and collaboration
among our group companies and across global geographies in order to best deploy our comprehensive expertise
to provide our customers with value-added solutions and services.
In November 2019, MUFG Bank completed its acquisition from DVB Bank SE in Germany its aviation
finance lending portfolio, employees and the related operating infrastructure, based on an agreement entered into
among the two banks and BOT Lease Co., Ltd., a consolidated subsidiary of MUFG Bank, in March 2019. In
connection with this agreement, MUFG Bank and BOT Lease agreed to purchase from DVB Bank its aviation
investment management and asset management businesses. This transaction is expected to be closed
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during the first half of fiscal year ending March 31, 2021, subject to regulatory approvals and certain 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
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.
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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 our intermediate 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 349 branches.
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. See “Item 3.D. Key Information—Risk Factors—
Risks Related to Our Major Investees—Any adverse changes in the business of MUFG Americas Holdings
Corporation, Krungsri or Bank Danamon 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 690 branches
(consisting 648 banking branches, 40 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, 2020. 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.
In August 2019, Krungsri announced a plan to acquire 50% of shares of SB Finance Company Inc. (SBF) in
the Philippines.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Major Investees Risks Related to
Our Business—Any adverse changes in the business of MUFG Americas Holdings Corporation, Krungsri or
Bank Danamon 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
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medium-sized enterprises, and large corporations in Indonesia. It operates an extensive distribution network
spread out from Aceh to Papua, with more than 900 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.
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
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 Major Investees Risks Related to
Our Business—Any adverse changes in the business of MUFG Americas Holdings Corporation, Krungsri or
Bank Danamon could significantly affect our results of operations.” and “Item 5. Operating and Financial
Review and Prospects—Recent Developments.”
Grab Holdings Inc.
In February 2020, we entered into a strategic alliance agreement with Grab Holdings Inc., or Grab, which is
headquartered in Singapore and provides on-demand transport services, food and package delivery services,
digital payments and financial services in Southeast Asia. Under the agreement, we will invest up to
$706 million, or ¥78.3 billion, in Grab to jointly develop next generation custom-made financial services in
Southeast Asia to promote financial inclusion in the region. While Grab is not expected to become our subsidiary
or equity method investee with our investment in Grab in the agreed-upon maximum amount, Grab will confer
“First Choice Bank” status on us and our Southeast Asian partner banks, such as Bank Danamon and Krungsri.
We and Grab plan to co-develop innovative financial products and services based on our combined customer
insight to better cater to the financial needs of Grab’s users, driver-partners and merchant-partners as well as our
customers.We aim to provide next-generation financial services by combining our strengths in financial
knowledge and know-how , including our financial product development capability, creditworthiness and risk
management expertise, with Grab’s advanced technologies and data management expertise. Through the alliance,
we will also leverage our initiatives and experience in Southeast Asia with Grab to accelerate both the evolution
of our business model and the realization of our next-generation digital financial services in Japan and other
markets.
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.
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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 Strategies—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.
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 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, the Global Markets Business
Group collaborates 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 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.
43
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 integrated operations management structure
with the Global Corporate and Investment Banking Business Group. In addition, with a view toward
sustainable growth of the investment products business targeting non-institutional investors in Japan, the
Global Markets Business Group has built an 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.
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, 2020, we held approximately 377 million shares of Morgan Stanley’s common stock
representing approximately 23.9% 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
44
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.
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, agreed on a merger whereby Mitsubishi
UFJ Morgan Stanley Securities will be the surviving company. The merger is currently scheduled to be
completed on August 1, 2020, subject to changes in the circumstances including the impact of the COVID-19
pandemic. Through the merger, we aim to further strengthen our wealth management business by leveraging our
broad customer base, utilizing Morgan Stanley’s global and high sophisticated expertise, and further
collaborating with our and Morgan Stanley’s other group companies.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Major Investees—If our strategic
alliance with Morgan Stanley fails, we could suffer financial or reputational loss.”
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 Strategies—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.”
45
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 and which is expected to be amended in 2024.
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
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—Operational Risk—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, creating Asset Management One Co., Ltd. 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
46
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, 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 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. In June 2020, the Diet passed an
amendment to the Payment Services Act, under which funds transfer services providers that provide only funds
transfer services but do not provide deposit or loan services may be authorized by the FSA to provide funds transfer
services exceeding one million yen, which is the current upper limit for their funds transfer services.
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 Strategies—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;
47
‰
‰
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 February 10, 2020):
‰
‰
ordinary banks (122 ordinary banks and 55 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 103 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.
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. Historically, each of the regional banks has been based in one of the Japanese prefectures and has
extended 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. The Japanese government currently promotes mergers between
regional banks to ensure the stable availability of financial services in regional areas and, in May 2020, enacted
special legislation to exempt such mergers from the application of certain anti-trust restrictions for 10 years.
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
48
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
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.
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 of 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.
The Banking Law and various other financial regulation related laws have recently been amended, including
certain deregulations on restrictions for shareholdings by banks. For example, although a bank is generally
49
prohibited from holding more than 5% of the outstanding shares of another company (other than certain financial
businesses) under the Banking Law, an amendment to the Banking Law which took effect in April 2017 allows
banks and bank holding companies to acquire and hold more than 5% of the voting rights in certain financial
technology companies if approved by the FSA. An additional amendment to the Banking Law which took effect
in June 2018 introduced a framework for affiliation and cooperation between financial institutions and financial
technology companies while adding measures designed to ensure customer protection . A further amendment to
the Banking Law which took effect in May 2020 allows banks 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
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.
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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.
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.
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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, 2020, 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 0.7 percentage points.
The Financial Stability Board identified us as a global systematically important bank, or G-SIB, in its most
recent annual report published in November 2019, 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, 2020 consist of a capital
conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.01% in addition to the
4.50% minimum Common Equity Tier 1 capital ratio.
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:
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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 was scheduled to become effective on January 1, 2022, subject to implementation
through legislation and regulation in each of the relevant jurisdictions, including Japan. In March 2020, the
implementation date was deferred by one year to January 1, 2023 in light of the COVID-19 pandemic.
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 was scheduled to become effective on January 1, 2022, subject to implementation through legislation
and regulation in each of the relevant jurisdictions, including Japan. In March 2020, the implementation date was
deferred by one year to January 1, 2023 in light of the COVID-19 pandemic.
For a discussion on our capital ratios, see “Item 5.B. Operating and Financial Review and Prospects—
Liquidity and Capital Resources—Capital Adequacy.”
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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 FSA adopted the minimum leverage ratio
requirement effective March 31, 2019, and the minimum leverage ratio requirement as of March 31, 2020 is
3.00%. In March 2020, the implementation date for the G-SIB leverage ratio buffer requirement was deferred by
one year to January 1, 2023 in light of the COVID-19 pandemic. On June 30, 2020, in coordination with the
Bank of Japan in implementing its monetary policy in response to the COVID-19 pandemic, the FSA published
amendments to the leverage ratio regulations, effective June 30, 2020. Under the amendments, deposits with the
Bank of Japan are excluded from the calculation of the leverage ratio during the period from June 30, 2020 to
March 31, 2021.
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.
The TLAC standard which was 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 and which became
applicable to G-SIBs in Japan on March 31, 2019, or the Japanese TLAC Standard, and the Financial Stability
Board’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
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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 issue and maintain 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 issue and maintain 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.
On June 30, 2020, in coordination with the Bank of Japan in implementing its monetary policy in response
to the COVID-19 pandemic, the FSA published amendments to the Japanese TLAC Standard, together with
amendments to the leverage ratio regulations, effective June 30, 2020. Under the amendments, deposits with the
Bank of Japan are excluded from the calculation of External TLAC ratio and Internal TLAC amounts on a total
exposure basis as well as the leverage ratio during the period from June 30, 2020 to March 31, 2021.
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 Ability to Meet Regulatory Capital
Requirements—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.”
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 maintain 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.
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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, 2020, 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 0.031% 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
(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
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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
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
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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, as well as in 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 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, as described above.
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.
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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 2019, 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 2019.
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. In light of the COVID-19
pandemic, the FSA issued a statement on March 17, 2020 that the FSA will tolerate LCR under 100% in the case
of stressed conditions. In addition, in cases where LCR declines under 100%, the FSA has stated that they will
respond in a flexible manner with respect to applicable reporting requirements established by the FSA.
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
final standard of NSFR in October 2014. In Japan, details of the NSFR requirements are currently under
discussion and the FSA confirmed in March 2020 that it would not implement the NSFR requirements prior to
April 2021.
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
abolished the Financial Institutions Inspection Manual which had traditionally been understood to set forth the
minimum standard for the operations of financial institutions in Japan in December 2019.
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.
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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 large exposure
exceeding 25% of their Tier 1 capital to a single counterparty and also prohibits a G-SIB’s exposure to another
G-SIB exceeding 15% of its Tier 1 capital.
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
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.
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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.
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 strengthened 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.
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 Personal Information Protection Commission of Japan 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,
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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 limits
stipulated by the Interest Rate Restriction Act. See “Item 3.D. Key Information—Risk Factors—Operational
Risk—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.
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
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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.
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.
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
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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.
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
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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
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—Operational Risk—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
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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
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.
On June 25, 2020, the FRB will release the results of the 2020 Dodd-Frank Act and Comprehensive Capital
Analysis and Review (CCAR) stress tests which will include results for MUFG Americas Holdings. The FRB
announced early in 2017 that MUFG Americas Holdings would not be subject to the qualitative portion of the
CCAR; further, beginning with CCAR 2019, the FRB limited its ability to object to firms’ capital plans on
qualitative grounds to firms recently subject to CCAR that continue to exhibit material deficiencies in capital
planning.
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The Volcker Rule was issued in final form by the Federal Reserve originally in December 2013, and
substantive portions were subsequently amended in November 2019. 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 are within the scope of the Rule, and, therefore, we
have undertaken steps that we believe are appropriate to bring our activities and investments into compliance
with the Rule. Although we are continuing to consider the effect of the recent changes and implement
corresponding changes to our compliance program, 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 have a material
negative impact on 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
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 previously 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 December 18, 2019, the CFTC proposed rules that would modify and
codify the cross-border application of certain of its Title VII swap rules to both U.S. and non-U.S. registered
swap dealers. Similarly, in December 2019, the SEC adopted a package of rule amendments, guidance, and a
related order designed to expand and clarify the framework for regulating cross-border security-based swaps,
including single-name credit default swaps. We are continuing to consider the effects of these proposed and final
regulatory changes.
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 final rule establishes separate SCCLs, one applicable to the combined U.S. operations, or CUSO, of
MUFG and another to MUAH, as MUFG’s U.S. intermediate holding company, or IHC. Originally, MUFG
CUSO was required to comply with its SCCL beginning on January 1, 2020, while IHC compliance was
scheduled to begin on July 1, 2020, unless that time is extended by the FRB in writing. The SCCL final rule
allows FBOs to satisfy its CUSO-level requirements by certifying as to home-country compliance with Basel
Committee standards in lieu of complying with the final U.S. SCCL rule. Earlier this year, the FRB extended by
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18 months the initial compliance dates of its SCCL rule as it applies to the CUSO of FBOs, in order to provide
additional time for foreign jurisdictions’ implementation of the Basel standard to become effective. The
compliance date is now July 1, 2021 for MUFG.
Separately, based on the preliminary categorization of MUAH as a Category IV entity under the final rules
tailoring prudential standards for large banking organization (“Tailoring Final Rules”), SCCL will no longer
apply to MUAH. The following paragraphs discuss the Tailoring Final Rules in greater detail.
On October 10, 2019, the FRB issued two final rules that (1) tailor the framework for application of
enhanced prudential standards to U.S. and foreign banking organizations and (2) modify the application of capital
and liquidity requirements to the operations of U.S. banking organizations and the U.S. operations of foreign
banking organizations. The final rules apply the same framework as to the U.S. and foreign BHCs but use a
differing calibration for foreign BHCs. The final rules became effective on December 31, 2019.
The final rule, promulgated solely by the FRB, determined 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 final rule was issued jointly by the FRB, the OCC, and the FDIC, and similarly categorized foreign
banking organizations and tailored the application of the agencies’ regulatory capital and standardized liquidity
requirements on that basis. Under the framework of the final rules, MUFG’s U.S. operations are subject to a split
category treatment: (i) the combined U.S. operations are classified as Category II, subject to the most stringent
requirements other than those applicable to U.S. G-SIBs; and (ii) MUAH, the U.S. BHC and IHC is classified as
Category IV, a classification that provides certain capital and liquidity relief from prior requirements, taking into
account the size and other risk characteristics of MUFG’s U.S. subsidiary operations.
On October 10, 2019, the FRB jointly issued with the FDIC final rule amendments revising their joint
resolution planning requirements of Section 165(d) of the Dodd-Frank Act. Resolution plans, also known as
living wills, describe a firm’s strategy for orderly resolution under bankruptcy in the event of material financial
distress or failure of the firm. The final rule tailors the rule’s requirements for firms that do not pose the same
systemic risk as the largest institutions, requiring resolution plans to be submitted on a three-year cycle. MUFG
is classified as a triennial full filer as applicable to large foreign and domestic banks classified within Category II
and III, and MUFG is subject to alternating between submitting full and targeted resolution plans every three
years. On May 6, 2020, the agencies, in recognition of immediate challenges of the COVID-19 pandemic,
extended the next submission date by 90 days, to September 29, 2021, for the next required targeted resolution
plan submission.
On January 30, 2020 the Federal Reserve adopted a final rule revising the “controlling influence” prong of
its “control” rules under the Bank Holding Company Act of 1956, as amended. The final rule largely adopts the
proposed rule issued by the FRB in April 2019, reaffirms the Federal Reserve’s conceptual framework for
analyzing “controlling influence,” and rejects a number of banking industry recommendations for liberalization
of the “control” rules. The issue of “control” is a central concept under the Bank Holding Company Act. Among
other things, control determines whether an investor in a banking organization is subject to the requirements and
restrictions of the Bank Holding Company Act, whether a bank holding company’s investment in a company is
permissible and/or subjects the investee company to the requirements and restrictions of the Bank Holding
Company Act, and whether an investor in any depository organization is subject to the Volcker Rule. As a result,
a determination of whether or not an investment constitutes “control” is often determinative of whether an
investment can be made (or, at least, must be restructured to avoid control). Originally effective on April 1, 2020,
the FRB on March 31, 2020 announced that it would delay the effective date of the final rule to September 30,
2020.
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
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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
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
68
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
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 21 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
We are disclosing the following information pursuant to Section 13(r) of the Securities Exchange Act of
1934 (Exchange Act), which 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, 2020, our non-U.S. subsidiary, MUFG Bank, engaged in certain
limited 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 prior to the expiration of the
Significant Reduction Exception granted to Japan, and in some cases, in connection with other petroleum-related
transactions with Iran by its customers that were exempt from applicable Iran-related sanctions or otherwise
permitted by OFAC. These transactions did not involve U.S. dollars or clearing services of U.S. banks for the
settlement of payments. For the fiscal year ended March 31, 2020, the aggregate fee income relating to these
transactions was less than ¥50 million, representing less than 0.001 percent of our total fee income. In addition,
some Iranian financial institutions and other entities in, or affiliated with, Iran maintained non-U.S. dollar
correspondent accounts and other similar settlement accounts with MUFG Bank outside the United States. In
addition to such accounts, MUFG Bank received deposits in Japan from, and provided settlement services in
Japan to, fewer than 10 Iranian government-related entities and fewer than 100 Iranian government-related
individuals such as Iranian diplomats, 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, 2020, 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
¥5 million, representing less than 0.001 percent of our total 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 will continue to monitor 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, 2020:
Mitsubishi UFJ Financial Group, Inc.
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Domestic
MUFG Bank, Ltd.
Overseas
MUFG Americas Holdings Corporation
Bank of Ayudhya Public Company Limited
PT Bank Danamon Indonesia, Tbk.
Domestic
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Real Estate Services Co., Ltd.
Japan Shareholder Service Ltd.
The Master Trust Bank of Japan, Ltd.
MU Investments Co., Ltd.
Mitsubishi UFJ Kokusai Asset Management Co., Ltd.
Overseas
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
First Sentier Investors Holdings Pty Ltd
Mitsubishi UFJ Trust International Limited
Domestic
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
au kabucom 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: Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. and Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd. are scheduled to
merge on August 1, 2020.
70
Set forth below is a list of our principal consolidated subsidiaries as of March 31, 2020:
Name
Country of
Incorporation
Proportion of
Ownership
Interest
(%)
Proportion of
Voting
Interest
(%)
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
USA
Thailand
Indonesia
China
MUFG Bank, Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Information Technology, Ltd. . . . . . . . . . . . . . . . . . . .
MU Business Service Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MU Center Service Tokyo Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Loan Business Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . .
MU Center Service Osaka Co., Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . .
MU Center Service Nagoya Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . .
MU Loan Administration Support Co., Ltd. . . . . . . . . . . . . . . . . . . . . .
MU Property Research Company Limited . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MU Business Partner Co., Ltd.
Mitsubishi UFJ Jinji Service Co., Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking Corporation . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Real Estate Services Co., Ltd. . . . . . . . . . . . . . . . . . . .
Japan Shareholder Services 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.
. . . . . . . . . . .
au Kabucom Securities Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUS Information Systems 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 . . . . . . . . . . . . . . . . . . . . .
PT Bank Danamon Indonesia, Tbk.
. . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank (China), Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank (Malaysia) Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysia
MUFG Bank (Europe) N.V.
AO MUFG Bank (Eurasia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank Turkey Anonim Sirketi
. . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank Mexico, S.A.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
First Sentier Investors Holdings Pty Ltd.
Mitsubishi UFJ Trust International Limited . . . . . . . . . . . . . . . . . . . . .
MUFG Securities EMEA plc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Securities Asia Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Securities Asia (Singapore) Limited . . . . . . . . . . . . . . . . . . . . .
MUFG Securities (Canada), Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UK
Bermuda
Australia
UK
UK
China
Singapore
Canada
Russia
Turkey
Mexico
UK
. . . Luxembourg
. . . . . . . . . . . . . . . . . . . . . . . Luxembourg
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
71
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%
46.50%
100.00%
100.00%
100.00%
60.00%
100.00%
51.00%
100.00%
100.00%
86.11%
60.00%
80.00%
100.00%
100.00%
76.88%
94.10%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
51.00%
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%
100.00%
100.00%
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%
51.00%
100.00%
100.00%
86.11%
60.00%
80.00%
100.00%
100.00%
76.88%
94.10%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
51.00%
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, 2019 and 2020 consisted of the following:
As of March 31,
2019
2020
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 362,742
829,606
648,598
305,281
34,002
¥ 380,477
782,367
623,676
310,957
35,594
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,180,229
1,206,629
2,133,071
1,203,542
Premises and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 973,600
¥ 929,529
Our registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan. As of March 31,
2020, 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,
2020:
Owned land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owned buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book Value
(in millions)
¥380,477
248,669
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, 2020, we invested approximately ¥123,804 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
77
82
85
88
89
89
99
107
108
108
108
131
136
C. Research and Development, Patents and Licenses, etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
D. Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
E. Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
F. Tabular Disclosure of Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139
G. Safe Harbor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139
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, Thailand and Indonesia 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.
Recent Developments and Prospects
Our results of operations for the fiscal year ended March 31, 2020 were adversely affected by the
COVID-19 pandemic. Among the negative consequences of the COVID-19 pandemic described elsewhere in this
Annual Report, we provided for additional allowance for credit losses in light of the deteriorating credit quality
of our borrowers.
The COVID-19 pandemic is expected to have a further adverse impact on our business and results of
operations as economic and corporate activity deteriorates in Japan and around the world and financial markets
remain volatile. More specifically, we currently expect that the COVID-19 pandemic will have a further adverse
impact on, among other things,
‰
‰
‰
‰
‰
‰
net interest income, particularly foreign currency net interest income, primarily due to interest rate
reductions by central banks or declines in long-term interest rates in various markets,
fees and commissions income mainly due to decreases in the value of assets under custody or
management, declines in customer investments or other transactions, or changes in consumer spending
trends, as any of these negative factors may be exacerbated by, among other things, weakened appetite
for investments or other transaction under uncertain or volatile market conditions or governmental
restrictions on business activities,
net investment securities gains (losses) primarily due to losses on sales of securities or a decline in the
value of our securities portfolio,
net equity in earnings of equity method affiliates if the financial performance of our equity method
affiliates deteriorates,
other income and expenses, including impairment losses on goodwill or other intangible assets, due to
weaker business prospects and other factors causing deterioration in the business environment, and
regulatory capital ratios due to, among other factors, an increase in risk-weighted assets such as loans
and a decrease in the value of our equity securities portfolio.
In addition, there is a risk that we will have to recognize credit losses if there is a further deterioration in the
credit quality of our borrowers such as those in the air transportation and other industries that may be adversely
impacted by weakened demand for, or governmental or other restrictions on, travel, retail operations, or other
economic or recreational activities. For more information, see “—B. Liquidity and Capital Resources—Financial
Condition—Loan Portfolio.”
At present, the timing of containment of COVID-19 cannot be forecasted, and the full extent of the impact
of the pandemic on the real economy remains uncertain. Under these highly uncertain circumstances, our current
expectations may be significantly different from actual results. We intend to continue to closely monitor, and
endeavor to effectively deal with, further developments relating to the pandemic. For more information, see
“Item 3.D. Risk Factors.” See also “Forward-Looking Statements.”
74
General Economic Conditions
The global economy was generally on a downward trend due to negative effects of the U.S.-China trade
conflict and other factors in the first half of the fiscal year ended March 31, 2020, with some signs of bottoming
out and recovering at least in some industry sectors, including the semiconductor and other manufacturing
sectors, around the beginning of the second half of the fiscal year. However, in and after the fourth quarter, the
outbreak and global spread of the COVID-19 pandemic brought much of global economic activity to a halt.
Public health measures of unprecedented scale have been implemented in various countries and regions in an
effort to contain the pandemic. However, the full extent and severity of the impact of the pandemic on the global
economy are yet to be known.
Japan’s economic growth continued at a moderate pace during the fiscal year ended March 31, 2020, while
showing a mixture of positive and negative trends, with the quarter-on-quarter real gross domestic product, or
GDP, growth rate being 0.5% for the quarter ended June 30, 2019, 0.0% for the quarter ended September 30,
2019, and negative 1.9% for the quarter ended December 31, 2019, and negative 0.6% for the quarter ended
March 31, 2020. The year-over-year real GDP growth rate was 0.9% for the quarter ended June 30, 2019, 1.7%
for the quarter ended September 30, 2019, negative 0.7% for the quarter ended December 31, 2019 and negative
1.7% for the quarter ended March 31, 2020. Japan’s Consumer Price Index, or CPI, fluctuated between negative
0.2% and positive 0.3% on a month-on-month basis and between positive 0.2% and 0.9% on a year-over-year
basis during the fiscal year ended March 31, 2020. During the same period, the unemployment rate in Japan
remained low, fluctuating between 2.1% and 2.6%. 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, 2020 was 8,480, a 5.3% increase from the previous fiscal year. The total liabilities of companies that
filed for legal bankruptcy during the fiscal year ended March 31, 2020 were ¥1,218 billion, a 21% decrease from
the previous fiscal year. The Japanese economy remains subject to the impact of the COVID-19 pandemic,
continuing deflationary pressure, increasing public debt, intensifying trade conflicts and global competition,
declining domestic population, stagnant private consumption, and various other factors that could adversely
affect economic conditions in Japan.
The U.S. economy expanded during the three quarters ended December 31, 2019, with the
quarter-on-quarter annualized real GDP growth rate being 2.0% for the quarter ended June 30, 2019, 2.1% for the
quarter ended September 30, 2019, and 2.1% for the quarter ended December 31, 2019, but turning to negative
5.0% for the quarter ended March 31, 2020. The year-over-year real GDP growth rate was 2.3% for the quarter
ended June 30, 2019, 2.1% for the quarter ended September 30, 2019, 2.3% for the quarter ended December 31,
2019 and 0.2% for the quarter ended March 31, 2020. The U.S. economic growth was supported by the
improvement in the labor market, higher wages and increased corporate production activities through the end of
the quarter ended December 31, 2019, but the U.S. economy declined in the quarter ended March 31, 2020 due to
the impact of COVID-19 pandemic. During the fiscal year ended March 31, 2020, the unemployment rate in the
U.S. fluctuated between 3.8% and 4.4%. However, the long-term prospects of the U.S. economy remains
uncertain in light of the economic impact of the COVID-19 pandemic, changes in the government’s economic,
monetary, trade and foreign relations policies, the November 2020 presidential election, and various other
factors.
The Eurozone’s economic growth continued at a slow rate during the three quarters ended December 31,
2019, with the quarter-on-quarter real GDP growth rate being 0.1% for the quarter ended June 30, 2019, 0.3% for
the quarter ended September 30, 2019, and 0.1% for the quarter ended December 31, 2019, but turning to
negative 3.6% for the quarter ended March 31, 2020. The year-over-year real GDP growth rate was 1.2% for the
quarter ended June 30, 2019, 1.3% for the quarter ended September 30, 2019, 1.0% for the quarter ended
December 31, 2019 and negative 3.1% for the quarter ended March 31, 2020. During the fiscal year ended
March 31, 2020, the unemployment rate in the Eurozone declined to 7.1% for March 2020. There are still
uncertainties in the Eurozone economy, including the impact of the COVID-19 pandemic, 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.
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In Asia excluding Japan, economic conditions in ASEAN (Association of Southeast Asian Nations) and
NIEs (Newly Industrializing Economies) generally improved but the economic growth remained relatively
modest during the fiscal year ended March 31, 2020. In China, economic conditions continued to improve at a
moderate pace until the quarter ended December 31, 2019 but declined in the quarter ended March 31, 2020 due
to the impact of the COVID-19 pandemic. China’s quarter-on-quarter real GDP growth rate was 1.5% for the
quarter ended June 30, 2019, 1.3% for the quarter ended September 30, 2019, 1.5% for the quarter ended
December 31, 2019 and negative 9.8% for the quarter ended March 31, 2020. China’s year-over-year real GDP
growth rate was 6.2% for the quarter ended June 30, 2019, 6.0% for the quarter ended September 30, 2019, 6.0%
for the quarter ended December 31, 2019 and negative 6.8% for the quarter ended March 31, 2020. The Thai
economy was on a gradually stabilizing trend until the quarter ended December 31, 2019 but declined in the
quarter ended March 31, 2020 due to the impact of the COVID-19 pandemic. Thailand’s quarter-on-quarter real
GDP growth rate was 0.3% for the quarter ended June 30, 2019, 0.3% for the quarter ended September 30, 2019,
negative 0.2% for the quarter ended December 31, 2019 and negative 2.2% for the quarter ended March 31,
2020. Thailand’s year-over-year real GDP growth rate was 2.4% for the quarter ended June 30, 2019, 2.6% for
the quarter ended September 30, 2019, 1.5% for the quarter ended December 31, 2019 and negative 1.8% for the
quarter ended March 31, 2020. 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, the negative impact of the COVID-19 pandemic on the
global economy, including importing developed countries, intensifying trade conflicts and potential geopolitical
issues.
Interest Rates
Interest rates remained at historical low levels in Japan under the Bank of Japan’s monetary policy. The
yield on 10-year Japanese government bonds fluctuated between negative 0.286% and negative 0.009% during
the six months ended September 30, 2019, but subsequently rose to around 0% towards December 31, 2019,
declined again to negative 0.153% in February 2020, and rose back to around 0% towards March 31, 2020. 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 modified its 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. In October 2019, the Bank of Japan decided to
maintain its monetary policy, while slightly modifying its forward guidance to clarify that it expects short- and
long-term interest rates to remain at their present or lower levels without specifying the duration of its guidance.
In March 2020, the Bank of Japan introduced a package of COVID-19 emergency measures, including those
designed to facilitate corporate financing through lending up to ¥8.0 trillion yen against corporate debt collateral
at a 0% interest rate with maturities up to one year and increasing the limit of purchases on commercial paper and
corporate bonds to ¥2.0 trillion yen, and has since expanded its emergency measures, including elimination of the
limit on purchases of Japanese government bonds. The yield on 10-year Japanese government bonds was
negative 0.081% on March 29, 2019 and positive 0.022% on March 31, 2020. The yield currently fluctuates
around negative 0.006%.
In the United States, the FRB reduced the target range for the federal funds rate to between 2.00% and
2.25% in July 2019, to between 1.75% and 2.00% in September 2019, and further to between 1.50% and 1.75%
in December 2019. Subsequently, the FRB reduced the target range for the federal funds rate twice in March
2020 to between 1.00% and 1.25% and further to 0.00% and 0.25%. Following the Federal Open Market
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Committee meeting in June 2020, most of the FRB members indicated their willingness to maintain the rate at
the current level until the end of the calendar year 2022 in light of increasing uncertainty in the economic
outlook. The 10-year U.S. Treasury bond yield decreased from 2.406% at the end of March 2019 to 0.670% at
the end of March 2020, while fluctuating between 0.543% and 2.595% during the period. The yield currently
fluctuates around 0.717%.
The yield on 10-year German Bunds decreased from negative 0.070% at the end of March 2019 to negative
0.471% as of March 31, 2020, while fluctuating between negative 0.856% and positive 0.080% during the
period. The yield currently fluctuates around negative 0.439%. The yield on 10-year French Obligations
Assimilables du Trésor decreased from 0.318% at the end of March 2019 to negative 0.015% as of March 31,
2020, while fluctuating between negative 0.438% and positive 0.424% during the period. The yield currently
fluctuates around negative 0.118%.
Foreign Currency Exchange Rates
The Japanese yen appreciated against the U.S. dollar from ¥110.86 to the U.S. dollar as of March 29, 2019
to ¥107.54 to the U.S. dollar as of March 31, 2020, while fluctuating between ¥102.36 to the U.S. dollar and
¥112.19 to the U.S. dollar during the period. The Japanese yen has since been fluctuating around ¥106.95 to the
U.S. dollar.
The Japanese yen was on a generally appreciating trend against the euro during the fiscal year ended
March 31, 2020, with the exchange rate being ¥118.64 to the euro as of March 31, 2020 compared to ¥124.35 to
the euro as of March 29, 2019. The Japanese yen has been fluctuating around ¥120.55 to the euro since April
2020.
The Japanese yen was on a generally appreciating trend against the Thai baht during the fiscal year ended
March 31, 2020, with the exchange rate being ¥3.2829 to the Thai baht as of March 31, 2020 compared to
¥3.4929 to the Thai baht as of March 29, 2019. The Japanese yen has been fluctuating around ¥3.4549 to the Thai
baht since April 2020.
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 ¥21,205.81 on March 29, 2019 to ¥18,917.01 on March 31, 2020. 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 ¥16,552.83 on March 19, 2020. The closing price of the Nikkei Stock
Average has since risen and has been fluctuating around ¥22,654.76.
According to the latest land price survey conducted by the Japanese government, between January 1, 2019
and January 1, 2020, the average residential land price in Japan increased 0.8%, and the average commercial land
price in Japan increased 3.1%. In the three major metropolitan areas of Tokyo, Osaka and Nagoya, between
January 1, 2019 and January 1, 2020, the average residential land price increased 1.1% and the average
commercial land price increased 5.4%. In the local regions of Japan, which consist of regions other than the three
major metropolitan areas, between January 1, 2019 and January 1, 2020, the average residential land price
increased 0.5% and the average commercial land price increased 1.5%.
Principal Sources of Income and Expenses
Net Interest Income
Net interest income is a function of:
‰
‰
the amount of interest-earning assets,
the amount of interest-bearing liabilities,
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‰
‰
‰
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.
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:
‰
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.
‰
Insurance commissions consist of commissions earned by acting as an agent for insurance companies
for the sale of insurance products.
‰
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
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contracts, see Note 23 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
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 31 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:
‰
‰
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, 2020.
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:
‰
‰
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;
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‰ 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.
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 31 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 available-for-sale debt
securities and net gains (losses) from marketable equity securities. Impairment losses on available-for-sale debt
securities are recognized when management concludes that declines in the fair value of such debt securities are
other than temporary, and offset net gains on sales of available-for-sale debt securities. Net gains (losses) from
marketable equity securities include net gains (losses) on sales of marketable equity securities. 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:
‰
‰
‰
‰
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,
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‰
‰
‰
‰
‰
‰
‰
‰
‰
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,
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, 2020, 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. Under our current medium-term business plan, for the three fiscal years ending
March 31, 2022, we aim to integrate the expertise and capabilities of our subsidiaries to build a foundation for
future growth.
The COVID-19 pandemic has impacted, and is expected to further impact, our business and financial
performance as economic and corporate activity deteriorates and the financial market remains volatile. At
present, the timing of containment of COVID-19 cannot be forecasted, and the impact of the pandemic on the
real economy remains uncertain. We will continue to closely monitor and seek to flexibly and effectively deal
with developments relating to the pandemic. However, our efforts to deal with the impact of the pandemic may
prove insufficient, in which case our results of operations and financial condition may be materially and
negatively affected. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business
Environment” and “—Business Environment—Recent Developments and Prospects.”
Implementation of Share Repurchase Program and Cancellation of Purchased Shares
During November 2019 and December 2019, we repurchased 85,775,400 shares of our common stock for
¥49,999,996,482 under a share repurchase program that was adopted in November 2019 and completed in
December 2019. 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
November 14, 2019 and December 31, 2019 and to cancel the repurchased shares. We cancelled all of the
repurchased shares on January 20, 2020.
The purposes of the above share repurchase program 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 and Repurchases of TLAC Eligible Senior Debt Securities
During and after the fiscal year ended March 31, 2020, we issued $10.3 billion, or ¥1,125.3 billion,
€1.5 billion, or ¥180.6 billion, HK$0.2 billion, or ¥3.3 billion, and AU$0.5 billion, or ¥33.0 billion, aggregate
principal amount of external TLAC eligible senior debt securities.
In March 2020, we repurchased through tender offers $1,624.4 million aggregate principal amount of our
outstanding external TALC eligible senior notes. All of the repurchased senior notes were cancelled.
As of March 31, 2020, our external TLAC ratios were 18.62% on a risk-weighted assets basis and 7.38% 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 as of March 31, 2020 and 18% on a risk-weighted assets basis and
6.75% on a leverage exposure basis from March 31, 2022. See “Capital Adequacy” below and “Item 4.B.
Information on the Company—Business Overview—Supervision and Regulation—Japan—Total loss-absorbing
capacity.”
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Redemption of Preferred Securities Issued by Special Purpose Company
On January 27, 2020, we redeemed in full ¥240.0 billion of Japanese yen-denominated non-cumulative
preferred securities issued by an overseas special purpose company in the Cayman Islands called MUFG Capital
Finance 9 Limited.
In July 2019, we redeemed 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.
Issuances of Basel III-Compliant Domestic Subordinated Bonds
In October 2019, we issued, in a public offering in Japan, ¥273.0 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 PT Bank Danamon Indonesia,
Tbk, or 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%.
As of the acquisition date, total assets acquired amounted to ¥1,728.5 billion, including loans of
¥1,086.6 billion and intangible assets of ¥146.9 billion, and total liabilities assumed amounted to
¥1,242.1 billion, including deposits of ¥915.1 billion. We also recorded goodwill of ¥254.3 billion in connection
with our acquisition of Bank Danamon. For the fiscal year ended March 31, 2020, we recognized an impairment
loss on the goodwill as further discussed in “Results of Operations—Non-interest Expenses—Impairment of
goodwill” below and Notes 2 and 6 to our consolidated financial statements included elsewhere in this Annual
Report.
Our investment in Bank Danamon 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.
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Bank Danamon, which was established in 1956, provides banking and financial products and services to
consumer, small and medium enterprise, and corporate customers, with a network of approximately 900 offices
in Indonesia.
Acquisition of Aviation Finance Division from DVB Bank
In November 2019, MUFG Bank completed its acquisition from DVB Bank SE in Germany of DVB Bank’s
aviation finance lending portfolio of approximately €4.0 billion, or ¥480.0 billion, employees and related
operating infrastructure, based on an agreement entered into among the two banks and BOT Lease Co., Ltd., a
consolidated subsidiary of MUFG Bank, in March 2019. In connection with this agreement, MUFG Bank and
BOT Lease agreed to purchase from DVB Bank its aviation investment management and asset management
businesses. This transaction is expected to be closed in the first half of the fiscal year ending March 31 2021,
subject to regulatory approvals and certain 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. See Note 2 to our
consolidated financial statements included elsewhere in this Annual Report.
Acquisition of Shares in Colonial First State Group Limited Subsidiaries and Rebranding of Acquired
Business as First Sentier Investors
In August 2019, Mitsubishi UFJ Trust and Banking completed its acquisition of 100% of the shares in each
of nine subsidiaries of Colonial First State Group Limited which collectively represent a global asset
management business known as Colonial First State Global Asset Management, or CFSGAM, from Australian
financial group Commonwealth Bank of Australia and its wholly owned subsidiary Colonial First State Group
Limited for an aggregate purchase price of approximately AU$4.2 billion, or ¥312 billion, in cash. As a result of
the acquisition, the nine subsidiaries became our consolidated subsidiaries. Total assets acquired amounted to
¥197.9 billion, including cash and bank deposits of ¥42.0 billion and intangible assets of ¥106.0 billion, and total
liabilities assumed amounted to ¥68.5 billion, including accrued bonuses of ¥18.8 billion. We also recorded
goodwill of ¥177.1 billion in connection with the acquisition. 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. In September 2019, CFSGAM was rebranded as First Sentier Investors.
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 one of its subsidiaries, Mitsubishi UFJ
Morgan Stanley PB Securities Co., Ltd., or PB Securities, agreed on a merger whereby Mitsubishi UFJ Morgan
Stanley Securities will be the surviving company. In connection with the planned merger, in October 2019,
MUFG Bank transferred the shares it held representing 25% of the equity interest in PB Securities to Mitsubishi
UFJ Morgan Stanley Securities, resulting in Mitsubishi UFJ Morgan Stanley Securities holding 100% of the
equity interest in PB Securities. The merger has been postponed since the previous target completion date of
June 1, 2020, and is currently scheduled to be completed on August 1, 2020, subject to changes in the
circumstances including the impact of the COVID-19 pandemic. Through the planned merger, Mitsubishi UFJ
Morgan Stanley Securities aims to enhance its wealth management business.
Strategic Investment in Grab Holdings Inc. in Singapore
In February 2020, we entered into a strategic alliance agreement with Grab Holdings Inc., or Grab, which is
headquartered in Singapore and provides on-demand transport services, food and package delivery services,
digital payments and financial services in Southeast Asia. Under the agreement, we will invest up to
$706 million, or ¥78.3 billion, in Grab to jointly develop next generation custom-made financial services in
Southeast Asia to promote financial inclusion in the region. While Grab is not expected to become our subsidiary
84
or equity method investee with our investment in Grab in the agreed-upon maximum amount, Grab will confer
“First Choice Bank” status on us and our Southeast Asian partner banks, such as Bank Danamon and Krungsri.
We and Grab plan to co-develop innovative financial products and services based on our combined customer
insight to better cater to the financial needs of Grab’s users, driver-partners and merchant-partners as well as our
customers.
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, Krungsri, and Other—based on the segments used to determine the allowance
for credit losses.
At March 31, 2020, we had ¥86,622.8 billion of loans in the Commercial segment and recorded an
allowance for credit losses against these loans of ¥482.3 billion. We 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 the Commercial segment by
evaluating various factors and assumptions, such as the borrower’s internal credit rating and historical loss
experience as well as adjustments to reflect existing economic conditions. We update these factors and
assumptions on a regular basis and upon the occurrence of unexpected changes in the economic environment. Of
the various factors and assumptions, the determination of the allowance for credit losses for the Commercial
segment requires management to make significant judgements, due to the subjectivity and uncertainty associated
with the determination of borrowers’ internal credit ratings which are highly dependent on the estimation of the
borrowers’ performance and business sustainability in case the borrowers experience financial problems. Key
elements relating to the policies and discipline used in determining the allowance for credit losses for the
Commercial segment 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, we recognized a qualitative reserve for loan losses, specific to the Commercial segment, as a
result of the estimated impact that the COVID-19 had on borrowers’ credit risk which has been incurred but did
not appear on the individual borrower’s financials. The estimate included assumptions regarding which
borrowers (certain industries and regions) have suffered significant impacts on their performance as a result of
the COVID-19. Assumptions about the severity and duration of the COVID-19 were also used to estimate the
impact of the COVID-19 on the borrowers.
85
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
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.”
On April 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement of Credit Losses on
Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current U.S.
GAAP with the current expected credit loss model that reflects expected credit losses and requires consideration
of a broader range of reasonable and supportable information to estimate credit losses. For more information on
this guidance, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
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 26 to our consolidated financial statements included elsewhere in this
Annual Report and “Item 3.D. Key Information—Risk Factors—Operational Risk—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.”
Business Developments
As part of our global strategies, we have executed multiple large-scale acquisitions, investments and capital
alliances. We completed the acquisition of PT Bank Danamon Indonesia, Tbk. (“Danamon”) on April 29, 2019
and the acquisition of nine subsidiaries of Colonial First State Group Limited, which collectively, including their
subsidiaries represent the global asset management business of Colonial First State Global Asset Management,
on August 2, 2019, which were renamed First Sentier Investors (“FSI”) after the acquisition. We accounted for
86
these acquisitions under the acquisition method of accounting for business combinations. Accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values,
including Danamon’s relationships with agents of ¥79.6 billion and core deposit intangibles of ¥44.1 billion and
FSI’s customer relationships of ¥100.9 billion, respectively. Management estimated the fair values of these
intangible assets using the multi-period excess earnings method, which is a specific discounted cash flow
method.
The estimation of the fair values of these intangible assets requires management to make significant
judgements related to significant assumptions. For the Danamon’s relationships with agents, the significant
assumptions included the growth rate of loan origination amounts reflecting market growth forecast, the attrition
rate of the existing agents based on historical actual results, and the discount rate in which the risk that the future
cash flow differ from the estimate is taken into consideration. The fair value of Danamon’s intangible assets of
relationships with agents was determined, discounting expected cash flows based on excess earnings through the
period for which relationships with existing agents was expected to continue. These cash flows were calculated
using the growth rate of loan origination amounts reflecting forecast of motorcycle sales market in Indonesia and
the attrition rate of existing agents based on historical actual results. The discount rate was determined based on
cost of shareholders’ equity, considering risks of changes in relationship continuity, transaction size and
profitability, relating to intangible assets, and risks involved in business scale. In addition, the fair value of
Danamon’s core deposit intangibles was determined, discounting expected cash flows based on the effect of
reduced funding cost through the period for which the deposit balance was expected to be kept. These cash flows
were calculated using the assumptions, such as the attrition rate of depositors. For the FSI’s customer
relationships, the significant assumptions included the growth rate of asset under management reflecting market
growth forecast, the attrition rate of the existing customers based on historical actual results, and the discount rate
in which the risk that the future cash flows differ from the estimate is taken into consideration. The fair value of
FSI’s customer relationships was determined, discounting expected cash flows based on excess earnings through
the period for which relationship with customers was expected to continue. These cash flows were calculated
using the growth rate of assets under management reflecting expected market growth of investment objectives
such as equity securities, debt securities, and infrastructures, and the attrition rate of existing customers based on
historical actual results. The discount rate was determined based on cost of shareholders’ equity, considering
business risks relating to intangible assets. Changes in these significant assumptions could have a significant
impact on the fair value of these intangible assets.
Impairment on Goodwill
As part of our global strategies, we have executed multiple large-scale acquisitions, investments and capital
alliances, and recorded goodwill resulting from these business combinations. 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 process that compares the carrying amount of a reporting unit with its fair
value. An impairment loss is recognized to the extent that the carrying amount of a reporting exceeds its fair
value, but not exceeding the total amount of goodwill allocated to that reporting unit. 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.
Our consolidated goodwill balance was ¥517.6 billion at March 31, 2020, which was allocated to our reporting
units. The measurement of the fair value of the Danamon reporting unit was primarily based on a market
approach, and was also corroborated by multiple valuation techniques. We determined that the carrying value of
Danamon exceeded the fair value as of the measurement date, resulting in the impairment loss on goodwill of
¥241.4 billion for the fiscal year ended March 31, 2020. In addition, we determined the fair values of the MUFG
Americas Holdings Corporation (“MUAH”) reporting units within the Global Commercial Banking Business
Group segment and Global Corporate & Investment Banking Business Group segment (“MUAH reporting
units”) using a combination of the income and the market approaches. The income approach determined the fair
value of the reporting units by discounting management’s projections of each reporting unit’s cash flows,
87
including a terminal value to estimate the fair value of cash flows beyond the final year of projected results, using
a discount rate derived from the Capital Asset Pricing Model. The market approach incorporates comparable
public company price to tangible book value and price to earnings multiples. The principal factors used in the
discounted cash flow analysis requiring judgment are the projected future operating cash flows based on
forecasted future income. We determined that the carrying values of MUAH reporting units exceeded the fair
values as of the measurement date, resulting in the impairment loss on goodwill of ¥80.3 billion for the fiscal
year ended March 31, 2020.
The determination of the fair value of these reporting units requires management to make significant
judgments related to significant assumptions due to the subjectively and uncertainty associated with the
assumptions. The significant assumptions included the market capitalization to estimate the fair value of the
Danamon reporting units, and the control premium considered in relation to market capitalization, for Danamon
reporting unit and projected future operating cash flows based on forecasted future income in the income
approach, for MUAH reporting units.
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 31
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.
88
A. Operating Results
The following discussion relates to our operating results for the fiscal years ended March 31, 2019 and 2020.
For the discussion on our operating results for the fiscal year ended March 31, 2018, including certain
comparative discussion on our operating results for the fiscal years ended March 31, 2018 and 2019, 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, 2019, filed with the SEC on July 10, 2019.
Results of Operations
The following table sets forth a summary of our results of operations for the fiscal years ended March 31,
2019 and 2020:
Fiscal years ended March 31,
2019
2020
(in billions)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,813.4
1,518.0
¥3,927.1
1,684.3
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,295.4
34.3
1,595.2
2,985.5
870.8
133.2
2,242.8
321.7
1,875.8
3,363.6
433.3
114.6
Net income before attribution of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
¥ 737.6
19.0
¥ 318.7
12.7
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . . . .
¥ 718.6
¥ 306.0
Major components of our net income attributable to Mitsubishi UFJ Financial Group for the fiscal years
ended March 31, 2019 and 2020 are discussed in further detail below.
89
Net Interest Income
The following table is a summary of our interest rate spread, including the average balances of, and interest
and average interest rates on, our assets and liabilities, for the fiscal years ended March 31, 2019 and 2020.
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,
2019
Interest
income
(expense)
Average
balance
Average
rate
Average
balance
2020
Interest
income
(expense)
Average
rate
(in billions, except percentages)
Interest-earning assets:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥145,279.1 ¥ 1,048.6
2,764.8
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96,128.3
0.72% ¥145,258.9 ¥
2.88
101,024.8
998.4
2,928.7
0.69%
2.90
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥241,407.4 ¥ 3,813.4
1.58% ¥246,283.7 ¥ 3,927.1
1.59%
Financed by:
Interest-bearing liabilities:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥173,199.6 ¥ (504.2) 0.29% ¥172,878.9 ¥ (473.4) 0.27%
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,013.8) 1.65
(1,210.9) 1.84
61,443.6
65,982.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . .
234,643.2
6,764.2
(1,518.0) 0.65
—
238,861.6
7,422.1
(1,684.3) 0.71
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥241,407.4
0.63% ¥246,283.7
0.68%
Net interest income and interest rate spread . . . . . . . . . . . . . .
Net interest income as a percentage of total interest-earning
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,295.4
0.93%
¥ 2,242.8
0.88%
0.95%
0.91%
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, 2020 compared to the fiscal year ended March 31, 2019:
Fiscal Year Ended March 31, 2019
versus
Fiscal Year Ended March 31, 2020
Increase (decrease)
due to changes in
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (3,478)
35,026
Volume(1)
Net change
Rate(1)
(in millions)
¥(15,969) ¥(19,447)
(33,152)
(68,178)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,548
¥(84,147) ¥(52,599)
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.”
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
Net interest income decreased ¥52.6 billion to ¥2,242.8 billion for the fiscal year ended March 31, 2020
from ¥2,295.4 billion for the fiscal year ended March 31, 2019. This decrease was due to higher foreign interest
expense, mainly reflecting higher average interest rates on, and higher average balance of, foreign deposits. This
decrease was also attributable to lower domestic interest income, mainly reflecting lower interest rates on
domestic loans. These negative impacts on net interest income were partially offset by an increase in foreign
interest income, primarily reflecting higher interest rates on foreign loans. See “—Business Environment—
Recent Developments and Prospects.”
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Interest income increased ¥113.7 billion to ¥3,927.1 billion for the fiscal year ended March 31, 2020 from
¥3,813.4 billion for the previous fiscal year. Domestic interest income decreased ¥50.2 billion, mainly due to
lower interest rates on domestic loans, reflecting the competitive downward pressure in the continued low
interest rate environment in Japan. Foreign interest income increased ¥163.9 billion primarily due to higher
interest rates on foreign loans and higher volumes of, and higher interest rates on, foreign money market
transactions.
Interest expense increased ¥166.3 billion to ¥1,684.3 billion for the fiscal year ended March 31, 2020 from
¥1,518.0 billion for the previous fiscal year. Domestic interest expense decreased ¥30.8 billion mainly due to
lower interest rates on call money, funds purchased, and payables under repurchase agreements and securities
lending transactions, reflecting lower U.S dollar funding rates in Japan. Foreign interest expense increased
¥197.1 billion. 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) decreased five basis point to 0.88% for the fiscal year ended March 31,
2020 from 0.93% for the previous fiscal year. Between the same periods, the average interest rate spread on
domestic activities decreased one basis point to 0.42% from 0.43%, and the average interest rate spread on
foreign activities decreased 17 basis points to 1.06% from 1.23%. The decrease in the average interest rate spread
on domestic activities mainly reflected lower interest rates on loans, reflecting the competitive downward
pressure in the continued low interest rate environment in Japan. The decrease in the average interest rate spread
on foreign activities mainly reflected the declining gap between long-term interest rates and short-term interest
rates.
The yield on 10-year Japanese government bonds fluctuated between negative 0.286% and negative 0.009%
during the six months ended September 30, 2019, but subsequently rose to around 0% towards December 31,
2019, declined again to negative 0.153% in February 2020, and rose back to around 0% towards March 31, 2020.
During the previous fiscal year, the yield on such bonds fluctuated between negative 0.10% and positive 0.15%.
In October 2019, the Bank of Japan decided to maintain its monetary policy, while slightly modifying its forward
guidance to clarify that it expects short- and long-term interest rates to remain at their present or lower levels
without specifying the duration of its guidance. As a result, long-term interest rates may fluctuate at lower levels
or to greater degrees for an extended period, increasing uncertainty in the long-term interest rate market in Japan.
In the United States, the FRB reduced the target range for the federal funds rate from between 2.25% and 2.50%
to between 2.00% and 2.25% in July 2019, and to between 1.75% and 2.00% in September 2019, and further to
between 1.50% and 1.75% in October 2019, and, in light of the COVID-19 pandemic risks, further to between
0% to 0.25% in March 2020. See “—Business Environment.”
The average balance of interest-earning assets increased ¥4,876.3 billion to ¥246,283.7 billion for the fiscal
year ended March 31, 2020 from ¥241,407.4 billion for the fiscal year ended March 31, 2019. The average
balance of domestic interest-earning assets decreased ¥20.2 billion to ¥145,258.9 billion mainly due to a decrease
in the average balance of our interest-earning deposits in other banks and loans, largely offset by increases in the
average balance of our call loans, funds sold, and receivables under resale agreements and securities borrowing
transactions as well as trading account assets. The average balance of foreign interest-earning assets increased
¥4,896.5 billion primarily due to increases in call loans, funds sold, and receivables under resale agreements and
securities borrowing transactions and trading account assets.
The average balance of interest-bearing liabilities increased ¥4,218.4 billion to ¥238,861.6 billion for the
fiscal year ended March 31, 2020 from ¥234,643.2 billion for the fiscal year ended March 31, 2019. The average
balance of domestic interest-bearing liabilities decreased ¥320.7 billion mainly due to a decrease in domestic
deposits. The average balance of foreign interest-bearing liabilities increased ¥4,539.1 billion mainly due to an
increase in foreign deposits and call money, funds purchased, and payables under repurchase agreements and
securities lending transactions.
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Our net interest income for each of the fiscal years ended March 31, 2020 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.”
Provision for (reversal of) credit losses
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
We recorded ¥321.7 billion of provision for credit losses for the fiscal year ended March 31, 2020,
compared to ¥34.3 billion of provision for credit losses for the previous fiscal year. By segment, for the fiscal
year ended March 31, 2020, ¥153.8 billion, ¥26.5 billion, ¥30.9 billion, ¥70.0 billion and ¥41.5 billion of
provision for credit losses were recorded in the Commercial, Card, MUFG Americas Holdings, Krungsri and
Other segments, respectively, while ¥1.0 billion of reversal of credit losses was recorded in the Residential
segment. For the previous fiscal year, ¥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.
The provision for credit losses recorded in the Commercial segment for the fiscal year ended March 31,
2020 mainly reflected, the financing provided to a domestic borrower in the services sector to facilitate the
borrower’s restructuring efforts, and the deterioration in the business and financial performance of some large
domestic borrowers in the manufacturing sector and some large foreign borrowers in the oil and gas sector and
the electric power sector. The provision for credit losses for the Commercial segment also included ¥46.4 billion
of qualitative reserves in light of the estimated impact that the COVID-19 pandemic had on the credit risk of our
borrowers. See Note 4 to our consolidated financial statements included elsewhere in this Annual Report.
The larger provision for credit losses in the Card segment for the fiscal year ended March 31, 2020 mainly
reflected an increase in default borrowers who filed for bankruptcy as part of their debt workout efforts. The
increase in provision for credit losses in the MUFG Americas Holdings segment for the fiscal year ended
March 31, 2020 reflected the deteriorated in the financial condition of large borrowers in the electric power
sector and the real estate rental sector as well as the growth in the unsecured consumer loan portfolio. The larger
provision for credit losses in the Krungsri segment mainly reflected the expansion of the retail and consumer loan
portfolio, particularly automobile loans.
The reversal of credit losses in the Residential segment for the fiscal year ended March 31, 2020 reflected
our assessment that the credit quality of the portfolio remained substantially unchanged as the stable corporate
environment in recent periods continued to have a positive impact on the financial condition of residential
borrowers.
We recorded ¥90.4 billion of provision for credit losses for our domestic loan portfolio for the fiscal year
ended March 31, 2020, compared to reversal of credit losses of ¥40.2 billion for the previous fiscal year. This
reflected, the financing provided to the domestic borrower in the services sector to facilitate the borrower’s
restructuring efforts, and the deteriorated business and financial condition of large domestic borrowers in the
manufacturing sector in the Commercial segment. We recorded ¥231.3 billion of provision for credit losses for
our foreign portfolio for the fiscal year ended March 31, 2020, compared to ¥74.5 billion of provision for credit
losses for the previous fiscal year. The larger provision reflected, the deteriorated financial condition of some
92
large foreign borrowers that belong to the foreign oil and gas sector and the foreign electric power sector in the
Commercial and MUFG Americas Holdings segments, the expansion of the retail and consumer loan portfolio in
the Krungsri segment, and newly extended loans to automobile purchasers and small and medium-sized
enterprises as well as unsecured consumer loans in Bank Danamon, which became our consolidated subsidiary in
April 2019, in the Other segment.
For more information, see “—Liquidity and Capital Resources—Financial Condition—Loan Portfolio.” See
also “—Business Environment—Recent Developments and Prospects.”
Non-Interest Income
The following table is a summary of our non-interest income for the fiscal years ended March 31, 2019 and
2020:
Fiscal years ended March 31,
2019
2020
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
52.6
168.7
73.2
225.9
233.4
147.6
115.0
45.0
46.9
45.2
285.1
¥
53.7
169.4
66.0
238.1
221.5
184.6
119.9
46.3
44.4
49.8
308.4
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange losses—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account profits (losses)—net:
Net losses on interest rate and other derivative contracts . . . . . . . . . . . . . . . . . . . .
Net profits on trading account securities, excluding derivatives . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities gains (losses)—net:
Net gains on sales of available-for-sale debt securities . . . . . . . . . . . . . . . . . . . . .
Impairment losses on available-for-sale debt securities . . . . . . . . . . . . . . . . . . . . .
Net losses from marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on remeasurement of previously held equity method investment(1) . . . . . . . . . . . .
Other non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,438.6
(96.0)
1,502.1
(281.8)
(24.0)
192.9
168.9
28.7
(0.6)
(355.8)
75.4
(252.3)
209.7
22.7
—
103.6
(159.0)
924.4
765.4
106.4
(1.6)
(646.0)
9.0
(532.2)
282.7
10.0
41.2
88.4
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,595.2
¥1,875.8
Note:
(1) Represents profits recognized in connection with our acquisition of Bank Danamon. See Note 2 to our consolidated financial statements
included elsewhere in this Report.
93
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
Non-interest income increased ¥280.6 billion to ¥1,875.8 billion for the fiscal year ended March 31, 2020
from ¥1,595.2 billion for the fiscal year ended March 31, 2019. This increase was mainly attributable to an
increase in trading account profits, partially offset by net investment securities losses and net foreign exchange
losses. See “—Business Environment—Recent Developments and Prospects.”
Fees and commissions income
Fees and commissions income increased ¥63.5 billion to ¥1,502.1 billion for the fiscal year ended March 31,
2020 from ¥1,438.6 billion for the fiscal year ended March 31, 2019. This increase was primarily due to an
increase in fees and commissions on administration and management services for investment funds mainly due to
higher fees from asset management services, reflecting the consolidation of First Sentier Investors as well as an
increase in the volume of investment products held by domestic corporate investors. The increase was also
attributable to an increase in other fees and commissions, reflecting the consolidation of Bank Danamon, as well
as an increase in 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. These increases were partially
offset by a decrease in fees and commissions on securities-related services mainly due to lower volumes of
selling and buying transactions by retail customers.
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, 2019 and 2020:
Fiscal years ended March 31,
2019
2020
(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 . . . . . . . . . . .
¥(354.4)
71.8
186.6
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (96.0)
¥(434.1)
748.3
(596.0)
¥(281.8)
Net foreign exchange losses for the fiscal year ended March 31, 2020 were ¥281.8 billion, compared to net
losses of ¥96.0 billion for the fiscal year ended March 31, 2019. This was mainly due to larger net foreign
exchange losses on foreign currency-denominated trading account securities, such as U.S. Treasury bonds, under
the fair value option as the Japanese yen appreciated against the U.S. dollar from ¥110.99 to the U.S. dollar as of
March 31, 2019 to ¥108.83 to the U.S. dollar as of March 31, 2020, while the Japanese yen depreciated against
the U.S. dollar during the previous fiscal year resulting in net foreign exchange gains on U.S. dollar-denominated
trading account securities under the fair value option. 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 into in connection with our U.S. dollar funding. These losses were largely offset by an
increase in net foreign exchange gains on other than derivative contracts, reflecting the positive 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 appreciated against other major currencies on a spot
rate basis between March 31, 2019 and March 31, 2020.
94
Net trading account profits (losses)
The following table sets forth the details of our trading account profits and losses for the fiscal years ended
March 31, 2019 and 2020:
Fiscal years ended March 31,
2019
2020
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
5.6
80.1
0.3
(39.8)
(70.2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (24.0)
Net profits (losses) on trading account securities, excluding derivatives
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities under the fair value option . . . . . . . . . . . . . . . . . .
¥ (16.0)
208.9
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥192.9
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥168.9
¥(173.2)
29.8
—
14.9
(30.5)
¥(159.0)
¥ 86.6
837.8
¥ 924.4
¥ 765.4
Net trading account profits were ¥765.4 billion for the fiscal year ended March 31, 2020, compared to net
profits of ¥168.9 billion for the fiscal year ended March 31, 2019. This improvement was mainly due to an
increase in net profits on trading account securities, excluding derivatives, resulting mainly from an increase 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, 2020. The yield on
10-year U.S. Treasury bonds declined to around 0.6% as of March 31, 2020 from around 2.4% as of March 31,
2019.
The improvement in net profits on trading account securities, excluding derivatives, was partially offset by
larger net losses on interest rate and other derivative contracts, which primarily reflected ¥173.2 billion of net
losses on interest rate contracts for the fiscal year ended March 31, 2020, compared to ¥5.6 billion of net profits
on such contracts for the fiscal year ended March 31, 2019 mainly due to fluctuations in interest rates particularly
in the United States towards March 31, 2020.
Net investment securities gains (losses)
Net investment securities losses were ¥532.2 billion for the fiscal year ended March 31, 2020, compared to
net losses of ¥252.3 billion for the fiscal year ended March 31, 2019. This was mainly due to ¥646.0 billion of
net losses from marketable equity securities, reflecting a decline in stock prices towards March 31, 2020 in
Japan.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for the fiscal year ended March 31, 2020 was
¥282.7 billion, compared to ¥209.7 billion for the previous fiscal year, reflecting higher earnings of our equity
method investees, including Morgan Stanley.
95
Non-Interest Expense
The following table shows a summary of our non-interest expense for the fiscal years ended March 31, 2019
and 2020:
Fiscal years ended March 31,
2019
2020
(in billions)
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,175.4
179.8
313.7
275.1
98.9
235.1
118.1
93.8
59.2
95.4
—
38.5
302.5
¥1,242.6
182.9
332.0
303.6
113.5
237.3
3.7
98.4
60.0
100.2
383.8
(62.3)
367.9
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,985.5
¥3,363.6
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
Non-interest expense increased ¥378.1 billion to ¥3,363.6 billion for the fiscal year ended March 31, 2020
from ¥2,985.5 billion for the previous fiscal year. Major factors affecting this increase are discussed below. See
“—Business Environment—Recent Developments and Prospects.”
Salaries and employee benefits
Salaries and employee benefits increased ¥67.2 billion to ¥1,242.6 billion for the fiscal year ended
March 31, 2020. The increase was due to an increase in overseas salaries and employee benefits, mainly
reflecting the impact of the consolidation of Bank Danamon.
Impairment of intangible assets
Impairment of intangible assets decreased ¥114.4 billion to ¥3.7 billion. This was primarily attributable to
¥116.1 billion of impairment losses on system integration-related assets of Mitsubishi UFJ NICOS recorded in
the previous fiscal year, 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.
Impairment of goodwill
We recognized ¥383.8 billion of impairment loss on goodwill for the fiscal year ended March 31, 2020. Of
this amount, the impairment loss recorded in connection with our investment in Bank Danamon was
¥241.4 billion. In light of Bank Danamon’s publicly traded stock price in comparison to the per-share purchase
price for Bank Danamon and considering other factors, we performed a quantitative goodwill impairment test, as
a result of which we concluded that the fair value of Bank Danamon as a reporting unit had fallen below its
carrying amount. The measurement of the fair value of the reporting unit was primarily based on a market
approach and was corroborated by multiple valuation techniques. The amount of the recognized impairment loss
represented all of the goodwill recorded in connection with our acquisition of Bank Danamon. See Notes 2 and 6
to our consolidated financial statements included elsewhere in this Annual Report.
96
We also recognized ¥80.3 billion of impairment loss relating to MUFG Americas Holdings for the fiscal
year ended March 31, 2020. Due to the decline in interest rates and weaker business prospects than previously
forecasted, our previous cash flow projections for certain reporting units relating to MUFG Americas Holdings
were revised downward. As a result of our quantitative goodwill impairment test, we concluded that the fair
values of these reporting units, measured on December 31, 2019, were below the carrying amounts of such
reporting units. We measured the fair values of the reporting units using a combination of the income and market
approaches.
We consolidate MUFG Americas Holdings based on financial information for the fiscal year ended
December 31 as this date and our fiscal year which ended on March 31 have been treated as coterminous. For the
fiscal year ended March 31, 2020, the effect of recording a goodwill impairment as an intervening event
primarily due to the economic environment triggered by COVID-19 pandemic for the three-month period ended
March 31, 2020 would have been approximately ¥80 billion to ¥110 billion. This intervening event occurring
during the three-month period ended March 31, 2020, if recorded, would not have had a substantial and
permanent effects on consolidated total assets, net income or total equity as of March 31, 2020, and therefore, the
intervening event was not recognized for the fiscal year ended March 31, 2020. See Note 6 to our audited
consolidated financial statements included elsewhere in this Annual Report.
We recognized ¥62.2 billion of impairment loss relating to Krungsri for the fiscal year ended March 31,
2020. As Thailand’s economy slowed down, Krungsri’s stock price declined. As a result our quantitative
goodwill impairment test, we concluded that the fair value of Krungsri as a reporting unit, measured on
December 31, 2019, had fallen below its carrying amount. We measured the fair value of the reporting unit
primarily based on the market approach as corroborated by multiple valuation techniques.
Provision for (reversal of) off-balance sheet credit instruments
We recognized ¥62.3 billion of reversal of off-balance sheet credit instruments for the fiscal year ended
March 31, 2020, compared to ¥38.5 billion of provision for off-balance sheet credit instruments for the previous
fiscal year, mainly due to reversal reported in our commercial banking subsidiaries.
We consolidate certain foreign subsidiaries based on financial information for the fiscal year ended
December 31 as this date and our fiscal year which ended on March 31 have been treated as coterminous. For the
fiscal year ended March 31, 2020, the effect of recording a provision for credit losses and a provision for
off-balance sheet credit instruments, including commitments to extend credit, financial guarantees and standby
letters of credit as an intervening event primarily due to the economic environment triggered by COVID-19
pandemic for the three-month period ended March 31 2020 would have been approximately ¥84 billion and
would have resulted in a decrease of ¥58 billion to net income attributable to Mitsubishi UFJ Financial Group.
This intervening event occurring during the three-month period ended March 31, 2020, if recorded, would not
have had a substantial and permanent effects on consolidated total assets, net income or total equity as of March
31, 2020, and therefore, the intervening event was not recognized for the fiscal year ended March 31, 2020. See
Note 4 to our audited consolidated financial statements included elsewhere in this Annual Report.
On April 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement of Credit Losses on
Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current U.S.
GAAP with the current expected credit loss model that reflects expected credit losses and requires consideration
of a broader range of reasonable and supportable information to estimate credit losses. As a result, considering
the COVID-19 pandemic and macroeconomic variables under the circumstances, our allowance for credit losses
and our allowance for off-balance sheet credit instruments increased an aggregate of approximately ¥380 billion
to ¥450 billion as of the opening balance sheet date. For more information on this guidance, see Note 1 to our
consolidated financial statements included elsewhere in this Annual Report.
97
Income Tax Expense
The following table shows a summary of our income tax expense for the fiscal years ended March 31, 2019
and 2020:
Fiscal years ended March 31,
2019
2020
(in billions, except percentages)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥870.8
133.2
15.3%
30.6%
¥433.2
114.5
26.4%
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, 2019 and 2020 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realization of previously unrecognized tax effects of subsidiaries . . . . . . . .
Nontaxable dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and interest expense for uncertainty in income taxes . . . . . . . . . . . . . . .
Noncontrolling interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in tax laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expiration of loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended March 31,
2019
30.6%
2020
30.6%
0.5
—
(3.3)
(2.5)
(1.4)
—
(9.1)
0.6
0.6
0.2
0.0
0.1
(1.0)
1.2
26.1
(9.2)
(3.2)
7.9
(19.8)
(15.6)
3.6
0.0
(0.1)
—
1.9
3.0
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.3%
26.4%
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% for each of
the fiscal years ended March 31, 2019 and 2020. 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, 2020
The effective income tax rate for the fiscal year ended March 31, 2020 was 26.4%, which was 4.2
percentage points lower than the combined normal effective statutory rate of 30.6%. This was primarily due to
the sale of a wholly owned subsidiary, as a result of which we recognized tax benefits from temporary
differences not previously recognized as part of deferred tax assets, decreasing our income tax expense by
¥85.6 billion and our effective income tax rate by 19.8 percentage points for the fiscal year ended March 31,
2020. Another factor contributing to the lower effective income tax rate was our receipt of nontaxable dividends,
which resulted in a decrease of ¥67.6 billion in income tax expense and a decrease of 15.6 percentage points in
the effective income tax rate for the fiscal year ended March 31, 2020. 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
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our income before income tax expense reported under U.S. GAAP. These impact were partially offset by an
increase of 26.1 percentage points in the effective income tax rate resulting from recognition of the goodwill
impairment loss discussed above, which had the effect of decreasing our income before income tax expense
under U.S. GAAP by ¥113.1 billion for the fiscal year ended March 31, 2020, since such loss was not deductible
in computing our taxable income under Japanese tax law.
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
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.
Net income (loss) attributable to noncontrolling interests
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
We recorded ¥12.7 billion of net income attributable to noncontrolling interests for the fiscal year ended
March 31, 2020, compared to ¥19.0 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 29 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.
The following is a brief explanation of our business segments for the fiscal year ended March 31, 2020:
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
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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. Starting in the current fiscal year ended March 31, 2020, this business group
also covers Bank Danamon. 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. Starting in the current fiscal
year ended March 31, 2020, this business group also covers First Sentier Investors. 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.
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.
We made modifications to our internal management accounting rules and practices to clarify the
responsibility for profits of each business segment, effective April 1, 2019. Major rule changes are (i)
reallocation of certain overseas Japanese corporates business in MUFG Americas Holdings previously included
in the Global Commercial Banking Business Group into the Japanese Corporate & Investment Banking Business
Group due to refinement of the business segment definition, (ii) reallocation of operating expenses among the
Business Groups based on cost drivers due to refinement of the business segment definition, and (iii) allocation
of adjustments related to the derivative counterparty risk previously included in Other to the Customer Business
Groups and the Global Markets Business Group that held the derivative assets. These modifications had the
following impact for the fiscal years ended March 31, 2018 and 2019:
‰
‰
‰
increasing the operating profits of the Global Corporate & Investment Banking Business Group by
¥1.8 billion, the Global Markets Business Group by ¥6.3 billion, and Other by ¥29.7 billion for the
fiscal year ended March 31, 2018,
reducing the operating profits of the Retail & Commercial Banking Business Group by ¥0.5 billion, the
Japanese Corporate & Investment Banking Business Group by ¥18.6 billion, and the Global
Commercial Banking Business Group by ¥18.7 billion for the fiscal year ended March 31, 2018,
increasing the operating profits of the Retail & Commercial Banking Business Group by ¥1.9 billion,
the Global Markets Business Group by ¥5.1 billion, and Other by ¥30.6 billion for the fiscal year ended
March 31, 2019, and
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‰
reducing the operating profits of the Global Corporate & Investment Banking Business Group by
¥10.4 billion, the Japanese Corporate & Investment Banking Business Group by ¥13.8 billion, and the
Global Commercial Banking Business Group by ¥13.4 billion for the fiscal year ended March 31, 2019.
Prior period business segment information has been restated to enable comparison between the relevant
amounts for the fiscal years ended March 31, 2018, 2019 and 2020.
For further information, see Note 29 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, 2018,
2019 and 2020:
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, 2018
Net revenue . . . . . . . . . . . . . ¥1,582.5
781.6
BK and TB(1):
. . . . . . .
¥523.2
433.0
¥364.3
236.9
¥652.8
(3.3)
¥190.4
83.8
(in billions)
¥3,313.2 ¥574.5 ¥ 30.4 ¥3,918.1
2,029.9
1,532.0
128.6
369.3
Net interest
income . . . . . . .
Net fees . . . . . . . .
Other . . . . . . . . . .
463.4
246.4
71.8
Other than BK and
TB . . . . . . . . . . . . . .
Operating expenses . . . . . . .
800.9
1,226.3
148.9
225.1
59.0
90.2
314.8
92.1
146.8
(2.0)
127.4
226.7
(3.3)
—
—
—
83.8
—
701.1
702.1
128.8
235.1
(12.0)
146.2
183.5
(22.9)
(32.0)
1,119.7
667.2
243.0
656.1
468.8
106.6
119.4
1,781.2
2,356.0
205.2
228.7
(98.2) 1,888.2
2,717.5
132.8
Operating profit (loss) . . . . . ¥ 356.2
¥208.4
¥137.6
¥184.0
¥ 71.0
¥ 957.2 ¥345.8 ¥(102.4) ¥1,200.6
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.
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 . . . . . . . . . . . . . ¥1,522.0
737.1
BK and TB(1):
. . . . . . .
¥545.2
415.0
¥383.8
254.0
¥690.5
(1.3)
¥203.0
93.2
(in billions)
¥3,344.5 ¥479.8 ¥ (11.9) ¥3,812.4
1,861.0
1,498.0
303.9
59.1
Net interest
income . . . . . . .
Net fees . . . . . . . .
Other . . . . . . . . . .
457.2
243.8
36.1
Other than BK and
TB . . . . . . . . . . . . . .
Operating expenses . . . . . . .
784.9
1,221.3
150.2
210.3
54.5
130.2
309.3
110.9
142.4
0.7
129.8
241.5
(1.3)
—
—
—
93.2
—
717.0
689.7
91.3
227.8
(13.9)
90.0
200.4
(54.9)
(86.4)
1,145.2
620.9
94.9
691.8
483.5
109.8
124.6
1,846.5
2,380.2
175.9
223.5
(71.0) 1,951.4
2,740.1
136.4
Operating profit (loss) . . . . . ¥ 300.7
¥235.9
¥142.3
¥207.0
¥ 78.4
¥ 964.3 ¥256.3 ¥(148.3) ¥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.
101
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, 2020
Net revenue . . . . . . . . . . . . . ¥1,501.6
721.1
BK and TB(1):
. . . . . . .
¥551.1
420.7
¥376.8
270.5
¥804.6
0.1
¥243.0
94.6
(in billions)
¥3,477.1 ¥575.2 ¥ 15.7 ¥4,068.0
1,878.1
1,507.0
358.4
12.7
Net interest
income . . . . . . .
Net fees . . . . . . . .
Other . . . . . . . . . .
439.0
248.0
34.1
Other than BK and
TB . . . . . . . . . . . . . .
Operating expenses . . . . . . .
780.5
1,203.0
164.2
205.0
51.5
130.4
315.8
115.2
137.6
17.7
106.3
247.8
0.9
—
(0.8)
2.5
92.2
(0.1)
721.8
682.8
102.4
123.1
(12.6)
247.9
85.4
(64.8)
(7.9)
930.3
605.4
342.4
804.5
571.8
148.4
171.7
1,970.1
2,510.1
216.8
232.2
3.0
150.7
2,189.9
2,893.0
Operating profit (loss) . . . . . ¥ 298.6
¥235.3
¥129.0
¥232.8
¥ 71.3
¥ 967.0 ¥343.0 ¥(135.0) ¥1,175.0
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, 2020 Compared to Fiscal Year Ended March 31, 2019
Retail & Commercial Banking Business Group
Net revenue of the Retail & Commercial Banking Business Group decreased ¥20.4 billion to
¥1,501.6 billion for the fiscal year ended March 31, 2020 from ¥1,522.0 billion for the fiscal year ended
March 31, 2019. 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 net interest income due to
lower interest rate spreads on domestic loans due to competitive downward pressure on interest rates on such
loans in the continued low interest rate environment in Japan. The decrease in net revenue was also attributable
to a decrease in investment products sales reflecting weaker retail customer demand for investment products
under unfavorable market conditions. These decreases were 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 ¥18.3 billion to
¥1,203.0 billion for the fiscal year ended March 31, 2020 from ¥1,221.3 billion for the fiscal year ended
March 31, 2019. 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 ¥2.1 billion to
¥298.6 billion for the fiscal year ended March 31, 2020 from ¥300.7 billion for the fiscal year ended March 31,
2019.
Japanese Corporate & Investment Banking Business Group
Net revenue of the Japanese Corporate & Investment Banking Business Group increased ¥5.9 billion to
¥551.1 billion for the fiscal year ended March 31, 2020 from ¥545.2 billion for the fiscal year ended March 31,
2019. 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
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higher net interest income from both Japanese yen-denominated loans and foreign currency-denominated loans to
large Japanese corporate customers, reflecting higher interest rate spreads on such loans.
Operating expenses of the Japanese Corporate & Investment Banking Business Group increased ¥6.5 billion
to ¥315.8 billion for the fiscal year ended March 31, 2020 from ¥309.3 billion for the fiscal year ended March 31,
2019. The increase mainly reflected higher expenses for financial regulatory compliance purposes in Europe and
our investment to enhance the information system platform in the Asia and Oceania region.
As a result, operating profit of the Japanese Corporate & Investment Banking Business Group decreased
¥0.6 billion to ¥235.3 billion for the fiscal year ended March 31, 2020 from ¥235.9 billion for the fiscal year
ended March 31, 2019.
Global Corporate & Investment Banking Business Group
Net revenue of the Global Corporate & Investment Banking Business Group decreased ¥7.0 billion to
¥376.8 billion for the fiscal year ended March 31, 2020 from ¥383.8 billion for the fiscal year ended March 31,
2019. 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 decrease in net revenue was mainly attributable to a decrease in the translated Japanese yen
value of foreign currency-denominated revenues reflecting the negative impact of the appreciation of the
Japanese yen against other major currencies on a spot rate basis between March 31, 2019 and 2020 as well as
losses on sales of high yield bonds in our securities business. These negative impacts more than offset the
positive impact of the closings of several large financing deals in the Americas and the Asia and Oceania region
as well as higher net interest income from foreign loans reflecting higher interest rate spreads on such loans due
in part to our efforts to reduce assets that were not generating sufficient profits.
Operating expenses of the Global Corporate & Investment Banking Business Group increased ¥6.3 billion to
¥247.8 billion for the fiscal year ended March 31, 2020 from ¥241.5 billion for the fiscal year ended March 31,
2019. The increase was mainly attributable to the one-time cost for our acquisition from DVB Bank SE in
Germany of DVB Bank’s aviation finance lending portfolio.
As a result, operating profit of the Global Corporate & Investment Banking Business Group decreased
¥13.3 billion to ¥129.0 billion for the fiscal year ended March 31, 2020 from ¥142.3 billion for the fiscal year
ended March 31, 2019.
Global Commercial Banking Business Group
Net revenue of the Global Commercial Banking Business Group increased ¥114.1 billion to ¥804.6 billion
for the fiscal year ended March 31, 2020 from ¥690.5 billion for the fiscal year ended March 31, 2019. 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, Krungsri and Bank
Danamon. The increase in net revenue was mainly due to the consolidation of Bank Danamon and higher net
interest income reflecting an increase in Krungsri’s loan portfolio. The increase in net revenue was partially
offset by lower net interest income in MUFG Union Bank mainly reflecting declines in interest rates in the
United States.
Operating expenses of the Global Commercial Banking Business Group increased ¥88.3 billion to
¥571.8 billion for the fiscal year ended March 31, 2020 from ¥483.5 billion for the fiscal year ended March 31,
2019. The increase was mainly attributable to the consolidation of Bank Danamon and 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.
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As a result, operating profit of the Global Commercial Banking Business Group increased ¥25.8 billion to
¥232.8billion for the fiscal year ended March 31, 2020 from ¥207.0 billion for the fiscal year ended March 31,
2019.
Asset Management & Investor Services Business Group
Net revenue of the Asset Management & Investor Services Business Group increased ¥40.0 billion to
¥243.0 billion for the fiscal year ended March 31, 2020 from ¥203.0 billion for the fiscal year ended March 31,
2019. 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 asset management services reflecting the
consolidation of First Sentier Investors as well as an increase in investment products sales to domestic corporate
investors. The increase in net revenue was also attributable to higher fees from investor services both in and
outside Japan mainly because we expanded our offerings of bundled services, including fund financing, to global
fund customers.
Operating expenses of the Asset Management & Investor Services Business Group increased ¥47.1 billion
to ¥171.7 billion for the fiscal year ended March 31, 2020 from ¥124.6 billion for the fiscal year ended March 31,
2019. The increase was mainly attributable to the one-time cost for our acquisition of First Sentier Investors as
well as higher cost commensurate with business volume growth.
As a result, operating profit of the Asset Management & Investor Services Business Group decreased
¥7.1 billion to ¥71.3 billion for the fiscal year ended March 31, 2020 from ¥78.4 billion for the fiscal year ended
March 31, 2019.
Global Markets Business Group
Net revenue of the Global Markets Business Group increased ¥95.4 billion to ¥575.2 billion for the fiscal
year ended March 31, 2020 from ¥479.8 billion for the fiscal year ended March 31, 2019. This was mainly due to
higher net revenue from our overseas sales and trading business as we continued to work to improve our business
model to better capture customer business opportunities abroad to increase volume as well as higher net revenue
from our asset and liability management operations particularly reflecting our effort to deal with the declining
interest rate environment. These increases in net revenue were partially offset by a decrease in net interest
income reflecting tighter interest rate spreads between long-term and short-term interest rates in the United
States.
Operating expenses of the Global Markets Business Group increased ¥8.7 billion to ¥232.2 billion for the
fiscal year ended March 31, 2020 from ¥223.5 billion for the fiscal year ended March 31, 2019. This increase
primarily reflected the amortization cost for IT system development projects and the cost for our business model
improvement measures.
As a result, operating profit of the Global Markets Business Group increased ¥86.7 billion to ¥343.0 billion
for the fiscal year ended March 31, 2020 from ¥256.3 billion for the fiscal year ended March 31, 2019.
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 ¥60.5 billion to
¥1,522.0 billion for the fiscal year ended March 31, 2019 from ¥1,582.5 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
104
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 ¥5.0 billion to
¥1,221.3 billion for the fiscal year ended March 31, 2019 from ¥1,226.3 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 ¥55.5 billion to
¥300.7 billion for the fiscal year ended March 31, 2019 from ¥356.2 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 ¥23.0 billion to
¥545.2 billion for the fiscal year ended March 31, 2019 from ¥523.2 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.
Operating expenses of the Japanese Corporate & Investment Banking Business Group decreased ¥5.5 billion
to ¥309.3 billion for the fiscal year ended March 31, 2019 from ¥314.8 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
¥27.5 billion to ¥235.9 billion for the fiscal year ended March 31, 2019 from ¥208.4 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 ¥19.5 billion to
¥383.8 billion for the fiscal year ended March 31, 2019 from ¥364.3 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 ¥14.8 billion
to ¥241.5 billion for the fiscal year ended March 31, 2019 from ¥226.7 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
¥4.7 billion to ¥142.3 billion for the fiscal year ended March 31, 2019 from ¥137.6 billion for the fiscal year
ended March 31, 2018.
105
Global Commercial Banking Business Group
Net revenue of the Global Commercial Banking Business Group increased ¥37.7 billion to ¥690.5 billion for
the fiscal year ended March 31, 2019 from ¥652.8 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 ¥14.7 billion to
¥483.5 billion for the fiscal year ended March 31, 2019 from ¥468.8 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 ¥23.0 billion to
¥207.0 billion for the fiscal year ended March 31, 2019 from ¥184.0 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,
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 ¥94.7 billion to ¥479.8 billion for the fiscal
year ended March 31, 2019 from ¥574.5 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 ¥5.2 billion to ¥223.5 billion for the
fiscal year ended March 31, 2019 from ¥228.7 billion for the fiscal year ended March 31, 2018. This decrease
106
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 ¥89.5 billion to ¥256.3 billion
for the fiscal year ended March 31, 2019 from ¥345.8 billion for the fiscal year ended March 31, 2018.
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
March 31, 2019 and 2020. 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 29 to our consolidated financial statements included elsewhere in this Annual Report.
Fiscal years ended March 31,
2019
2020
(in billions)
Total revenue (interest income and non-interest income):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,886.4
¥ 1,596.8
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,637.6
222.3
1,157.9
504.4
3,522.2
2,224.0
89.4
1,326.4
566.2
4,206.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,408.6
¥ 5,802.8
Income (loss) before income tax expense (benefit):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (317.7)
¥ (969.1)
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
624.6
48.3
265.2
250.4
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,188.5
1,172.8
(129.2)
152.2
206.6
1,402.4
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 870.8
¥
433.3
Net income (loss) attributable to Mitsubishi UFJ Financial Group
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (345.1)
¥(1,001.5)
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
573.7
50.9
214.5
224.6
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,063.7
1,114.0
(140.4)
142.6
191.3
1,307.5
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 718.6
¥
306.0
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
107
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
Domestic net loss attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31, 2020
was ¥1,001.5 billion, compared to net loss of ¥345.1 billion for the fiscal year ended March 31, 2019. This was
mainly attributable to larger investment securities losses and the impairment losses on goodwill relating to Bank
Danamon, MUFG Americas Holdings and Krungsri.
Foreign net income attributable to Mitsubishi UFJ Financial Group increased ¥243.8 billion to
¥1,307.5 billion for the fiscal year ended March 31, 2020 from ¥1,063.7 billion for the fiscal year ended
March 31, 2019. The increase in foreign net income was mainly due to higher trading account profits, reflecting
net profits from trading account securities under the fair value option in the United States.
Effect of Change in Exchange Rates on Foreign Currency Translation
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
The average exchange rate for the fiscal year ended March 31, 2020 was ¥108.74 per U.S.$1.00, compared
to the average exchange rate of ¥110.91 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, 2019 was ¥109.05 per U.S.$1.00, compared to the average exchange rate for the fiscal year ended
December 31, 2018 of ¥110.43 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 ¥91.0 billion, net interest income by ¥29.0 billion and
income before income tax expense by ¥31.0 billion, respectively, for the fiscal year ended March 31, 2020.
B. Liquidity and Capital Resources
Financial Condition
Total Assets
Our total assets as of March 31, 2020 were ¥331,753.3 billion, an increase of ¥26,524.4 billion from
¥305,228.9 billion as of March 31, 2019. The increase in total assets mainly reflected an increase in receivables
under resale agreements of ¥13,021.2 billion and an increase in trading account assets of ¥6,927.4, which were
partially offset by a decrease in equity securities of ¥1,592.3 billion.
The following table shows our total assets as of March 31, 2019 and 2020 by geographic region based
principally on the domicile of the obligors:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign:
As of March 31,
2019
2020
(in billions)
¥194,070.5
¥207,532.3
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
49,987.4
21,535.3
27,993.0
11,642.7
60,587.9
19,099.4
30,845.9
13,687.8
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
111,158.4
124,221.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥305,228.9
¥331,753.3
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
108
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
currency-denominated assets decreases as major foreign currencies depreciates against the Japanese yen. For
example, as of March 31, 2020, the exchange rate was ¥108.83 per U.S.$1.00, as compared with ¥110.99 as of
March 31, 2019. This appreciation of the Japanese yen against the U.S. dollar and other foreign currencies
between March 31, 2019 and March 31, 2020 resulted in a ¥2,671.5 billion decrease in the Japanese yen amount
of our total assets as of March 31, 2020.
Loan Portfolio
The following table sets forth our loans outstanding, before deduction of allowance for credit losses, as of
March 31, 2019 and 2020, 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,
2019
2020
(in billions)
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
¥ 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
¥ 11,448.8
733.2
12,054.7
2,585.1
7,504.6
5,161.1
1,572.3
8,673.9
15,319.7
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,156.8
65,053.4
Foreign:
Governments and official institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
841.7
11,641.4
31,951.1
7,597.5
726.3
11,788.2
32,565.0
8,404.1
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,031.7
53,483.6
Unearned income, unamortized premium—net and deferred loan fees—net . . . . . . . . .
(304.6)
(350.3)
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥116,883.9
¥118,186.7
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 ¥291.8 billion and ¥344.8 billion as of March 31, 2019 and 2020, 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, 2020, the average balance of
loans was ¥116,448.5 billion, accounting for 47.3% of the average total interest-earning assets, compared to
¥118,102.2 billion, representing 48.9% of the average total interest-earning assets, for the previous fiscal year.
As of March 31, 2020, our total loans were ¥118,186.7 billion, accounting for 35.6% of total assets, compared to
¥116,883.9 billion, accounting for 38.3% of total assets as of March 31, 2019. As a percentage of total loans
before unearned income, net unamortized premiums and net deferred loan fees, between March 31, 2019 and
March 31, 2020, domestic loans decreased from 55.6% to 54.9%, while foreign loans increased from 44.4% to
45.1%.
109
Our domestic loan balance decreased ¥103.4 billion, or 0.2%, between March 31, 2019 and March 31, 2020.
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 ¥1,451.9 billion, or 2.8%, between March 31, 2019 and March 31, 2020.
This was primarily due to our acquisition of Bank Danamon. In addition, 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. Particularly, the growth in the foreign loan balance was attributable to larger volumes of
retail, consumer and residential loans in MUFG Americas Holdings and automobile loans in Krungsri.
Credit quality indicator
The following table sets forth credit quality indicators of loans by class as of March 31, 2019 and 2020:
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 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign(2)
Loans acquired with deteriorated credit
1,465.7
8,610.5
1,543.4
35,418.2
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
¥217.7
47.9
7.9
22.5
20.0
68.7
0.9
10.2
24.9
14.7
112.1
3.8
¥333.6
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
36,093.2
26.3
¥86,971.3
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,661.8
516.9
¥
(in billions)
¥66.3
¥61.6
¥13,728.1
578.5
¥
Accrual
Nonaccrual
Total(1)
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention Classified
Total(1)(3)
(in billions)
MUFG Americas Holdings . . . . . . . . . .
¥4,752.1
¥15.5
¥4,699.7
¥51.9
¥88.4
¥9,607.6
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,682.2
¥199.1
¥129.2
¥6,010.5
Normal
Special
Mention
Substandard or Doubtful
or Doubtful of Loss
Total(1)
(in billions)
110
As of March 31, 2020:
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
¥49,695.9
10,997.3
696.5
11,790.4
2,390.2
7,124.1
institutions . . . . . . . . . . . . . . . . . . .
5,146.4
Communication and information
services . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign(2)
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,530.8
8,540.1
1,480.1
34,719.1
8.2
¥1,186.1
317.0
28.4
191.0
158.9
301.9
13.2
32.4
112.8
30.5
636.5
9.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
¥84,423.2
¥1,832.3
¥220.2
58.6
6.9
20.1
21.8
71.8
0.9
8.9
19.3
11.9
128.1
19.0
¥367.3
Total(1)
¥51,102.2
11,372.9
731.8
12,001.5
2,570.9
7,497.8
5,160.5
1,572.1
8,672.2
1,522.5
35,483.7
36.9
¥86,622.8
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,256.8
504.3
¥
(in billions)
¥61.7
¥61.3
¥13,318.5
565.6
¥
Accrual
Nonaccrual
Total(1)
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention Classified
Total(1)(3)
(in billions)
MUFG Americas Holdings . . . . . . . . . .
¥4,590.8
¥15.1
¥4,877.9
¥87.6
¥84.0
¥9,655.4
Normal
Special
Mention
Substandard or Doubtful
or Doubtful of Loss
Total(1)
(in billions)
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥6,513.7
¥246.3
¥151.6
¥6,911.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,086.5
(in billions)
¥31.4
¥1,117.9
Accrual
Nonaccrual
Total(1)
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) Excludes the loans held by MUFG Americas Holdings, Krungsri and Other.
(3) Total loans of MUFG Americas Holdings do not include FDIC covered loans and small business loans which are not individually rated
totaling ¥0.7 billion and ¥0.4 billion as of March 31, 2019 and 2020, 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.
111
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
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, Krungsri and Other segments, credit quality indicators are
generally based on information as of December 31.
112
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, 2019 and 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(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
¥144.6
49.5
59.6
21.1
¥764.1
34.3
174.0
44.1
9.5
(1.0)
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
Fiscal year ended March 31, 2020:
Commercial Residential Card
MUFG
Americas
Holdings Krungsri Other Total
(in billions)
Allowance for credit losses:
. . . . . . . . . . . .
Balance at beginning of fiscal year
Provision for (reversal of) credit losses . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥389.6
153.8
85.3
26.4
¥38.6
(1.0)
3.3
0.4
¥32.6 ¥52.6
30.9
27.9
4.1
26.5
25.1
1.2
¥144.8 ¥ — ¥658.2
321.7
41.5
243.1
23.6
63.8
8.5
70.0
77.9
23.2
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1)
58.9
(2.2)
2.9
—
23.9
23.8
— (0.7)
54.7
9.5
15.1
2.3
179.3
8.9
Balance at end of fiscal year . . . . . . . . . . . . . . . . . .
¥482.3
¥34.7
¥35.2 ¥59.0
¥169.6 ¥28.7 ¥809.5
Note:
(1) Other is principally comprised of gains or losses from foreign exchange translation.
Allowance for credit losses and recorded investment in loans by portfolio segment as of March 31, 2019 and
2020 are shown below:
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(1) . . . . . . . . . . . . . . . . . . . . . .
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(1) . . . . . . . . . . . . . . . . . . . . . .
26.3
7.4
3.3
11.2
5.9
54.1
Total(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥86,971.3 ¥13,728.1 ¥578.5 ¥9,608.3 ¥6,010.5 ¥116,896.7
113
As of March 31, 2020:
Commercial Residential Card
Allowance for credit losses:
Individually evaluated for
MUFG
Americas
Holdings Krungsri
(in billions)
Other
Total
impairment . . . . . . . . . . . . . . . . . ¥
364.1 ¥
12.6 ¥ 19.8 ¥
6.0 ¥
30.2 ¥
5.0 ¥
437.7
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
108.1
21.1
15.4
53.0
139.4
22.6
359.6
Loans acquired with deteriorated
credit quality(1) . . . . . . . . . . . . . .
10.1
1.0
0.0
0.0
0.0
1.1
12.2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
482.3 ¥
34.7 ¥ 35.2 ¥
59.0 ¥ 169.6 ¥
28.7 ¥
809.5
Loans:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
945.0 ¥
92.4 ¥ 65.3 ¥
67.7 ¥
99.0 ¥
17.5 ¥
1,286.9
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
85,640.9
13,219.7
497.4
9,581.1
6,806.5
1,092.5
116,838.1
Loans acquired with deteriorated
credit quality(1) . . . . . . . . . . . . . .
36.9
6.4
2.9
7.0
6.1
7.9
67.2
Total(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . ¥86,622.8 ¥13,318.5 ¥565.6 ¥9,655.8 ¥6,911.6 ¥1,117.9 ¥118,192.2
Notes:
(1) Loans acquired with deteriorated credit quality in the above table include acquired impaired loans which are individually evaluated for
impairment.
(2) 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 ¥321.7 billion of provision for credit losses for the fiscal year ended March 31, 2020,
compared to ¥34.3 billion of provision for credit losses for the previous fiscal year. Our total allowance for credit
losses as of March 31, 2020 was ¥809.5 billion, an increase of ¥151.3 billion from ¥658.2 billion as of March 31,
2019. The total allowance for credit losses represented 0.68% of the total loan balance as of March 31, 2020,
compared to 0.56% as of March 31, 2019. Significant trends in each portfolio segment are discussed below. See
“—Business Environment—Recent Developments and Prospects.”
Commercial segment—We recorded ¥153.8 billion of provision for credit losses for the fiscal year ended
March 31, 2020, compared to ¥43.9 billion of reversal of credit losses for the previous fiscal year. The provision
for credit losses for the fiscal year ended March 31, 2020 reflected the financing provided to a domestic borrower
in the services sector to facilitate the borrower’s restructuring efforts and the deteriorated business and financial
condition of some large domestic borrowers in the manufacturing sector. The provision for credit losses also
reflected the deteriorated business and financial performance of some large foreign borrowers in the oil and gas
sector and the electric power sector. The provision for credit losses also included ¥46.4 billion of qualitative
reserves in light of the estimated impact that the COVID-19 pandemic had on the credit risk of our borrowers.
See Note 4 to our consolidated financial statements included elsewhere in this Annual Report. In addition, our
recoveries increased as a result of collection from some large domestic borrowers in the Legally/Virtually
Bankrupt category during the year ended March 31, 2020. As a result, the ratio of loans classified as Close Watch
to total loans increased to 2.12% as of March 31, 2020 from 2.09% as of March 31, 2019, and the ratio of loans
classified as Likely to become Bankrupt and Legally/Virtually Bankrupt to total loans increased to 0.42% as of
March 31, 2020 from 0.38% as of March 31, 2019. The total allowance for credit losses for this segment
represented 0.56% of the segment’s total loan balance as of Mach 31, 2020, compared to 0.45% as of March 31,
2019.
Residential segment—We recorded ¥1.0 billion of reversal of credit losses for the fiscal year ended
March 31, 2020, compared to ¥4.5 billion of reversal of credit losses for the previous fiscal year. The credit
114
quality of the portfolio remained substantially unchanged as the stable corporate environment in recent periods
continued to have a positive impact on the financial condition of residential borrowers. The ratio of loans
classified as Nonaccrual to total loans in the segment decreased to 0.46% as of March 31, 2020 from 0.48% as of
March 31, 2019. The ratio of total allowance for credit losses to the total loan balance in this segment decreased
to 0.26% as of March 31, 2020 from 0.28% as of March 31, 2019.
Card segment—We recorded ¥26.5 billion of provision for credit losses for the fiscal year ended March 31,
2020, compared to ¥23.9 billion of provision for credit losses for the previous fiscal year. The larger provision
for credit losses primarily reflected an increase in default borrowers who filed for bankruptcy as part of their debt
workout efforts. The increase in default borrowers led to an increase in the amount of nonaccrual loans that were
charged off during the reporting period, which amount is reflected in each of charge-offs and provision for credit
losses in the above table. Although the stable corporate environment in recent periods positively affected some of
our 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 10.83% as of March 31,
2020, from 10.65% as of March 31, 2019. The ratio of total allowance for credit losses to the total loan balance in
this segment increased to 6.22% as of March 31, 2020 from 5.63% as of March 31, 2019.
MUFG Americas Holdings segment—We recorded ¥30.9 billion of provision for credit losses for the fiscal
year ended March 31, 2020, compared to ¥9.3 billion of provision for credit losses for the previous fiscal year.
The larger provision for credit losses mainly reflected the deteriorated financial condition of large borrowers in
the electric power sector and the real estate rental sector. The larger provision was also attributable to the growth
in the unsecured consumer loan portfolio in line with MUFG Union Bank’s expansion strategy. As a result, the
ratio of loans classified as Special Mention or below and Nonaccrual to total loans in the segment increased to
1.93% as of March 31, 2020 from 1.62% as of March 31, 2019. The ratio of total allowance for credit losses to
the total loan balance in this segment increased to 0.61% as of March 31, 2020 from 0.55% as of March 31,
2019.
Krungsri segment—We recorded ¥70.0 billion of provision for credit losses for the fiscal year ended
March 31, 2020, compared to ¥49.5 billion of provision for credit losses for the previous fiscal year. The larger
provision for credit losses mainly reflected the expansion of the retail and consumer loan portfolio, particularly
automobile loans. In addition, some borrowers of mortgage and automobile loans experienced deterioration in
their financial condition. As a result, the ratio of loans classified as Special Mention or below to total loans in the
segment increased to 5.76% as of March 31, 2020 from 5.46% as of March 31, 2019. The ratio of total allowance
for credit losses to the total loan balance in this segment increased to 2.45% as of March 31, 2020 from 2.41% as
of March 31, 2019.
Other segment—We recorded ¥41.5 billion of provision for credit losses for the fiscal year ended March 31,
2020. The provision for credit losses mainly reflected newly extended loans to automobile purchasers and small
and medium-sized enterprises as well as unsecured consumer loans in Bank Danamon, which became our
consolidated subsidiary in April 2019. The ratio of loans classified as nonaccrual to total loans in the segment
was 2.81% as of March 31, 2020. The ratio of total allowance for credit losses to the total loan balance in this
segment was 2.57% as of March 31, 2020.
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.
Although we reversed allowance for credit losses for certain loan portfolio segments 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—Credit Risk—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.”
115
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 six portfolio segments—Commercial, Residential, Card, MUFG
Americas Holdings, Krungsri and Other. Our allowance policy for the major portfolio segments—Commercial,
Residential, Card, MUFG Americas Holdings and Krungsri—is summarized below.
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.
On April 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement of Credit Losses on
Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current U.S.
GAAP with the current expected credit loss model that reflects expected credit losses and requires consideration
of a broader range of reasonable and supportable information to estimate credit losses. As a result, considering
the COVID-19 pandemic and macroeconomic variables under the circumstances, we estimate that our allowance
for credit losses and allowance for off-balance sheet credit instruments increased an aggregate of approximately
¥380 billion to ¥450 billion as of the opening balance sheet date. For more information on this guidance, see
Note 1 to our audited consolidated financial statements included elsewhere in this Annual Report.
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 ¥57.0 billion as of March 31,
2020, a decrease of ¥62.3 billion from ¥119.3 billion as of March 31, 2019. This decrease was primarily because
a large domestic borrower in the services industry, in whose favor we have provided guarantees in substantial
amounts, had improved the credit capability by the restructuring efforts.
116
Intervening Event
We consolidate certain foreign subsidiaries based on financial information for the fiscal year ended
December 31 as this date and our fiscal year which ended on March 31 have been treated as coterminous. For the
fiscal year ended March 31, 2020, the effect of recording a provision for credit losses and a provision for off-
balance sheet credit instruments, including commitments to extend credit, guarantees and standby letters of
credit, as an intervening event primarily due to the economic environment triggered by COVID-19 pandemic for
the three-month period ended March 31 2020 would have been approximately ¥84 billion and would have
resulted in a decrease of ¥58 billion to net income attributable to Mitsubishi UFJ Financial Group. This
intervening event occurring during the three-month period ended March 31, 2020, if recorded, would not have
had a substantial and permanent effects on consolidated total assets, net income or total equity as of March 31,
2020, and therefore, the intervening event was not recognized for the fiscal year ended March 31, 2020.
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.
117
Nonaccrual loans
The following table shows information about the nonaccrual status of loans by class as of March 31, 2019
and 2020:
Commercial
As of March 31,
2019
2020
(in billions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥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
—
¥313.0
93.8
8.5
21.8
51.2
94.1
1.0
10.5
20.2
11.9
127.0
64.0
61.2
35.8
149.7
27.8
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥687.7
¥778.5
Notes:
(1) Excludes the loans held by MUFG Americas Holdings, Krungsri and Other.
(2) The above table does not include loans held for sale of ¥12.7 billion and ¥0.3 billion as of March 31, 2019 and 2020, respectively, and
loans acquired with deteriorated credit quality of ¥6.3 billion and ¥25.4 billion as of March 31, 2019 and 2020, respectively.
Total nonaccrual loans increased ¥90.8 billion between March 31, 2019 and March 31, 2020. Significant
trends in each portfolio segment are discussed below.
Commercial segment—Nonaccrual loans in the domestic commercial category increased ¥40.2 billion
between March 31, 2019 and March 31, 2020. This increase mainly reflected the financing provided to the
domestic borrower in the services category to facilitate the borrower’s restructuring efforts and the deteriorated
business and financial condition of large domestic borrowers in the manufacturing sector, as discussed in
“—Allowance for credit losses” above. Nonaccrual loans in the foreign commercial category increased mainly
due to our acquisition of DVB Bank’s aviation finance portfolio.
Residential segment—Nonaccrual loans in the segment decreased ¥4.5 billion between March 31, 2019 and
March 31, 2020 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 decreased ¥0.2 billion between March 31, 2019 and
March 31, 2020. While the amount of consumer loans transferred from accrual status to nonaccrual status
increased, the amount of such increase was more than offset by the amount of charge-offs of nonaccrual
consumer loans to borrowers who filed for bankruptcy.
118
MUFG Americas Holdings segment—Nonaccrual loans in the segment decreased ¥10.7 billion between
March 31, 2019 and March 31, 2020. This was mainly due to sale, and repayment from surplus deposits, of
portions of the loans outstanding to a large borrower in the electric power industry.
Krungsri segment—Nonaccrual loans in the segment increased ¥22.2 billion between March 31, 2019 and
March 31, 2020. The increase mainly reflected the continued expansion of the automobile loan portfolio. In
addition, loans to some borrowers in mortgage and automobile loans became nonaccrual due to deterioration in
their financial condition.
Troubled debt restructurings
The following table shows information about outstanding recorded investment balances of TDRs by class as
of March 31, 2019 and 2020:
Commercial(1)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2019
2020
(in billions)
¥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
—
¥433.8
314.0
3.4
27.9
17.3
58.2
0.1
3.2
6.8
2.9
71.9
28.5
65.5
62.2
76.8
9.5
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥707.6
¥748.2
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) Excludes the loans held by MUFG Americas Holdings, Krungsri and Other.
(3) TDRs for the Card, MUFG Americas Holdings, Krungsri and Other segments include accrual and nonaccrual loans. Included in the
outstanding recorded investment balances as of March 31, 2019 and 2020 are nonaccrual TDRs as follows: ¥38.8 billion and ¥40.0
billion—Card; ¥15.0 billion and ¥19.2 billion—MUFG Americas Holdings; ¥31.1 billion and ¥34.7 billion—Krungsri; and nil and ¥1.1
billion—Other, respectively.
Total TDRs increased ¥40.6 billion between March 31, 2019 and March 31, 2020. Significant trends in each
portfolio segment are discussed below.
Commercial segment—TDRs in the domestic commercial category decreased ¥11.6 billion between
March 31, 2019 and March 31, 2020. This was mainly due to repayments by small and medium-sized domestic
borrowers in the wholesale and retail and consumer categories of loans classified as TDRs pursuant to their
respective restructured terms. The continued gradual recovery of economic conditions in Japan positively
affected the financial performance and repayment ability of such borrowers during the first three quarters of the
119
fiscal year ended March 31, 2020. TDRs in the foreign commercial category increased primarily as a result of the
restructuring of the loans to the large foreign borrowers in the electric power sector.
Residential segment—TDRs in the segment decreased ¥5.9 billion between March 31, 2019 and March 31,
2020 primarily as a result of repayments of loans classified as TDRs pursuant to their respective restructured
terms.
Card segment—TDRs in the segment increased ¥0.5 billion between March 31, 2019 and March 31, 2020.
Although consumer loans newly classified as TDRs increased, the amount of such increase was substantially
offset by the amount of charge-offs of nonaccrual consumer loans classified as TDRs outstanding to borrowers
who filed for bankruptcy and by the amount of consumer loans classified as TDRs repaid pursuant to their
respective restructured terms.
MUFG Americas Holdings segment—TDRs in the segment increased ¥14.1 billion between March 31, 2019
and March 31, 2020. The increase primarily reflected the deteriorated financial condition of a large borrower in
the real estate rental sector.
Krungsri segment—TDRs in the segment increased ¥13.8 billion between March 31, 2019 and March 31,
2020. This increase primarily reflected the continued expansion of the automobile loan portfolio. In addition,
loans to some borrowers of mortgage and automobile loans became nonaccrual due to deterioration in their
financial condition.
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, Krungsri and Other 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, 2020, extensions of the stated maturity dates of loans were the primary
concession type in the Commercial, Residential, MUFG Americas Holdings and Krungsri segments and
reductions in the stated rates were the primary concession type in the Card and Other segments.
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.
120
The following tables show information about impaired loans by class as of March 31, 2019 and 2020:
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
¥560.5
349.6
8.3
20.8
30.3
118.3
institutions . . . . . . . . . . . . . .
1.0
Communication and
information services . . . . . .
Other industries . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Consumer
Foreign(3) . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . .
Residential(4) . . . . . . . . . . . . . . . . . . . . . .
Card(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings(4)
. . . . . . . .
Krungsri(4)
. . . . . . . . . . . . . . . . . . . . . . .
8.8
13.8
9.6
127.5
8.1
97.2
64.6
46.6
57.1
¥157.5
28.2
6.0
30.0
13.0
45.6
0.0
6.9
18.0
9.8
34.5
—
6.5
0.4
23.2
26.1
¥ 718.0
377.8
14.3
50.8
43.3
163.9
¥ 759.4
384.3
14.8
55.9
46.8
175.7
1.0
1.0
15.7
31.8
19.4
162.0
8.1
103.7
65.0
69.8
83.2
16.6
38.4
25.9
183.1
15.0
120.6
72.2
83.3
90.4
¥227.0
92.9
6.6
5.7
20.1
84.5
0.8
6.8
6.9
2.7
86.0
5.5
14.3
21.8
8.3
28.3
Total(5) . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥961.6
¥248.2
¥1,209.8
¥1,324.0
¥391.2
121
As of March 31, 2020
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(3) . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . .
Residential(4) . . . . . . . . . . . . . . . . . . . . . .
Card(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings(4)
. . . . . . . .
Krungsri(4)
. . . . . . . . . . . . . . . . . . . . . . .
Other(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 598.7
375.7
6.6
20.7
55.3
113.2
1.1
8.0
10.6
7.5
141.9
12.9
88.1
65.2
33.9
68.2
22.7
¥147.9
32.1
5.3
29.0
13.1
38.9
0.0
5.8
16.4
7.3
56.5
—
4.8
0.3
33.8
30.8
1.1
¥ 746.6
407.8
11.9
49.7
68.4
152.1
¥ 784.3
414.1
12.0
55.3
72.7
160.5
1.1
1.3
13.8
27.0
14.8
198.4
12.9
92.9
65.5
67.7
99.0
23.8
14.7
33.2
20.5
220.3
19.9
107.7
72.7
84.7
106.3
26.1
¥268.1
119.1
5.0
6.7
41.0
81.0
0.9
6.0
6.4
2.0
96.0
4.7
12.7
19.8
6.0
30.2
6.2
Total(5) . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,031.6
¥275.2
¥1,306.8
¥1,422.0
¥443.7
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
(2)
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, 2019 and 2020 are accrual TDRs as follows: ¥497.1 billion and ¥505.7 billion—Commercial;
¥34.4 billion and ¥28.5 billion—Residential; ¥26.2 billion and ¥25.5 billion—Card; ¥33.1 billion and ¥43.0 billion—MUFG Americas
Holdings; ¥26.9 billion and ¥35.2 billion—Krungsri; and nil and ¥8.4 billion—Other, respectively.
(3) Excludes the loans held by MUFG Americas Holdings, Krungsri and Other.
(4)
Impaired Loans for the Residential, Card, MUFG Americas Holdings, Krungsri and Other segments in the above table include loans
acquired with deteriorated credit quality.
In addition to impaired loans presented in the above table, there were loans held for sale that were impaired of ¥12.7 billion and
¥0.3 billion as of March 31, 2019 and 2020, respectively.
(5)
122
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, 2019 and 2020:
Fiscal years ended March 31,
2019
2020
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(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 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
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,262.3
Note:
(1) Excludes the loans held by MUFG Americas Holdings, Krungsri and Other.
¥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
—
¥26.2
¥ 726.8
387.5
13.1
48.7
58.7
157.8
1.1
14.8
28.3
16.8
174.8
9.4
98.2
65.3
82.8
91.6
11.9
¥1,260.8
¥ 8.7
4.1
0.2
0.7
0.8
2.2
0.0
0.3
0.2
0.2
3.0
0.1
1.3
1.2
2.8
5.3
0.5
¥22.9
123
Past due analysis
Aging of past due loans by class as of March 31, 2019 and 2020 are shown below:
As of March 31, 2019:
Commercial
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in billions)
Recorded
Investment>
90 Days and
Accruing
Total
Loans(1)
Domestic . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . .
Banks and other financial
¥ 11.6
1.6
0.2
2.1
0.7
2.8
¥ 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
institutions . . . . . . . . . . . . .
—
0.0
0.0
5,208.4
5,208.4
Communication and
Foreign(2)
information services . . . . . .
Other industries . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . .
0.4
0.4
3.4
10.9
62.7
17.2
28.6
126.3
0.8
13.0
6.5
20.0
16.6
30.6
10.9
106.8
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
36,062.3
13,641.4
527.4
9,557.6
5,771.5
1,510.4
8,755.0
1,594.5
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
As of March 31, 2020:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . .
Communication and
Foreign(2)
information services . . . . . .
Other industries . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in billions)
Recorded
Investment>
90 Days and
Accruing
Total
Loans(1)
¥
9.2
0.8
0.1
0.9
0.8
2.6
—
0.3
0.2
3.5
10.0
48.5
14.7
31.1
160.2
16.4
¥ 27.0
2.8
0.1
3.3
0.9
2.6
¥ 36.2
3.6
0.2
4.2
1.7
5.2
¥ 51,066.0
11,369.3
731.6
11,997.3
2,569.2
7,492.6
¥ 51,102.2
11,372.9
731.8
12,001.5
2,570.9
7,497.8
¥ 4.7
0.6
—
1.2
0.0
0.0
0.1
0.1
5,160.4
5,160.5
0.1
12.8
4.3
23.5
15.4
30.0
14.4
129.2
24.4
0.4
13.0
7.8
33.5
63.9
44.7
45.5
289.4
40.8
1,571.7
8,659.2
1,514.7
35,450.2
13,248.2
518.0
9,603.3
6,616.1
1,069.2
1,572.1
8,672.2
1,522.5
35,483.7
13,312.1
562.7
9,648.8
6,905.5
1,110.0
—
—
0.1
2.8
0.2
6.3
—
2.1
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥290.1
¥263.9
¥554.0
¥117,571.0
¥118,125.0
¥13.3
124
Notes:
(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.
(2) Excludes the loans held by MUFG Americas Holdings, Krungsri and Other.
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, 2019 . . . . . . . . . . . . . . . . . . . . .
For the fiscal year ended March 31, 2020 . . . . . . . . . . . . . . . . . . . . .
¥
8.2
¥104.4
¥ 0.5
¥29.9
¥ 7.7
¥74.5
¥(15.6)
¥(10.5)
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.
The principal amount of non-performing loans sold in the fiscal year ended March 31, 2020 increased
compared to the previous fiscal year mainly due to increased sales of nonperforming loans outstanding to some
large domestic and foreign borrowers in the Commercial segment.
In connection with the sale of loans, including performing loans, we recorded net gains of ¥20.7 billion and
¥6.5 billion for the fiscal years ended March 31, 2019 and 2020, 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 was 53.6% as of March 31, 2020,
remaining at a similar level to March 31, 2019. We also hold Japanese government bonds that are classified as
held-to-maturity debt securities, which accounted for 2.5% of the total investment securities as of March 31,
2020.
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, 2019 and 2020, the
aggregate book value of our marketable equity securities under Japanese GAAP satisfied the requirements of the
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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, 2020, we sold down ¥139 billion of equity securities held in our strategic equity investment
portfolio valued under Japanese GAAP. As of March 31, 2020, the balance of such securities valued under
Japanese GAAP represented 12.8% 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 decreased ¥1,186.8 billion to ¥43,751.2 billion as of March 31, 2020 from
¥44,938.0 billion as of March 31, 2019, primarily due to a decrease in equity securities, particularly domestic
marketable equity securities.
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, 2019 and
2020.
As of March 31,
2019
2020
Amortized
cost
Fair value
Net
unrealized
gains (losses)
Amortized
cost
Fair value
Net
unrealized
gains (losses)
(in billions)
¥23,748.6
¥24,077.7
¥329.1
¥23,308.5
¥23,462.9
¥154.4
Available-for-sale debt securities:
Japanese government and
Japanese government
agency bonds . . . . . . . . . . .
Japanese prefectural and
municipal bonds . . . . . . . . .
2,204.0
2,226.6
22.6
2,938.7
2,952.8
14.1
Foreign government and
official institution bonds . . .
Corporate bonds . . . . . . . . . . .
Mortgage-backed securities . .
Asset-backed securities . . . . .
Other debt securities . . . . . . . .
Total available-for-sale debt
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
2,936.1
1,261.6
1,840.0
1,461.1
161.8
3,037.5
1,272.8
1,841.6
1,469.5
163.1
101.4
11.2
1.6
8.4
1.3
securities . . . . . . . . . . . . . . . . . . .
¥33,174.5
¥33,518.5
¥344.0
¥33,907.8
¥34,200.2
¥292.4
Held-to-maturity debt
securities(1)
. . . . . . . . . . . . . . . . .
¥ 4,441.9
¥ 4,452.9
¥ 11.0
¥ 4,165.8
¥ 4,177.9
¥ 12.1
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 decreased ¥51.6 billion to ¥292.4 billion as of
March 31, 2020 from ¥344.0 billion as of March 31, 2019. The decrease was primarily attributable to a
¥174.7 billion decrease in net unrealized gains on Japanese government and Japanese government agency bonds,
reflecting generally rising trends in the yield on such bonds. The decrease was offset in part by an improvement
in net unrealized losses on foreign government and official institutions bonds, reflecting declining trends in the
yield on such bonds.
The amortized cost of available-for-sale debt securities increased ¥733.3 billion to ¥33,907.8 billion as of
March 31, 2020 from ¥33,174.5 billion as of March 31, 2019. This increase was mainly attributable to a
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¥734.7 billion increase in Japanese prefectural and municipal bonds and a ¥287.2 billion increase in foreign
government and official institution bonds. These increases were partially offset by a ¥440.1 billion decrease in
Japanese government and Japanese government agency bonds.
The amortized cost of held-to-maturity debt securities decreased ¥276.1 billion to ¥4,165.8 billion as of
March 31, 2020 from ¥4,441.9 billion as of March 31, 2019. The decrease was mainly due to a decrease in
mortgage-backed securities.
Losses resulting from impairment of investment securities, which reflect the decline in the value of
available-for-sale debt securities considered to be other than temporary, were ¥1.6 billion for the fiscal year
ended March 31, 2020 compared to ¥0.6 billion for the previous fiscal year. These losses were reflected in net
investment securities gains (losses) in our consolidated statements of income.
The following table shows information relating to our equity securities as of March 31, 2019 and 2020:
As of March 31,
2019
2020
(in billions)
Equity securities:
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonmarketable equity securities:
¥6,358.5
¥4,768.3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unlisted preferred securities(1)
Other(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities held by investment companies and brokers and
393.3
198.0
350.0
226.9
dealers(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27.8
40.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥6,977.6
¥5,385.2
Notes:
(1) 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 public companies. Those securities are
primarily carried at cost.
(2) These securities are equity securities issued by unlisted companies other than unlisted preferred securities. Those securities are primarily
carried at cost.
(3) 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 ¥1,592.4 billion to ¥5,385.2 billion as of March 31, 2020 from ¥6,977.6 billion
as of March 31, 2019. The decrease was primarily attributable to a decrease in the fair value of marketable equity
securities as the stock prices in Japan declined towards March 31, 2020.
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 ¥616.9 billion as of March 31, 2020, respectively, because their fair values were not
readily determinable. The decrease was primarily attributable to a decrease in the holdings of unlisted preferred
securities, reflecting the redemption of preferred securities issued by overseas special purpose companies.
Cash and Due from Banks, and Interest-earning Deposits in Other Banks
Cash and due from banks decreased ¥641.3 billion to ¥33,283.0 billion as of March 31, 2020 from
¥33,924.3 billion as of March 31, 2019. This decrease was primarily because of a decrease in deposit with the
Bank of Japan.
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Interest-earning deposits in other banks increased ¥4,619.8 billion to ¥45,266.7 billion as of March 31, 2020
from ¥40,646.9 billion as of March 31, 2019. This increase was mainly because of an increase in interest-bearing
funds held at the Federal Reserve in the United States.
Receivables under Resale Agreements
Receivables under resale agreements increased ¥13,021.3 billion to ¥23,996.0 billion as of March 31, 2020
from ¥10,974.7 billion as of March 31, 2019. This was mainly in reaction to increases in payables under
repurchase agreements, due to trust account and other short-term borrowings as we increased our funding
capacity in anticipation of a significant increase in financing needs in the market following the outbreak of the
COVID-19 pandemic.
Receivables under Securities Borrowing Transactions
Receivables under securities borrowing transactions increased ¥685.4 billion to ¥3,444.0 billion as of
March 31, 2020 from ¥2,758.6 billion as of March 31, 2019. This increase was mainly due to an increase in
collateral deposited for funding in domestic banking and securities subsidiaries.
Trading Account Assets
Trading account assets increased ¥6,927.5 billion to ¥47,504.1 billion as of March 31, 2020 from
¥40,576.6 billion as of March 31, 2019. Trading account assets consist of trading account securities and trading
derivative assets. Trading account securities increased ¥5,174.4 billion to ¥32,546.5 billion as of March 31, 2020
from ¥27,372.1 billion as of March 31, 2019. This increase was mainly due to the higher fair value of our trading
residential mortgage-backed securities portfolio. Trading derivative assets increased ¥1,753.1 billion to
¥14,957.6 billion as of March 31, 2020 from ¥13,204.5 billion as of March 31, 2019. This increase was mainly
attributable to the higher fair value of interest rate contracts.
Total Liabilities
As of March 31, 2020, total liabilities were ¥316,008.8 billion, an increase of ¥26,764.6 billion from
¥289,244.2 billion as of March 31, 2019. This was primarily due to an increase of ¥9,324.4 billion in other short-
term borrowings, including borrowings from the Bank of Japan, and an increase of ¥6,625.3 billion in payables
under repurchase agreements.
Deposits
Deposits are our primary source of funds. The balance of deposits increased ¥4,673.7 billion to
¥203,954.5 billion as of March 31, 2020 from ¥199,280.8 billion as of March 31, 2019. The increase was mainly
attributable to an increase in domestic deposits, primarily in Japan.
The total average balance of interest-bearing deposits increased ¥2,903.7 billion to ¥169,511.2 billion for
the fiscal year ended March 31, 2020 from ¥166,607.5 billion for the fiscal year ended March 31, 2019, mainly
due to an increase in domestic deposits.
Payables under Repurchase Agreements
Payables under repurchase agreements increased ¥6,625.3 billion to ¥31,849.9 billion as of March 31, 2020
from ¥25,224.6 billion as of March 31, 2019. This increase was mainly because we increased our funding
capacity in anticipation of a significant increase in financing needs in the market following the outbreak of the
COVID-19 pandemic.
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Other Short-Term Borrowings
Other short-term borrowings increased ¥9,324.4 billion to ¥16,055.5 billion as of March 31, 2020 from
¥6,731.1 billion as of March 31, 2019. This increase was mainly attributable to borrowings from the Bank of
Japan in anticipation of a significant increase in financing needs in the market following the outbreak of the
COVID-19 pandemic.
Long-term Debt
Long-term debt decreased ¥63.7 billion to ¥27,926.8 billion as of March 31, 2020 from ¥27,990.5 billion as
of March 31, 2019. This decrease was mainly due to redemption of long-term debt by MUFG Bank. The average
balance of long-term debt for the fiscal year ended March 31, 2020 was ¥28,034.0 billion, a decrease of
¥633.5 billion from ¥28,667.5 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 ¥199,791.8 billion for the fiscal
year ended March 31, 2020 from ¥196,393.3 billion for the fiscal year ended March 31, 2019. These deposits
provide us with a sizable source of stable and low-cost funds. Our average deposits, combined with our average
total equity of ¥15,417.9 billion, funded 66.1% of our average total assets of ¥325,500.4 billion during the fiscal
year ended March 31, 2020. Our deposits exceeded our loans before allowance for credit losses by
¥85,767.8 billion as of March 31, 2020 compared to ¥82,396.9 billion as of March 31, 2019. 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, 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,
2020 was ¥55,968.9 billion, and the average balance of short-term borrowings for the fiscal year ended
March 31, 2020 was ¥37,630.9 billion. The balance of our long-term debt as of March 31, 2020 was
¥27,926.8 billion, and the average balance of long-term debt for the fiscal year ended March 31, 2020 was
¥28,034.1 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
systemic market stress conditions and institution-specific stress events, including credit rating
downgrades, on their liquidity positions;
129
‰
‰
Foreign banking subsidiaries—Our major foreign banking subsidiaries, MUFG Americas Holdings and
Krungsri, monitor various liquidity metrics, including total available liquidity, 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 them to meet expected obligations in both stable and adverse
conditions. They 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.
In addition, we are working with our other foreign banking subsidiaries to enhance their liquidity risk
management measures;
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, 2020, we held ¥23,462.9 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.
In April 2020, Fitch downgraded the long-term credit ratings of MUFG, MUFG Bank, Mitsubishi UFJ Trust
and Banking by one-notch from A to A-. 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—Funding Liquidity Risk—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.”
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Total Equity
The following table presents a summary of our total equity as of March 31, 2019 and 2020:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive losses, net of taxes . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost
March 31, 2019 March 31, 2020
(in billions, except percentages)
¥ 2,090.3
¥ 2,090.3
5,533.5
5,577.2
8,319.1
8,333.6
239.6
239.6
8,079.5
8,094.0
(420.4)
(284.3)
(506.0)
(517.2)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,199.6
785.1
¥15,016.5
728.0
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,984.7
¥15,744.5
Ratio of total equity to total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.24%
4.75%
Mitsubishi UFJ Financial Group shareholders’ equity as of March 31, 2020 was ¥15,016.5 billion, a
decrease of ¥183.1 billion from ¥15,199.6 billion as of March 31, 2019.
Capital surplus decreased ¥43.7 billion to ¥5,533.5 billion as of March 31, 2020 from ¥5,577.2 billion as of
March 31, 2019. This decrease was mainly due to repurchases of shares of our common stock and cancellation of
the repurchased shares.
Retained earnings decreased ¥14.5 billion to ¥8,319.1 billion as of March 31, 2020 from ¥8,333.6 billion as
of March 31, 2019, primarily reflecting dividend payments partially offset by the net income of our banking
subsidiaries for the fiscal year ended March 31, 2020. We decided to pay our year-end dividend of ¥12.5 per
share of our common stock for the six months ended March 31, 2020, resulting in an annual dividend of ¥25 per
share of our common stock for the fiscal year ended March 31, 2020.
As a result of our adoption on April 1, 2020 of Accounting Standards Update 2016-13, Measurement of
Credit Losses on Financial Instruments, we estimate that our retained earnings decreased approximately ¥270
billion to ¥330 billion as of the opening balance sheet date. For more information on this guidance, see Note 1 to
our audited consolidated financial statements included elsewhere in this Annual Report.
Accumulated other comprehensive losses, net of taxes, as of March 31, 2020 was ¥420.4 billion, compared
to ¥284.3 billion in losses as of March 31, 2019. This was mainly due to ¥129.6 billion of negative net change in
the balance of pension liability adjustments because the investment returns on our pension plans decreased.
Total equity decreased ¥240.2 billion to ¥15,744.5 billion as of March 31, 2020 from ¥15,984.7 billion as of
March 31, 2019. The ratio of total equity to total assets decreased 0.49 percentage points to 4.75% as of
March 31, 2020 from 5.24% as of March 31, 2019.
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 Ability to Meet Regulatory Capital
131
Requirements—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, 2020, we were required to maintain a capital conservation buffer of 2.5%, a G-SIB
surcharge of 1.5% and a countercyclical buffer of 0.01% 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, 2020, 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 0.7 percentage points.
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,
2020, 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 2023. 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.”
For information on the issuances of TLAC-qualified securities, see also “Recent Developments—Issuances of
Senior Debt Securities for TLAC Purposes.”
132
Capital Ratios, Leverage Ratio and External TLAC Ratios of MUFG
The table below presents our consolidated total capital components, risk-weighted assets, risk-adjusted
capital ratios, leverage ratio and external TLAC ratios in accordance with Basel III as of March 31, 2019 and
2020. 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 21 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,
2019
Minimum
ratios required(1)
As of March 31,
2020
Minimum
ratios required(1)
(in billions, except percentages)
¥ 14,322.4
1,953.8
16,276.3
2,493.4
¥ 18,769.7
¥117,091.1
¥ 13,708.3
1,914.9
15,623.3
2,656.2
¥ 18,279.5
¥115,135.6
12.23%
13.90
16.03
4.94
18.16
7.90
8.54%
10.04
12.04
3.00
16.00
6.00
11.90%
13.56
15.87
4.42
18.62
7.38
8.51%
10.01
12.01
3.00
16.00
6.00
Notes:
(1) 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%. The minimum capital ratios required as of March 31, 2020 include a capital conservation buffer of
2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.01%.
(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%. The
TLAC ratio on a risk-weighted assets basis and the required minimum ratios as of March 31, 2020 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 0.01%.
Management believes that, as of March 31, 2020, 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, 2020 was lower compared to the ratio as of
March 31, 2019 due to a decrease in Common Equity Tier 1 capital, more than offsetting the impact of the
decrease in risk-weighted assets. The decrease in Common Equity Tier 1 capital was mainly due to decreases in
retained earnings and unrealized gains on available-for-sale securities. The decrease in risk-weighted assets
mainly reflected a decrease in credit risks resulting from updates to parameters for the calculation of credit risks
and the impact of the appreciation of the Japanese yen against other major currencies, lower stock values and
changes in other financial markets.
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, 2019 and 2020. 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 21 to our
consolidated financial statements included elsewhere in this Annual Report.
133
As of
March 31,
2019
Minimum capital
ratios required
As of
March 31,
2020
Minimum capital
ratios required
Consolidated:
MUFG Bank
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
10.83%
12.46
14.42
4.63
4.50%
6.00
8.00
3.00
10.70%
12.29
14.43
4.21
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 . . . . . . . . . . . . . . . . . . . . . . . . .
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
19.46
21.90
25.46
4.51
10.67
12.52
14.76
4.02
20.11
22.27
25.42
5.87
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, 2020, 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
calculated 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 down. The minimum LCR required under Basel III as adopted by the FSA is 100% during the
calendar year 2019 and 2020.
Three months ended
March 31,
2019(1),(6)
June 30,
2019(2),(6)
September 30,
2019(3),(6)
December 31,
2019(4),(6)
March 31,
2020(5),(6)
MUFG (consolidated) . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank (consolidated) . . . . . . . . . . . . . . . . . . .
MUFG Bank (stand-alone) . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking
141.2% 145.6%
150.7
159.0
155.8
166.3
147.8%
158.9
172.2
(consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Mitsubishi UFJ Trust and Banking (stand-alone)
115.2
141.5
119.4
138.5
115.9
130.3
152.3%
163.2
177.3
116.4
133.0
154.6%
165.9
179.2
114.1
130.0
Notes:
(1) 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.
(2) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between April 1, 2019 and
June 28, 2019 divided by the average amount of net cash outflows for the same fifty-nine business days.
(3) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between July 1, 2019 and
September 30, 2019 divided by the average amount of net cash outflows for the same sixty-two business days.
134
(4) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between October 1, 2019 and
December 30, 2019 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 6, 2020 and
March 31, 2020 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 21 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.
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, 2018 and 2019:
As of
December 31,
2018
Minimum capital
ratios required
as of
December 31,
2018(1)
As of
December 31,
2019
Minimum capital
ratios required
as of
December 31,
2019(2)
Ratio OCC
requires to be
“well capitalized”
as of
December 2019
MUFG Americas Holdings:
Tier I capital (to risk-
weighted assets) . . . . . . .
13.96%
7.875%
14.10%
8.500%
Tier I capital (to quarterly
average assets)(3) . . . . . . .
8.77
Total capital (to risk-
weighted assets) . . . . . . .
14.60
4.000
9.875
8.88
14.73
4.000
10.500
Common Equity Tier I
Capital (to risk-weighted
assets) . . . . . . . . . . . . . . .
MUFG Union Bank:
Tier I capital (to risk-
13.96
6.375
14.10
7.000
—
—
—
—
weighted assets) . . . . . . .
14.45%
7.875%
14.47%
8.500%
8.0%
Tier I capital (to quarterly
average assets)(3) . . . . . . .
10.61
Total capital (to risk-
weighted assets) . . . . . . .
15.09
Common Equity Tier I
Capital (to risk-weighted
assets) . . . . . . . . . . . . . . .
14.45
10.65
15.11
4.000
10.500
14.47
7.000
5.0
10.0
6.5
4.000
9.875
6.375
135
Notes:
(1) Beginning January 1, 2018, the minimum capital requirement includes a capital conservation buffer of 1.875%.
(2) Beginning January 1, 2019, the minimum capital requirement includes a capital conservation buffer of 2.500%.
(3) Excludes certain deductions.
Management believes that, as of December 31, 2019, MUFG Americas Holdings and MUFG Union Bank
were in compliance with all capital adequacy requirements to which they were subject.
As of December 31, 2018 and 2019, the OCC categorized MUFG Union Bank as “well-capitalized.” To be
categorized as “well-capitalized,” MUFG Union Bank must maintain minimum ratios of Total capital, Tier I
capital and Common Equity 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 21 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
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, 2020, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets
of ¥440.5 billion on a stand-alone basis represented 313.0% 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 ¥465.3 billion on a consolidated basis represented 316.2% of the total
amounts equivalent to market, counterparty credit and operational risks. 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. These figures are calculated in accordance with Japanese GAAP, pursuant to the Financial
Instruments and Exchange Act of Japan.
For further information, see Note 21 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
136
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, 2019 and 2020:
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,
2019
2020
(in millions)
¥ 1,812
¥ 990
(1,212)
356
34
(706)
719
(350)
Net fair value of contracts outstanding at end of fiscal year . . . . . . . . . . . . . . . . . . . . . .
¥
990
¥ 653
The following table summarizes the maturities of non-exchange traded contracts as of March 31, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥—
—
—
—
¥—
¥261
458
—
(66)
¥653
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.”
137
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, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,109
2,160
36,021
6,752
8
¥
763
738
14,543
451
73
¥
226
160
8,272
5,939
7
¥ 4,098
3,058
58,836
13,142
88
Total guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,050
16,568
14,604
79,222
Other off-balance sheet instruments:
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit
Commercial letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to make investments . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,274
707
9
4
22,745
49
95
1
2,379
1
143
—
76,398
757
247
5
Total other off-balance sheet instruments . . . . . . . . . . . . . . . .
¥51,994
¥22,890
¥ 2,523
¥77,407
See Note 24 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
upon, the total contractual or notional amounts of these commitments do not necessarily represent our future cash
requirements. As of March 31, 2020, approximately 64% of these commitments have an expiration date within
one year, 25% have an expiration date from one year to five years, and 11% 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 25 to our consolidated financial statements included elsewhere
in this Annual Report.
138
F. Tabular Disclosure of Contractual Obligations
The following table shows a summary of our contractual obligations outstanding as of March 31, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥55,230 ¥ 7,951 ¥1,332 ¥ 832 ¥65,345
253
Estimated interest expense on time deposit obligations(1)
. . . . . .
27,917
Long-term debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
Financing lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
517
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
363
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
227
10,117
7
107
102
1
7,884
3
196
42
22
6,426
11
137
108
3
3,490
4
77
111
Total(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥65,790 ¥14,655 ¥5,017 ¥8,958 ¥94,420
Notes:
(1) Contractual obligations related to estimated interest expense on time deposit obligations are calculated by applying the March 31, 2020
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, 2020. We expect to contribute approximately ¥26.3 billion for pension and other benefits for our employees for the fiscal
year ending March 31, 2021. 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, 2020. Among
the liabilities for unrecognized tax benefits, it is reasonably possible that the unrecognized tax benefits will decrease by approximately
¥2.4 billion during the next twelve months. For further information, see Note 8 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.”
139
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 June 29, 2020, 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
April 2004
Economic Engineering, The University of
Tokyo
Professor, Research Center for Advanced
Science and Technology, National
University Corporation, The University of
Tokyo
June 2014
Outside director of Electric Power
Development Co., Ltd.
October 2015
Resigned from Professor of The University of
Tokyo
Resigned from an Outside director of Electric
Power Development Co., Ltd.
Ambassador Extraordinary and Plenipotentiary
of Japan to Latvia
June 2016
Emeritus Professor of the University of Tokyo
January 2019
Retired from Ambassador Extraordinary and
(incumbent)
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)
Keiko Honda
(September 27, 1961)
Member of the Board
of Directors
(Outside Director)
April 1984
May 1986
Joined Bain & Company Japan, Incorporated
Joined Shearson Lehman Brothers Securities
Co., Ltd.
July 1989
July 1999
July 2007
Joined McKinsey & Company, Inc. Japan
Partner of McKinsey & Company, Inc. Japan
Director (Senior Partner) of McKinsey &
July 2013
Executive Vice President & CEO of
Company, Inc. Japan
Multilateral Investment Guarantee Agency
(World Bank Group)
October 2019
Retired from Multilateral Investment
Guarantee Agency (World Bank Group)
140
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2020
Joined Columbia University School of
International and Public Affairs as Adjunct
Professor and Adjunct Senior Research
Scholar (incumbent)
March 2020
June 2020
Outside Director of AGC Inc. (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
of Directors
(Outside Director)
July 1999
Public 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
June 2008
June 2012
Corporate Strategy and Planning
Department, Member of the Board of
Directors of NTT DoCoMo Kansai, Inc.
Executive Vice President, General Manager of
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
Directors of NTT DOCOMO, INC.
June 2018
Corporate Advisor of NTT DOCOMO, INC.
(incumbent)
June 2019
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
April 1995
July 2000
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)
External Audit & Supervisory Board member
of MITSUI & CO., LTD. (incumbent)
January 2002
June 2012
June 2013
June 2014
141
Haruka Matsuyama
(August 22, 1967)
Member of the Board
of Directors
(Outside Director)
Name
(Date of Birth)
Position in MUFG
Business Experience
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 New York and California 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
Hirofumi Nomoto
Member of the Board
(September 27, 1947)
of Directors
(Outside Director)
April 1971
April 2003
director) of MUFG (incumbent)
Joined TOKYU CORPORATION
Executive General Manager of Media
Business Headquarters of TOKYU
CORPORATION
April 2004
President & Representative Director of its
June 2007
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
June 2010
CORPORATION
Executive Officer & Senior Executive General
Manager of Urban Life Produce Business
Unit of TOKYU CORPORATION
Senior Managing Director & Representative
Director of TOKYU CORPORATION
April 2011
President & Representative Director of
TOKYU CORPORATION
April 2018
Chairman & Representative Director of
June 2019
TOKYU CORPORATION (incumbent)
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
142
Name
(Date of Birth)
Position in MUFG
Business Experience
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
June 2005
Member of the Board, Senior Vice President,
of Japan Tobacco Inc.
and Chief Financial Officer of Japan
Tobacco Inc.
June 2006
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.
Outside Director of Asahi Group Holdings,
March 2018
Ltd. (incumbent)
June 2018
Member of the Board of Directors (Outside
June 2019
Outside director of Dai-ichi Life Holdings,
director) of MUFG (incumbent)
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
(November 23, 1952)
Member of the Board
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
June 2013
Resigned from PricewaterhouseCoopers
PricewaterhouseCoopers Aarata
Aarata
143
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2015
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)
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.
June 2020
Retired from External director of Nomura Real
Estate Development, Co., Ltd.
Junichi Okamoto
Member of the Board
April 1980
Joined The Toyo Trust and Banking Company,
(November 9, 1957)
of Directors
Limited
Ritsuo Ogura
Member of the Board
(January 21, 1964)
of Directors
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)
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
Managing Executive Officer of the MUFG
Member of the Board of Directors of MUFG
(incumbent)
June 2008
June 2010
June 2012
June 2013
June 2015
June 2017
April 1986
June 2012
May 2016
May 2017
April 2019
April 2020
June 2020
144
Name
(Date of Birth)
Position in MUFG
Business Experience
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-
Chairman
(Corporate
Executive)
July 2004
Executive Officer of Mitsubishi Tokyo
Mitsubishi, Ltd. (BTM)
May 2005
June 2005
Financial Group, Inc. (MTFG)
Managing Executive Officer of BTM
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,
April 2013
June 2015
April 2012
Kanetsugu Mike
Member of the Board
(November 4, 1956)
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
President & 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
Member of the Board of Directors, Chairman
of MUFG (incumbent)
April 1979
June 2005
May 2009
May 2011
June 2011
May 2013
October 2015
May 2016
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
145
Name
(Date of Birth)
Position in MUFG
Business Experience
April 2020
Member of the Board of Directors, Deputy
Chairman of MUFG (incumbent)
Saburo Araki
(August 6, 1957)
Member of the Board
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
April 1981
June 2007
May 2009
May 2011
June 2012
June 2014
May 2015
June 2015
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
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
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)
June 2020
President & CEO of Mitsubishi UFJ Morgan
Stanley PB Securities Co., Ltd. (incumbent)
Iwao Nagashima
Member of the Board
April 1985
Joined The Mitsubishi Trust and Banking
(March 15, 1963)
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
June 2011
June 2013
June 2015
June 2016
Corporation
Executive Officer of TB
Managing Executive Officer of TB
Executive Officer of MUFG
Director and Managing Executive Officer of
TB
Managing Executive Officer of TB
Director and Senior Managing Executive
Officer of TB
April 2019
Director, Deputy President, and Executive
Officer of TB
Senior Managing Corporate Executive of
MUFG
President & CEO of MU Trust Apple Planning
Company, Ltd.
President & CEO of TB (incumbent)
Deputy Chairman of MUFG
Member of the Board of Directors, Deputy
Chairman of MUFG (incumbent)
April 2020
June 2020
146
Name
(Date of Birth)
Position in MUFG
Business Experience
Hironori Kamezawa
Member of the Board
(November 18, 1961)
of Directors
President & Group
CEO
(Representative
Corporate Executive)
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 CEO and Representative of the Board of
April 2019
Directors of Global Open Network, Inc.
Deputy President of MUFG
Member of the Board of Directors, Deputy
President of BK
CEO and Representative of the Board of
Directors of Global Open Network Japan,
Inc.
June 2019
Member of the Board of Directors, Deputy
April 2020
Member of the Board of Directors of BK
President of MUFG
(incumbent)
Member of the Board of Directors,
President & Group CEO 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 June 29, 2020, together with their respective
dates of birth, positions and experience:
Name
(Date of Birth)
Nobuyuki Hirano
(October 23, 1951)
Kanetsugu Mike
(November 4, 1956)
Saburo Araki
(August 6, 1957)
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.
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.
147
Name
(Date of Birth)
Iwao Nagashima
(March 15, 1963)
Hironori Kamezawa
(November 18, 1961)
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.
Business Experience
See “Members of the Board of Directors” under this Item 6.A.
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)
Naoki Hori
(January 27, 1961)
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
Senior Managing
Corporate Executive
(Group Head, Retail &
April 1983
June 2010
Commercial
Banking Business
Group)
May 2013
May 2016
June 2016
148
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
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2017
May 2018
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)
Masato Miyachi
(June 14, 1960)
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
Chairman of BK(US)
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)
April 1986
June 2012
May 2014
June 2015
June 2017
April 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
Senior Managing Corporate Executive of
MUFG (incumbent)
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 2020
Director, Deputy President, and Executive
Officer of TB (incumbent)
April 1983
June 2010
May 2014
May 2016
May 2017
April 2019
June 2019
Joined The Sanwa Bank, Limited
Executive Officer 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)
Masahiro Kuwahara
(November 11,
1962)
Senior Managing
Corporate Executive
April 1986
June 2012
(Group Chief Risk
Officer, or CRO)
May 2016
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
149
Name
(Date of Birth)
Position in MUFG
Business Experience
May 2019
June 2019
April 2020
April 1986
June 2012
July 2015
May 2016
April 2020
Managing Executive Officer of MUFG
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
(incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
Joined The Tokai Bank, Ltd.
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
Yoshitaka Shiba
(July 25, 1961)
Senior Managing
Corporate Executive
(Group Chief Audit
Officer, or CAO)
Managing Director,
Head of Internal
Audit Division
Tetsuya Yonehana
Senior Managing
April 1986
Joined The Mitsubishi Trust and Banking
(February 10, 1964)
Corporate Executive
(Group CFO)
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)
June 2012
June 2015
June 2016
April 2019
April 2020
June 2020
April 1987
June 2013
January 2017
May 2018
Corporation
Executive Officer of TB
Executive Officer of MUFG
Managing Executive Officer of TB
Director and Managing Executive Officer
of TB
Managing Executive Officer of MUFG
Director and Senior Managing Executive
Officer of TB
Senior Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(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)
June 2018
Member of the Board of Directors,
Managing Executive Officer of BK
(incumbent)
Member of the Board of Directors of
SCHD (incumbent)
150
Name
(Date of Birth)
Position in MUFG
Business Experience
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)
April 1988
June 2014
June 2018
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)
April 2019
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
June 2019
Member of the Board of Directors,
(incumbent)
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.
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)
151
Name
(Date of Birth)
Tomohiro Kimura
(June 7, 1967)
Masakazu Osawa
(June 20, 1968)
Position in MUFG
Business Experience
Managing Corporate
April 1990
Joined The Mitsubishi Trust and Banking
Executive
(Group Chief Human
June 2017
Resource Officer, or
Group CHRO
Group Deputy Chief
April 2020
Digital
Transformation
Officer, or Group
Deputy CDTO
in sub-charge of
Corporate
Administration
Division)
Managing Corporate
Executive
(Group Chief Digital
Transformation
Officer, or Group
CDTO
Managing Director,
Head of Digital
Transformation
Division)
April 1991
June 2017
April 2020
Corporation
Executive Officer of TB
Executive Officer of MUFG
Director and Managing Executive Officer
of TB (incumbent)
Managing Corporate Executive of MUFG
(incumbent)
President & CEO of MU Trust Apple
Planning Company, Ltd. (incumbent)
President & CEO of M.U.Trust Sougou
Kanri Co., Ltd. (incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of The Bank of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
(incumbent)
CEO and Representative of the Board of
Directors of Global Open Network, Inc.
(incumbent)
Chairman and Representative of the Board
of Directors of Global Open Network
Japan, Inc. (incumbent)
June 2020
Member of the Board of Directors,
Managing Executive Officer of BK
(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.
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, 2020 to our
directors (excluding outside directors), to corporate executives and to outside directors, was ¥133 million,
¥2,266 million and ¥224 million, respectively.
The compensation paid by MUFG and its subsidiaries during the fiscal year ended March 31, 2020 to our
directors and corporate executives consisted of annual base salaries, performance-based stock compensation,
cash bonuses and other benefits. MUFG’s compensation committee determines the compensation paid to our
directors and corporate executives.
152
The following table sets forth details of the aggregate compensation paid by MUFG and its subsidiaries
during the fiscal year ended March 31, 2020 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
22 . . . . . . . . .
¥2,399
¥1,357
¥326
Cash Bonuses
(in millions)
¥508
Performance-
based Stock
Compensation
Retirement
Allowances(2) Other
¥208
—
¥0
Notes:
(1)
Includes the current directors and corporate executives as well as those who retired during the fiscal year ended March 31, 2020 but
excludes the outside directors.
(2) Represents the aggregate amount of retirement allowances paid in cash during the fiscal year ended March 31, 2020, 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.
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, 2020:
Directors
Compensation paid
Aggregate
amount
Paid by
Annual
Base
Salary
Performance-
based Stock
Compensation
Cash
Bonuses
(in millions)
Nobuyuki Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥181
Mikio Ikegaya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥178
Saburo Araki
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥137
Kanetsugu Mike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥215
Hironori Kamezawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥128
Kenji Yabuta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥127
Naoki Hori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥129
Masato Miyachi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥190
Takayoshi Futae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥101
Iwao Nagashima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥113
MUFG
BK
MUFG
TB
MUFG
SCHD
MUMSS
MUFG
BK
MUFG
BK
MUFG
BK
MUFG
BK
ACOM
MUFG
BK
MUFG
BK
SCHD
MUFG
TB
¥58
17
¥34
34
¥25
13
13
¥50
33
¥43
26
¥43
26
¥40
23
6
¥92
69
¥28
26
9
¥36
21
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.
“ACOM” refers to ACOM Co., Ltd.
153
¥39
14
¥21
27
¥20
9
9
¥30
28
¥15
20
¥14
17
¥14
22
—
¥—
—
¥ 7
10
3
¥11
23
¥47
6
¥29
33
¥24
12
12
¥44
30
¥14
10
¥16
11
¥14
10
—
¥18
11
¥ 7
8
3
¥13
9
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, 2020 was ¥1,357 million. The
aggregate annual base salary paid to our outside directors for the same period was ¥224 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.
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. The outstanding stock acquisition rights of grantees who were on overseas assignments at the
time of the adoption of the plan were exchanged for points under the performance-based stock compensation plan
upon their return to Japan.
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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 “Item 16E. Purchases of
Equity Securities by the Issuer and Affiliated Purchasers.”
Cash 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, 2020 was ¥508 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, 2020 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.
Stock-based Compensation Plans
Prior to 2016, as part of our compensation structure, we issued stock acquisition rights to further motivate
our directors (excluding outside directors) and certain of our corporate auditors and officers to contribute to the
improvement of our stock prices and profits. As of March 31, 2020, an aggregate of 1,669 stock acquisition
rights, each representing a right to purchase 100 shares of MUFG common stock at ¥1 per share of common
stock, under these previous stock-based compensation plans remained unexercised. All of them were waived as
155
of April 1, 2020, and exchanged for points under the second performance-based stock compensation plan as of
April 2, 2020.
MUFG Americas Holdings Corporation Stock Bonus Plan
Under the MUFG Americas Holdings Corporation Stock Bonus 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, 2020, 108,220,888 RSUs have been granted under the plan, of which 43,554,160 RSUs were
outstanding as of June 30, 2020.
For more information on the plan, see “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers.”
Share Ownership
As of July 1, 2020, our directors and corporate executives held the following numbers of shares of our
common stock:
Directors
Number of Shares
Registered
Mariko Fujii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Keiko Honda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kaoru Kato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Haruka Matsuyama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toby S. Myerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hirofumi Nomoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yasushi Shingai
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tarisa Watanagase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Akira Yamate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junichi Okamoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ritsuo Ogura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
4,040
368*
25,000
—
—
—
182,892
88,534
156
Corporate Executives
Nobuyuki Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kanetsugu Mike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saburo Araki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Iwao Nagashima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hironori Kamezawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masamichi Yasuda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenji Yabuta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naoki Hori
Masato Miyachi
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunao Yokokawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takayoshi Futae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masahiro Kuwahara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yoshitaka Shiba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tetsuya Yonehana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naomi Hayashi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junichi Hanzawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hiroki Kameda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hiroshi Mori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tomohiro Kimura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masakazu Osawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*
Held in the form of ADRs.
Number of Shares
Registered
82,141
49,362
210,980
90,581
25,539
127,419
38,304
41,988
7,259
22,546
9,184
18,700
18,003
22,522
1,210
39,900
45,283
1,485
9,000
4,800
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 for our directors and corporate executives,
see “—Performance-based Stock 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 external experts. 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.
158
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 Hirofumi Nomoto, an outside director. The other members of
this committee are Mariko Fujii, Kaoru Kato and Haruka Matsuyama, who are outside directors, and Hironori
Kamezawa, Director, President & Group CEO. Between April 2019 and March 2020, the nominating and
governance committee met 14 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 Junichi Okamoto and Ritsuo Ogura, who are non-executive
directors. Between April 2019 and March 2020, the audit committee met 16 times.
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.
159
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, Kaoru Kato and Hirofumi Nomoto, who are outside directors, and Hironori
Kamezawa, Director, President & Group CEO. Between April 2019 and March 2020, the compensation
committee met 8 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 external
experts. External experts are professionals with no prior employment relationship with any of the MUFG group
companies. The committee currently has eight 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
Shinichi Koide, Atsushi Miyanoya and Kazuhiko Ohashi, who are external experts. Between April 2019 and
March 2020, 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
Myerson and Roberta Bienfait, who are outside directors of MUFG Americas Holdings, Kazuo Koshi, the
Chairman of the MUFG Americas Holdings Board, Masahiro Kuwahara, Senior 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 20 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
160
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.
D. Employees
As of March 31, 2020, we had approximately 133,200 employees, an increase of approximately 20,500
employees compared with the number of employees as of March 31, 2019 primarily due to Bank Danamon
becoming a consolidated subsidiary in April 2019. As of March 31, 2020, we had approximately 35,200 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, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17%
3
2
41
1
16
Mitsubishi UFJ Trust and Banking:
Trust-Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Securities Holdings:
Retail & Commercial Banking Business Unit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Corporate & Investment Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Corporate & Investment Banking Business Unit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Center/Corporate Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS:
Business Marketing Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit Risk Management & Risk Assets Administration Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operations Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systems & Systems Integration Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
4
1
0
2
3
1
0
1
1
1
1
0
0
0
0
2
100%
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Location
MUFG Bank:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25%
10
1
43
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
1
1
0
5
0
0
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, 2020, we had 754,778 registered shareholders of our common stock. The ten largest
holders of our common stock appearing on the register of shareholders as of March 31, 2020, 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(2)
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) . . . . . . . . . . . . . . . . .
BNYM RE NORWEST/WELLS FARGO OMNIBUS . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 9)(1) . . . . . . . . . . . . . . . . .
JP Morgan Chase Bank 385151 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government of Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 7)(1) . . . . . . . . . . . . . . . . .
State Street Bank West Client-Treaty 505234 . . . . . . . . . . . . . . . . . . . . . . . .
882,084,400
681,642,700
323,134,697
274,801,900
271,085,100
253,343,500
218,028,972
199,031,525
187,972,500
182,289,491
6.49%
5.01%
2.37%
2.02%
1.99%
1.86%
1.60%
1.46%
1.38%
1.34%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,473,414,785
25.57%
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Includes the shares held in trust accounts, which do not disclose the names of beneficiaries.
Notes:
(1)
(2) Numbers are truncated after two decimal points.
(3) According to a beneficial ownership report on Schedule 13G filed with the SEC by BlackRock Inc. on February 5, 2020, BlackRock and
its consolidated subsidiaries beneficially owned an aggregate of 5.7% of the outstanding shares of our common stock as of December 31,
2019. Other than as described in the table above, we have not independently confirmed this beneficial ownership information.
As of March 31, 2020, 1,600,189 shares, representing approximately 0.01% of our outstanding common
stock, were held by our directors and corporate executives.
As of March 31, 2020, 1,950,974,214 shares, representing 14.36% of our outstanding common stock, were
owned by 388 U.S. shareholders of record who are resident in the United States, one of whom is the ADR
depository’s nominee holding 180,818,006 shares, or 1.33%, 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, 2020, we held approximately 23.9% 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, 2020, 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.
163
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 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 December 31, 2018 and 2019 and for the fiscal years ended
December 31, 2017, 2018 and 2019, 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 27, 2020.
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. For more
information, see “Item 3.D. Key Information—Risk Factors—Operational Risk—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 26 to our consolidated financial statements included elsewhere in this Annual Report.
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 ¥12.5 per share of our common stock (in addition to interim
dividends of ¥12.5 per share of our common stock) for the fiscal year ended March 31, 2020 were approved by
shareholders at the ordinary general meeting of shareholders held on June 29, 2020.
164
See Exhibit 2(c) to this Annual Report 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 Exhibit 2(c) to this Annual
Report.
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.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information.
A. Share Capital
Not applicable.
165
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, 2020, a total of 13,581,995,120 shares of common stock (including 741,772,308 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
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.
“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.
166
“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;
(A) partnerships 50% or more of whose contributions are made by (1) natural persons who are
non-residents of Japan, (2) corporations which are organized under the laws of foreign countries or
whose principal offices are located outside Japan, (3) 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,
(4) corporations, a majority of the officers (or a majority of the officers having the power to represent
the corporation) of which are non-resident individuals, or (5) other partnerships a majority of whose
operating partners fall under any of (1) through (4), or (B) partnerships a majority of whose operating
partners are (i) any of (1) through (5) above, (ii) other partnerships 50% or more of whose contributions
are made by non-residents of Japan or partnerships that are any of (1) through (5) above, or (iii) certain
limited liability partnerships under the Limited Liability Partnership Act; 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 ten percent 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
within 45 days from such acquisition. Further, an amendment to the Foreign Exchange Law which took effect on
May 8, 2020, introduced a similar reporting requirement where a foreign investor acquires the right to instruct
voting on shares through acquisition of ADSs or otherwise and holds, together with parties who have a special
relationship with that foreign investor, the right to instruct voting on shares representing ten percent or more of
the voting rights in us. 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
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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.
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
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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 company with a 50% or more
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.
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
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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
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.
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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.
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.
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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
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 and an earlier IRS notice would convert what would otherwise be passive
income into non-passive income when such income is banking income earned by an active bank. The proposed
Treasury regulations and IRS notice have different requirements for qualifying as an active bank, and for
determining the banking income that may be excluded from passive income under this special rule for active
banks. Moreover, the proposed Treasury regulations have been outstanding since 1994 and will not be effective
unless finalized. Because final regulations have not been issued, the definition of banking income for purposes of
the active bank exception is unclear under both the proposed Treasury regulations and the notice. Based upon
certain management estimates and assumptions, we do not believe that we were a PFIC for the year ended
March 31, 2020. 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,
2021 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
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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,
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.
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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.
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 pursuant to the rules and regulations of the SEC
that apply to foreign private issuers. The SEC maintains a web site (http://www.sec.gov) that contains periodic
reports and other information regarding registrants, including us, electronically filed with the SEC. Except
otherwise specified in this Annual Report, no information is incorporated by reference in this Annual Report
(including, without limitation, information on our website at https://www.mufg.jp/).
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. However, our risk management measures may not be fully effective in
identifying all risks or mitigating the impact of any materialized risk on us.
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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
Information Risk
IT Risk
Tangible Asset Risk
Personnel Risk
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‰
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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 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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Incompliance with Laws
and Regulations Risk
The risk of loss due to failure to comply with laws and regulations, as well
as risks similar to these risks.
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 are 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.
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
Credit and Investment
Committee
Group-wide Credit Committee
Corporate Risk Management
Division
(coordinating risk management)
Management Planning Committee
(including ALM)
Market Risk,
Funding Liquidity Risk,
Operational Risk,
Reputation Risk,
Model Risk
Credit Policy & Planning Division
Credit Risk
Global Compliance Division
Information Risk
Global Financial Crimes Division
Operations & Systems Planning
Division
Incompliance with Laws and
Regulations Risk
IT Risk
Corporate Administration Division
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
Credit and Investment
Committee
Credit Committee
CPM Committee
Customer Protection
Committee,
System Strategy
Committee
MUFG BANK
Board of Directors
Executive Committee
Corporate Risk
Management Division
(coordinating risk
management)
Credit Policy & Planning
Division
Transaction Banking
Planning Office
Operations Planning
Division
Information Systems
Planning Divisin
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
Mitsubishi UFJ Trust and Banking
Board of Directors
Executive Committee
Corporate Risk
Management Division
(coordinating risk
management)
ALM Committee
Credit Risk,
Market Risk,
Funding Liquidity Risk,
Operational Risk,
Reputation Risk,
Model Risk,
Operations Risk
Business Process and
IT Planning Division
IT Risk
Global Compliance
Division
Information Risk,
Incompliance with Laws
and Regulations Risk
Corporate
Administration Division
Tangible Asset Risk
Personnel Division
Personnel Risk
Legal Division
Legal Risk
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176
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 crisis such as a natural disaster, a pandemic of an infectious diseases 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 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. In addition, in an effort to effectively deal with the COVID-19
pandemic, we have established a Group Crisis Event Control Headquarter to deliberate, formulate and implement
basic policies and countermeasures designed to ensure that our business operations are properly maintained and
we remain well positioned to respond to the needs of our customers.
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 major banking
subsidiaries used the Advanced Internal Ratings-Based approach, or the AIRB approach, to calculate capital
requirements for credit risk as of March 31, 2020. 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.
177
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 upgrade our 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 (which are MUFG Bank and Mitsubishi UFJ Trust
and Banking) 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. 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.
178
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.
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
10 through 12
10
11
12
13
14
15
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:
(1)
(2)
(3)
Borrowers who have problematic business performance, such as virtually delinquent principal
repayment or interest payment;
Borrowers whose business performance is unsteady, or who have unfavorable financial conditions;
Borrowers who have problems with loan conditions and for whom interest rates have been reduced
or shelved.
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.)
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.
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).
179
Japanese banks were historically required to use the following categories of borrowers under the then
applicable FSA inspection manual, which was abolished in December 2019, and are currently expected to use
them as a basis for their borrower categorization with appropriate adjustments under the FSA’s discussion paper:
‰ 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,
‰ 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
180
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).
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.
181
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.
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. See “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Financial Condition—Investment Portfolio.”
182
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, 2020 was subject to a variation of
approximately ¥3.0billion 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.
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
183
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
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 the major 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.
184
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
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, 2020)
Trading activities
The aggregate VaR for our total trading activities as of March 31, 2020 was ¥24.81 billion, comprising
interest rate risk exposure of ¥24.31 billion, foreign exchange risk exposure of ¥5.34 billion, and equity-related
risk exposure of ¥2.15 billion. Compared with the VaR as of March 31, 2019, we experienced an increase in
market risk during the fiscal year ended March 31, 2020, primarily due to an increase in interest rate risk.
Our average daily VaR for the fiscal year ended March 31, 2020 was ¥19.11 billion. Based on a simple sum
of figures across market risk categories, interest rate risk accounted for approximately 75%, foreign exchange
risk for approximately 18% and equity-related risk for approximately 7%, 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.
185
The following tables set forth the VaR related to our trading activities by risk category for the periods
indicated:
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
—
(in billions)
¥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)
April 1, 2019—March 31, 2020
Average Maximum(1) Minimum(1) March 31, 2020
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . . . . .
¥19.11
18.56
6.07
7.23
4.58
1.73
0.00
(5.76)
¥35.78
35.03
11.67
11.06
7.23
7.21
0.07
—
(in billions)
¥15.64
14.21
4.10
4.78
2.28
0.60
0.00
—
¥24.81
24.31
9.35
7.20
5.34
2.15
0.00
(6.99)
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.
The average daily VaR by quarter in the fiscal year ended March 31, 2020 was as follows:
Quarter
April—June 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July—September 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October—December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January—March 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily average VaR
(in billions)
¥18.29
18.73
18.85
20.63
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, 2020, the revenue from our
trading activities has been relatively stable, keeping positive numbers in 245 days out of 261 trading days in the
period. During the same period, there were 97 days with positive revenue exceeding ¥1 billion and four days with
negative revenue exceeding minus ¥1 billion.
Non-trading Activities
The aggregate VaR for our total non-trading activities as of March 31, 2020, excluding market risks related
to our strategic equity portfolio and measured using the same standards as trading activities, was ¥672.7 billion.
186
Market risk related to interest rates equaled ¥613.4 billion and equities-related risk equaled ¥156.9 billion.
Compared with the VaR as of March 31, 2019, we experienced an increase in market risk during the fiscal year
ended March 31, 2020, primarily due to an increase in interest rate risk. The main cause for the increase in
interest rate risk was the greater U.S interest rate volatility particularly during the three months ended March 31,
2020.
Based on a simple sum of figures across market risk categories, interest rate risks accounted for
approximately 79% of our total non-trading activity market risks as of March 31, 2020. Looking at a breakdown
of interest rate related risk by currency, as of March 31, 2020, the yen accounted for approximately 29% while
the U.S. dollar accounted for approximately 58%, and the euro approximately 13%.
For a description of our strategic equity investment risk management, see “—Risk Management of Strategic
Equity Portfolio.”
The following tables set forth the VaR related to our non-trading activities by risk category for the periods
indicated:
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
April 1, 2019—March 31, 2020
Average Maximum(1) Minimum(1) March 31, 2020
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
¥ 328.9
157.0
187.5
4.5
174.8
(157.1)
351.1
¥711.5
216.1
502.8
6.4
214.2
—
765.2
(in billions)
¥252.9
128.0
109.6
3.5
112.0
—
284.9
¥ 613.4
207.5
412.3
6.4
156.9
(104.0)
672.7
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, 2020 was as follows.
Quarter
April—June 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July—September 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October—December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January—March 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily average VaR
(in billions)
¥301.6
310.5
338.1
457.2
187
Comparing the proportion of each currency’s interest rate VaR to the total interest rate VaR as of March 31,
2020 against that as of March 31, 2019, there was a 15 percentage point decrease in the Japanese yen from 44%
to 29%, a 26 percentage point increase in the U.S. dollar from 32% to 58%, and a 11 percentage point decrease in
the euro from 24% to 13%.
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 exceeded the VaR amount four times in the fiscal year ended March 31, 2020. This
means that our VaR model provided reasonably accurate measurements of market risk during the fiscal year.
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, 2020:
daily PL
(billion Yen)
excess:4 times
0
2
4
6
8
10
12
12
10
8
6
4
2
0
- 2
- 4
- 6
- 8
- 10
- 12
VaR (billion Yen)
188
The following graph shows VaR of trading activities and hypothetical profits and losses on a daily basis for
the fiscal year ended March 31, 2020:
(billion Yen)
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
daily PL
VaR
April 2019
March 2020
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
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, 2020, we held a total trading activity
position subject to estimated maximum potential losses of ¥16.4 billion as compared to ¥15.4 billion as of
March 31, 2019. 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 seek to maintain appropriate liquidity in both Japanese yen and foreign currencies by
managing their funding sources and mechanisms, such as deposits, short-term borrowings and long-term debt,
liquidity gap, liquidity-supplying products such as commitment lines, and buffer assets, primarily government
bonds.
189
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, including formulating contingency plans, 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.
190
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
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 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.
191
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 major
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
192
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.
We aim to flexibly adapt our IT risk management measures to changes in the business environment,
including the rapidly growing need for remote work solutions. We also continue to develop our risk management
capabilities for emerging technologies, such as artificial intelligence (AI), robotic process automation (RPA) and
blockchain, considering, among other things, the maturity and usage of such technologies.
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.
193
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.
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.
194
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.
(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
i
l
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
195
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
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.
196
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.
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—Operational Risk—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—Operational Risk—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.
197
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.
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.
198
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.
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.
199
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.
200
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
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
201
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.
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. 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.
202
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
203
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, 2020, the Depositary waived $131,752.95 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, 2020, the Depositary reimbursed us $1.0 million
for such expenses.
204
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, 2020.
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,
2020 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, 2020.
The effectiveness of our internal control over financial reporting as of March 31, 2020 has been audited by
Deloitte Touche Tohmatsu LLC, an independent registered public accounting firm, as stated in its report,
presented on page 209.
205
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.
206
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, 2020, 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,
2020, 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, 2020,
of the MUFG Group and our report dated July 10, 2020, 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.
207
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, 2020
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,
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. The MUFG Group Code of Conduct was most recently amended on April 1, 2020 to clarify
explanations and add contact information for reporting purposes. 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, 2020.
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, 2019 and 2020 are presented in the following table:
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2020
(in millions)
¥8,079
119
172
119
¥8,564
249
117
420
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥8,489
¥9,350
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
approximately 0.3% of the total fees paid to Deloitte Touche Tohmatsu LLC for the fiscal year ended March 31,
2019 and less than 0.1% of the total fees paid to Deloitte Touche Tohmatsu LLC for the fiscal year ended
March 31, 2020.
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
Total
Number of
Shares
Purchased(1)
Average Price
Paid per Share
April 1 to April 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .
May 1 to May 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . .
June 1 to June 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1 to July 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 1 to August 31, 2019 . . . . . . . . . . . . . . . . . . . . . .
September 1 to September 30, 2019 . . . . . . . . . . . . . . . . .
October 1 to October 31, 2019 . . . . . . . . . . . . . . . . . . . . .
November 1 to November 30, 2019 . . . . . . . . . . . . . . . . .
December 1 to December 31, 2019 . . . . . . . . . . . . . . . . .
January 1 to January 31, 2020 . . . . . . . . . . . . . . . . . . . . .
February 1 to February 29, 2020 . . . . . . . . . . . . . . . . . . .
March 1 to March 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
4,954
3,126
2,591
3,916
2,280
2,475
3,417
2,667
5,055
3,983
2,586
3,799
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,849
¥563.49
522.36
506.28
522.84
513.88
536.06
548.11
577.32
587.13
582.92
569.51
459.82
¥582.89
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)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
36,888,100
48,887,300
63,111,900
14,224,600
—
—
—
85,775,400
—
—
—
—
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 November and December 2019, we repurchased 85,775,400 shares of our common stock for ¥49,999,996,482 under a share
repurchase program that was adopted on November 13, 2019 and completed in December 2019. 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 November 14, 2019 and December 31, 2019. All of the repurchased shares were cancelled on January 20, 2020.
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, 2020.
In connection with the MUFG Americas Holdings Corporation Stock Bonus Plan, 9,275,070 ADSs were
purchased by the trustee of the independent trust between April 1, 2019 and March 31, 2020. 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. An amendment to the Companies Act,
which is expected to take effect in 2021, will require any listed company to have an outside director.
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.”
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 December 31, 2018 and 2019 and for the fiscal years ended
December 31, 2017, 2018 and 2019, 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 27, 2020.
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
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)
214
Exhibit
12
13
15(a)
15(b)
99(a)
99(b)
Description
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,
2020***
Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ
Financial Group, Inc. as of and for the fiscal year ended March 31, 2020****
99(c)
Financial Statements and Supplementary Data of Morgan Stanley*****
101.INS
Inline XBRL Instance Document—the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page for the Company’s Annual Report on From 20-F for the year ended March 31,
2020, has been formatted in Inline XBRL
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 27, 2020.
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, 2018, 2019 and 2020. 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,
2018
2019
2020
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 . . . . . . . . . . . . ¥ 31,515,803 ¥
Foreign . . . . . . . . . . . . .
7,889,777
26,391
100,217
0.08% ¥ 32,727,743 ¥
1.27
9,025,391
31,287
152,040
0.10% ¥ 30,349,122 ¥
1.68
8,268,196
31,578
135,689
0.10%
1.64
Total
. . . . . . . . . . .
39,405,580
126,608
0.32
41,753,134
183,327
0.44
38,617,318
167,267
0.43
Call loans, funds sold, and
receivables under resale
agreements and securities
borrowing transactions:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
7,703,606
7,873,112
Total
. . . . . . . . . . .
15,576,718
7,246
77,447
84,693
Trading account assets:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
4,737,292
20,012,444
27,126
405,469
Total
. . . . . . . . . . .
24,749,736
432,595
Investment securities(1):
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
34,659,859
6,891,939
183,622
160,279
Total
. . . . . . . . . . .
41,551,798
343,901
Loans(2):
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
65,985,440
757,623
51,779,709 1,513,596
Total
. . . . . . . . . . . 117,765,149 2,271,219
Total interest-earning assets:
Domestic . . . . . . . . . . . . 144,602,000 1,002,008
94,446,981 2,257,008
Foreign . . . . . . . . . . . . .
Total
. . . . . . . . . . . 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
8,170,312
10,339,632
4,624
252,973
18,509,944
257,597
7,305,805
22,242,975
29,108
460,734
29,548,780
489,842
34,535,660
8,623,509
200,330
214,175
43,159,169
414,505
64,897,973
732,783
51,550,492 1,865,149
116,448,465 2,597,932
145,258,872
998,423
101,024,804 2,928,720
246,283,676 3,927,143
0.06
2.45
1.39
0.40
2.07
1.66
0.58
2.48
0.96
1.13
3.62
2.23
0.69
2.90
1.59
Non-interest-earning assets:
Cash and due from banks . . .
Other non-interest-earning
34,040,675
assets . . . . . . . . . . . . . . . . .
48,549,541
Allowance for credit
losses . . . . . . . . . . . . . . . . .
(1,049,265)
Total non-interest-
earning assets . . .
81,540,951
Total assets . . . . . . . . . . . . . . . . . . ¥320,589,932
33,631,665
46,952,826
(699,000)
79,885,491
¥321,292,847
32,929,678
46,962,448
(675,353)
79,216,773
¥325,500,449
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,
2018
2019
2020
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 . . . . . . . . . . . . ¥123,141,060 ¥
Foreign . . . . . . . . . . . . .
41,421,717
58,779
456,089
0.05% ¥124,661,909 ¥
1.10
41,945,626
67,948
649,418
0.05% ¥124,294,925 ¥
1.55
45,216,271
77,143
758,938
0.06%
1.68
Total
. . . . . . . . . . . 164,562,777
514,868
0.31
166,607,535
717,366
0.43
169,511,196
836,081
0.49
Call money, funds purchased,
and payables under
repurchase agreements and
securities lending
transactions:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
17,913,277
10,138,998
113,805
56,955
Total
. . . . . . . . . . .
28,052,275
170,760
Due to trust account, other
short-term borrowings and
trading account liabilities:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
6,833,724
6,476,232
Total
. . . . . . . . . . .
13,309,956
Long-term debt:
11,121
82,523
93,644
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
25,277,891
2,654,153
183,944
65,539
Total
. . . . . . . . . . .
27,932,044
249,483
Total interest-bearing
liabilities:
Domestic . . . . . . . . . . . . 173,165,952
60,691,100
Foreign . . . . . . . . . . . . .
367,649
661,106
Total
. . . . . . . . . . . 233,857,052 1,028,755
0.64
0.56
0.61
0.16
1.27
0.70
0.73
2.47
0.89
0.21
1.09
0.44
Non-interest-bearing
liabilities . . . . . . . . . . . . . . . . . .
71,309,802
Total equity . . . . . . . . . . . . . . . . .
15,423,078
Total liabilities and equity . . . . . ¥320,589,932
Net interest income and interest
rate spread . . . . . . . . . . . . . . . .
Net interest income as a
percentage of total interest-
earning assets . . . . . . . . . . . . . .
17,201,589
9,204,904
188,009
149,536
26,406,493
337,545
1.09
1.62
1.28
17,245,242
10,502,391
137,759
222,893
27,747,633
360,652
0.80
2.12
1.30
5,777,333
7,184,301
13,576
141,697
12,961,634
155,273
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
0.23
1.97
1.20
0.92
2.35
1.07
0.29
1.65
0.65
6,025,686
7,542,997
20,557
144,350
13,568,683
164,907
25,313,006
2,721,002
237,995
84,709
28,034,008
322,704
172,878,859
473,454
65,982,661 1,210,890
238,861,520 1,684,344
0.34
1.91
1.22
0.94
3.11
1.15
0.27
1.84
0.71
70,572,971
16,076,679
¥321,292,847
71,221,044
15,417,885
¥325,500,449
¥2,230,261
0.92%
¥2,295,398
0.93%
¥2,242,799
0.88%
0.93%
0.95%
0.91%
The percentage of total average assets attributable to foreign activities was 36.6%, 36.8% and 38.1%,
respectively, for the fiscal years ended March 31, 2018, 2019 and 2020.
The percentage of total average liabilities attributable to foreign activities was 36.9%, 37.0% and 38.2%,
respectively, for the fiscal years ended March 31, 2018, 2019 and 2020.
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, 2019 compared to the fiscal year ended March 31, 2018, and the
fiscal year ended March 31, 2020 compared to the fiscal year ended March 31, 2019.
Fiscal year ended March 31, 2018
versus
fiscal year ended March 31, 2019
Fiscal year ended March 31, 2019
versus
fiscal year ended March 31, 2020
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 . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,046 ¥
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
15,865
3,850 ¥
35,958
4,896 ¥ (2,365) ¥ 2,656 ¥
51,823
(12,504)
(3,847)
291
(16,351)
Total
. . . . . . . . . . . . . . . . . . . . . . . .
16,911
39,808
56,719
(14,869)
(1,191)
(16,060)
Call loans, funds sold, and receivables under
resale agreements and securities borrowing
transactions:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,176)
(2,838)
(150)
75,179
(1,326)
72,341
1,348
61,973
(2,644)
41,212
(1,296)
103,185
Total
. . . . . . . . . . . . . . . . . . . . . . . .
(4,014)
75,029
71,015
63,321
38,568
101,889
Trading account assets:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
2,763
(11,301)
1,395
74,272
Total
. . . . . . . . . . . . . . . . . . . . . . . .
(8,538)
75,667
Investment securities(2):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
2,216
21,730
Total
. . . . . . . . . . . . . . . . . . . . . . . .
23,946
16,917
13,439
30,356
4,158
62,971
67,129
19,133
35,169
54,302
10,311
62,079
(12,487)
(69,785)
(2,176)
(7,706)
72,390
(82,272)
(9,882)
(3,120)
20,913
695
(2,186)
(2,425)
18,727
17,793
(1,491)
16,302
Loans:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,634)
14,127
21,317
271,388
19,683
285,515
(11,041)
(24,645)
(33,482)
90,683
(44,523)
66,038
Total
. . . . . . . . . . . . . . . . . . . . . . . .
12,493
292,705
305,198
(35,686)
57,201
21,515
Total interest income:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
3,215
37,583
43,329
470,236
46,544
507,819
(4,867)
107,816
(45,262)
56,077
(50,129)
163,893
Total . . . . . . . . . . . . . . . . . . . . . . . . ¥ 40,798 ¥513,565 ¥554,363 ¥102,949 ¥ 10,815 ¥113,764
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, 2018
versus
fiscal year ended March 31, 2019
Fiscal year ended March 31, 2019
versus
fiscal year ended March 31, 2020
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 . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
¥
Total . . . . . . . . . . . . . . . . . . . . . .
734
5,839
6,573
¥
8,435
187,490
¥
9,169
193,329
195,925
202,498
¥
(201) ¥
52,686
52,485
9,396
56,834
¥
9,195
109,520
66,230
118,715
Call money, funds purchased, and
payables under repurchase agreements
and securities lending transactions:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
(4,692)
(5,708)
78,896
98,289
74,204
92,581
Total . . . . . . . . . . . . . . . . . . . . . .
(10,400)
177,185
166,785
476
23,113
23,589
(50,726)
50,244
(50,250)
73,357
(482)
23,107
Due to trust account, other short-term
borrowings and trading account
liabilities:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
(1,916)
9,845
Total . . . . . . . . . . . . . . . . . . . . . .
7,929
4,371
49,329
53,700
2,455
59,174
61,629
607
6,943
7,550
Long-term debt:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
2,065
10,816
12,881
48,594
(3,161)
50,659
7,655
(2,271)
(9,952)
45,433
58,314
(12,223)
6,374
(4,290)
2,084
5,663
21,467
27,130
6,981
2,653
9,634
3,392
11,515
14,907
Total interest expense:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
(3,809)
20,792
140,296
331,947
136,487
352,739
(1,389)
72,790
(29,293)
124,255
(30,682)
197,045
Total . . . . . . . . . . . . . . . . . . . . . .
¥ 16,983
¥472,243
¥489,226
¥ 71,401
¥ 94,962
¥166,363
Net interest income:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,024
16,791
¥ (96,967) ¥ (89,943) ¥ (3,478) ¥ (15,969) ¥ (19,447)
(33,152)
35,026
138,289
(68,178)
155,080
Total . . . . . . . . . . . . . . . . . . . . . .
¥ 23,815
¥ 41,322
¥ 65,137
¥ 31,548
¥ (84,147) ¥ (52,599)
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, 2018, 2019 and 2020:
2018
Amortized
cost
Fair value
Net
unrealized
gains
(losses)
At March 31,
2019
Amortized
cost
Fair value
(in millions)
2020
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 . . . . . . . . . . . ¥24,272,345 ¥24,567,904 ¥295,559 ¥ 23,748,558 ¥ 24,077,696 ¥329,138 ¥ 23,308,538 ¥ 23,462,879 ¥154,341
8,886
16,087
Corporate bonds . . . . . . . . . . .
Other securities . . . . . . . . . . . .
1,090,442
4,064,659
1,099,328
4,080,746
999,707
3,402,696
988,137
3,377,266
935,965
2,589,367
923,912
2,581,942
11,570
25,430
12,053
7,425
Total domestic . . . . . . . . . .
27,778,199
28,093,236
315,037
28,113,961 28,480,099
366,138
28,463,639 28,642,953
179,314
Foreign:
U.S. Treasury and other
U.S. government agencies
bonds . . . . . . . . . . . . . . . . .
Other government and official
institution bonds . . . . . . . . .
Mortgage-backed securities . .
Other securities . . . . . . . . . . . .
1,400,997
1,366,456
(34,541)
1,722,943
1,710,328
(12,615)
1,994,173
2,086,763
92,590
806,665
1,229,111
1,341,697
805,236
1,214,211
1,353,975
(1,429)
(14,900)
12,278
925,931
1,138,101
1,273,551
931,091
1,115,714
1,281,271
5,160
(22,387)
7,720
941,937
1,063,983
1,444,035
950,725
1,064,787
1,454,975
8,788
804
10,940
Total foreign . . . . . . . . . . .
4,778,470
4,739,878
(38,592)
5,060,526
5,038,404
(22,122)
5,444,128
5,557,250
113,122
Total
. . . . . . . . . . . . . . . ¥ 32,556,669 ¥ 32,833,114 ¥276,445 ¥33,174,487 ¥33,518,503 ¥344,016 ¥33,907,767 ¥34,200,203 ¥292,436
Held-to-maturity debt securities:
Domestic:
Japanese national government
and Japanese government
agency bonds . . . . . . . . . . .
¥1,100,807 ¥
1,141,019 ¥ 40,212 ¥ 1,100,701 ¥ 1,142,320 ¥ 41,619 ¥ 1,100,574 ¥ 1,130,430 ¥ 29,856
Total domestic . . . . . . . . . .
1,100,807
1,141,019
40,212
1,100,701
1,142,320
41,619
1,100,574
1,130,430
29,856
Foreign:
U.S. Treasury and other
U.S. government agencies
bonds . . . . . . . . . . . . . . . . .
Other government and official
institution bonds . . . . . . . . .
Mortgage-backed securities . .
Asset-backed securities . . . . .
59,330
59,610
280
138,731
138,712
(19)
148,927
148,318
(609)
—
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)
2,628
883,281
2,030,371
2,791
893,423
2,002,932
163
10,142
(27,439)
Total foreign . . . . . . . . . . .
2,482,134
2,479,653
(2,481)
3,341,200
3,310,627
(30,573)
3,065,207
3,047,464
(17,743)
Total
. . . . . . . . . . . . . . . ¥ 3,582,941 ¥ 3,620,672 ¥ 37,731 ¥ 4,441,901 ¥ 4,452,947 ¥ 11,046 ¥ 4,165,781 ¥ 4,177,894 ¥ 12,113
Marketable equity securities:
Domestic:
Marketable equity
securities . . . . . . . . . . . . . . .
Total domestic . . . . . . . . . .
— ¥
6,544,938
— 6,544,938
Foreign:
Marketable equity
securities . . . . . . . . . . . . . . .
Total foreign . . . . . . . . . . .
—
—
126,646
126,646
Total
. . . . . . . . . . . . . . .
— ¥ 6,671,584
—
—
—
—
—
— ¥ 6,331,815
— 6,331,815
—
—
26,728
26,728
— ¥ 6,358,543
—
—
—
—
—
— ¥ 4,740,188
— 4,740,188
—
—
28,130
28,130
— ¥ 4,768,318
—
—
—
—
—
Nonmarketable equity securities presented in Equity securities in the accompanying consolidated financial
statements were primarily carried at cost of ¥538,251 million, ¥591,237 million and ¥576,977 million, at
March 31, 2018, 2019 and 2020, 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 ¥28,359 million, ¥27,820 million and ¥39,963 million, at March 31, 2018, 2019 and 2020, respectively.
A-6
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, 2020. 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 . . . . . . . . . . . . . . . . ¥10,480,660 0.06% ¥ 7,051,108 0.18% ¥1,947,633 0.29% ¥3,983,478 0.74% ¥23,462,879 0.23%
Corporate bonds . . . . . . . . . .
Other securities . . . . . . . . . . .
135,209 0.13
58,626 0.36
810,264 0.17
942,923 0.18
103,185 0.35
2,319,921 0.18
50,670 0.61
759,276 0.21
1,099,328 0.20
4,080,746 0.19
Total domestic . . . . . . .
10,674,495 0.06
8,804,295 0.18
4,370,739 0.23
4,793,424 0.65
28,642,953 0.22
Foreign:
U.S. Treasury and other U.S.
government agencies
bonds . . . . . . . . . . . . . . . .
Other government and
official institution
bonds . . . . . . . . . . . . . . . .
Mortgage-backed
167,837 2.11
831,515 1.95
1,046,109 2.24
41,302 4.20
2,086,763 2.15
500,099 2.25
423,411 2.84
25,928 3.36
1,287 4.41
950,725 2.54
securities . . . . . . . . . . . . . .
Other securities . . . . . . . . . . .
3,475 3.11
481,200 2.09
18,267 2.42
756,109 2.54
260,387 2.21
91,715 3.09
782,658 2.81
125,951 3.32
1,064,787 2.66
1,454,975 2.49
Total foreign . . . . . . . . .
1,152,611 2.16
2,029,302 2.37
1,424,139 2.31
951,198 2.94
5,557,250 2.41
Total . . . . . . . . . . . . . ¥11,827,106 0.26% ¥10,833,597 0.58% ¥5,794,878 0.73% ¥5,744,622 1.04% ¥34,200,203 0.57%
Held-to-maturity debt
securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . . ¥
— —% ¥ 1,100,574 0.51% ¥
— —% ¥
— —% ¥ 1,100,574 0.51%
Total domestic . . . . . . .
— —
1,100,574 0.51
— —
— —
1,100,574 0.51
Foreign:
U.S. Treasury and other U.S.
government agencies
bonds . . . . . . . . . . . . . . . .
Other government and official
institution bonds . . . . . . . . . .
Mortgage-backed
securities . . . . . . . . . . . . . .
Asset-backed securities . . . .
986 8.62
— —
147,941 2.51
— —
148,927 2.55
110 5.45
1,740 7.18
739 6.63
39 7.69
2,628 6.96
— —
22,917 1.72
77,130 2.23
23,457 1.60
96,961 2.34
345,830 1.92
709,190 2.62
1,638,167 2.01
883,281 2.56
2,030,371 1.99
Total foreign . . . . . . . . .
24,013 2.02
102,327 2.17
591,471 2.14
2,347,396 2.20
3,065,207 2.18
Total . . . . . . . . . . . . . ¥
24,013 2.02% ¥ 1,202,901 0.65% ¥ 591,471 2.14% ¥2,347,396 2.20% ¥ 4,165,781 1.74%
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, 2020.
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, 2020.
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:
2016
2017
At March 31,
2018
(in millions)
2019
2020
Domestic:
Manufacturing . . . . . . . . . .
Construction . . . . . . . . . . .
Real estate . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . .
Wholesale and retail
. . . . .
Banks and other financial
institutions(1)
Communication and
. . . . . . . . .
information services . . .
Other industries . . . . . . . . .
. . . . . . . . . . . . .
Consumer
¥ 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
¥ 11,448,778
733,212
12,054,671
2,585,111
7,504,561
5,146,932
5,223,906
4,818,364
5,213,020
5,161,093
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
1,572,344
8,673,871
15,319,721
Total domestic . . . . . .
72,435,938
67,006,528
65,696,342
65,156,790
65,053,362
Foreign:
Governments and official
institutions . . . . . . . . . . .
1,125,031
1,037,795
920,538
841,695
726,347
Banks and other financial
. . . . . . . . .
13,654,335
13,844,964
12,851,570
11,641,373
11,788,225
institutions(1)
Commercial and
industrial
. . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .
30,056,474
5,818,747
30,279,641
6,334,551
30,591,173
7,270,928
31,951,169
7,597,502
32,565,030
8,404,062
Total foreign . . . . . . .
50,654,587
51,496,951
51,634,209
52,031,739
53,483,664
Total
. . . . . . . . .
123,090,525
118,503,479
117,330,551
117,188,529
118,537,026
Unearned income, unamortized
premiums—net and deferred
loan fees—net . . . . . . . . . . . .
(299,567)
(288,507)
(294,656)
(304,588)
(350,287)
Total(2) . . . . . . . .
¥122,790,958
¥118,214,972
¥117,035,895
¥116,883,941
¥118,186,739
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 ¥100,889 million, ¥185,940 million, ¥226,923 million, ¥291,794 million and ¥344,790
million at March 31, 2016, 2017, 2018, 2019 and 2020, 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, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,437,196
393,789
2,845,169
1,135,003
5,170,771
3,204,961
¥ 3,295,852
258,601
4,232,351
997,954
1,679,548
1,186,980
¥ 1,715,730
80,822
4,977,151
452,154
654,242
769,152
¥ 11,448,778
733,212
12,054,671
2,585,111
7,504,561
5,161,093
542,120
5,240,434
2,090,295
863,639
2,073,206
3,010,455
166,585
1,360,231
10,218,971
1,572,344
8,673,871
15,319,721
Total Domestic . . . . . . . . . . . . . . . . . .
27,059,738
17,598,586
20,395,038
65,053,362
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,409,581
19,053,595
12,020,488
53,483,664
Total
. . . . . . . . . . . . . . . . . . . . . .
¥49,469,319
¥36,652,181
¥32,415,526
¥118,537,026
The above loans due after one year which had predetermined interest rates and floating or adjustable interest
rates at March 31, 2020 are shown below:
Predetermined rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating or adjustable rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,140,119
19,853,505
(in millions)
¥ 5,525,084
25,548,999
¥23,665,203
45,402,504
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥37,993,624
¥31,074,083
¥69,067,707
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.
Regarding our policy for placing loans on nonaccrual status, see “Summary of Significant Accounting
Policies — Loans” in Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
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, 2020, based on the domicile and type of industry of the borrowers:
2016
2017
2018
2019
2020
At March 31,
(in millions)
Nonaccrual loans:
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 372,875 ¥ 185,124 ¥
Construction . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions . . . . . . .
Communication and information services . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
15,256
66,210
41,056
132,858
675
20,270
29,715
174,106
15,248
50,142
38,977
131,545
2,432
18,711
10,352
161,680
77,188 ¥
10,922
37,853
31,733
108,639
1,145
13,815
37,677
149,491
65,921 ¥
9,877
26,513
27,115
94,990
898
11,955
26,110
143,668
93,798
8,558
30,449
52,182
94,440
994
10,539
20,766
136,181
Total domestic . . . . . . . . . . . . . . . . . . . . .
853,021
614,211
468,463
407,047
447,907
Foreign:
Governments and official institutions . . . . . . .
Banks and other financial institutions . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
132
14,337
264,163
68,514
—
5,902
301,685
64,834
—
1,716
215,601
67,869
—
1,160
219,669
78,780
34
443
255,214
100,628
Total foreign . . . . . . . . . . . . . . . . . . . . . .
347,146
372,421
285,186
299,609
356,319
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,200,167 ¥ 986,632 ¥ 753,649 ¥ 706,656 ¥ 804,226
Restructured loans:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 459,294 ¥ 682,041 ¥ 557,368 ¥ 511,151 ¥ 492,566
172,549
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,674
127,931
166,240
158,784
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 625,534 ¥ 840,825 ¥ 695,042 ¥ 639,082 ¥ 665,115
Accruing loans contractually past due 90 days or
more:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
Foreign(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,919 ¥
314
37,650 ¥
3,430
17,356 ¥
2,408
13,621 ¥
2,778
11,148
2,339
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
48,233 ¥
41,080 ¥
19,764 ¥
16,399 ¥
13,487
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,873,934 ¥1,868,537 ¥1,468,455 ¥1,362,137 ¥1,482,828
Notes:
(1) Foreign accruing loans contractually past due 90 days or more do not include ¥1,930 million, ¥1,514 million, ¥549 million, ¥234 million
and ¥74 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, 2016, 2017, 2018, 2019 and 2020,
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 ¥1,209,791 million and
¥1,306,829 million, at March 31, 2019 and 2020, 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, 2020 was approximately ¥32.5 billion, of
A-10
which ¥11.9 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, 2020 was approximately ¥38.5 billion, of which ¥18.3 billion was included in the
results of operations for the fiscal year.
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, 2018, 2019 and 2020. 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, 2020, 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.
A-11
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.”
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, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses at end of fiscal
Fiscal years ended March 31,
2016
2017
2018
2019
2020
(in millions, except percentages)
¥1,055,479
231,862
¥1,111,130
253,688
¥1,182,188
(240,847)
¥764,124
34,330
¥658,184
321,713
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
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
9,923
300
2,584
6,533
12,529
12
1,370
596
28,791
62,638
180,497
232,109
174,041
243,135
22,261
28,849
51,110
15,467
28,650
44,117
24,838
39,020
63,858
156,959
(19,252)
169,809
(12,821)
180,999
3,782
129,924
(10,346)
179,277
8,920
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,111,130
¥1,182,188
¥ 764,124
¥658,184
¥809,540
Allowance for credit losses applicable to foreign
activities:
Balance at beginning of fiscal year . . . . . . .
¥ 267,293
¥ 416,221
¥ 387,250
¥303,719
¥303,867
Balance at end of fiscal year . . . . . . . . . . . .
¥ 416,221
¥ 387,250
¥ 303,719
¥303,867
¥402,784
Provision for credit losses . . . . . . . . . . . . . .
¥ 237,189
¥
92,689
¥
21,889
¥ 77,338
¥231,831
Ratio of net charge-offs during the fiscal year to
average loans outstanding during the fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.13%
0.14%
0.15%
0.11%
0.15%
Note:
(1) Other principally includes 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, 2020:
2016
2017
At March 31,
2018
2019
2020
% 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
% of
loans in
each
category
to total
loans
Amount
Amount
(in millions, except percentages)
Domestic:
Manufacturing . . . . . . . . . ¥ 321,412
9,813
Construction . . . . . . . . . .
31,960
Real estate . . . . . . . . . . . .
34,430
Services . . . . . . . . . . . . . .
Wholesale and retail . . . .
116,450
Banks and other financial
institutions . . . . . . . . . .
12,840
9.88% ¥ 409,018
12,097
0.74
33,579
9.08
42,023
2.03
138,119
6.41
9.95% ¥179,799
7,934
0.69
21,062
9.81
29,518
2.15
99,985
6.73
9.27% ¥108,463
6,856
0.67
15,664
10.03
24,473
2.29
93,112
6.81
9.52% ¥146,281
5,671
0.61
15,244
9.99
45,202
2.26
93,636
6.52
9.66%
0.62
10.17
2.18
6.33
4.18
14,732
4.41
7,636
4.11
6,198
4.45
5,932
4.35
Communication and
information services . .
Other industries . . . . . . . .
Consumer . . . . . . . . . . . .
Foreign:
Governments and official
institutions . . . . . . . . . .
Banks and other financial
institutions . . . . . . . . . .
Commercial and
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
22,950
0.91
25,098
0.88
751
0.78
367
24,471
11.09
20,717
11.68
10,452
10.95
6,970
industrial . . . . . . . . . . .
Other . . . . . . . . . . . . . . . .
Unallocated . . . . . . . . . . . . . . .
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
1.29
7.47
13.49
0.72
9.93
27.27
6.48
—
7,327
15,055
72,408
1.33
7.32
12.93
369
0.61
10,117
9.94
250,438
141,860
—
27.47
7.09
—
Total . . . . . . . . . . . . ¥1,111,130
100.00% ¥1,182,188
100.00% ¥764,124
100.00% ¥658,184
100.00% ¥809,540 100.00%
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 . .
0.90%
1.00%
0.65%
0.56%
0.68%
59.29%
63.27%
52.04%
48.32%
54.59%
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, 2018, 2019 and 2020:
Fiscal years ended March 31,
2018
2019
2020
Average
amount
Average
rate
Average
amount
Average
rate
Average
amount
Average
rate
(in millions, except percentages)
Domestic offices:
Non-interest-bearing demand
deposits . . . . . . . . . . . . . . . . .
¥ 22,701,413
—% ¥ 24,429,358
—% ¥ 25,243,586 —%
Interest-bearing demand
deposits . . . . . . . . . . . . . . . . .
Deposits at notice . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . .
Foreign offices:
Non-interest-bearing demand
76,104,436
1,773,780
41,501,996
3,760,848
0.03
0.00
0.08
0.01
80,318,814
1,658,467
40,670,338
2,014,290
0.05
0.01
0.07
0.01
81,846,344
1,413,584
39,291,672
1,743,325
0.07
0.00
0.04
0.01
deposits . . . . . . . . . . . . . . . . .
5,477,038
—
5,356,424
—
5,037,045 —
Interest-bearing deposits,
principally time deposits and
. . . . . .
certificates of deposit
Total . . . . . . . . . . . . . . . . .
41,421,717
1.10
41,945,626
1.55
45,216,271
1.68
¥192,741,228
¥196,393,317
¥199,791,827
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, 2018, 2019 and 2020 were ¥882,772 million, ¥820,311 million and ¥775,125 million,
respectively.
At March 31, 2020, 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.$93 thousand at the Federal
Reserve Bank of New York’s noon buying rate on March 31, 2020) 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over three months through six months . . . . . . . . . . . . . . . . . . . .
Over six months through twelve months . . . . . . . . . . . . . . . . . . .
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,245,409
3,767,815
9,461,967
3,088,431
¥1,053,269
132,490
112,302
95,393
¥ 7,298,678
3,900,305
9,574,269
3,183,824
¥22,563,622
¥1,393,454
¥23,957,076
Foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥23,329,855
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, 2018, 2019 and 2020:
Call money, funds purchased, and payables under repurchase
agreements and securities lending transactions:
Average balance outstanding during the fiscal year . . . . . . . . . .
Maximum balance outstanding at any month-end during the
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
Fiscal years ended March 31,
2018
2019
2020
(in millions, except percentages)
¥28,052,275
¥26,406,493
¥27,747,633
28,757,355
28,757,355
31,395,497
28,588,039
36,535,711
36,535,711
0.61%
1.28%
1.30%
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.61%
1.13%
0.72%
Due to trust account and other short-term borrowings:
Average balance outstanding during the fiscal year . . . . . . . . . .
Maximum balance outstanding at any month-end during the
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
¥10,556,895
¥ 9,875,361
¥ 9,883,337
11,823,043
10,267,282
10,821,354
9,467,025
19,433,229
19,433,229
0.65%
1.25%
1.34%
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.87%
1.40%
0.55%
A-15
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of March 31, 2019 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the Fiscal Years ended March 31, 2018, 2019 and 2020 . . . . . . . .
Consolidated Statements of Comprehensive Income for the Fiscal Years ended March 31, 2018, 2019
and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for the Fiscal Years ended March 31, 2018, 2019 and 2020 . . . . . . . .
Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2018, 2019 and 2020 . . . .
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. Lease Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Pledged Assets and Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Call Money and Funds Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Due to Trust Account, 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-9
F-11
F-13
F-14
F-16
F-18
F-18
F-36
F-41
F-48
F-65
F-66
F-70
F-72
F-77
F-79
F-79
F-80
F-83
F-92
F-95
F-96
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-98
17. Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Common Stock and Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-98
19. Retained Earnings, Legal Reserve and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-100
20. Accumulated Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-102
21. Regulatory Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-106
22. Earnings per Common Share Applicable to Common Shareholders of MUFG . . . . . . . . . . . . . . . F-114
23. Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-114
24. Obligations Under Guarantees and Other Off-balance Sheet Instruments . . . . . . . . . . . . . . . . . . . F-121
25. Variable Interest Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-125
26. Commitments and Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-136
27. Fees and Commissions Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-137
28. Trading Account Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-138
29. Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-139
30. Foreign Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-142
31. Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-144
32. Parent Company Only Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-161
33. Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-164
F-1
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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, 2019 and 2020, the related consolidated statements of income, comprehensive income, equity
and cash flows for each of the three years in the period ended March 31, 2020, 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, 2019 and 2020,
and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2020,
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, 2020,
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, 2020, 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 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the
financial statements that were communicated or required to be communicated to the audit committee and that
(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any
way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.
F-3
Allowance for Credit Losses—Commercial Segment—Refer to Notes 1 and 4 to the Financial Statements
Critical Audit Matter Description
The MUFG Group has banking subsidiaries and they are engaged in lending business as one of their core
businesses. It maintains an allowance for credit losses to absorb incurred probable losses inherent in the loan
portfolio because there is a risk of not collecting all or part of the loan amount due to credit events such as
borrower’s bankruptcy. The appropriate level of the allowance for credit losses for the loan portfolio was
determined by evaluating various factors and assumptions, such as the borrower’s internal credit rating and
historical loss experience as well as adjustments to reflect existing economic conditions at the balance sheet date.
At March 31, 2020, the MUFG Group had ¥86,622,787 million of loans in the Commercial segment and recorded
an allowance for credit losses against these loans of ¥482,275 million.
Of the various factors and assumptions, the determination of the allowance for credit losses for the
Commercial segment requires management to make significant judgments due to the subjectivity and uncertainty
associated with the determination of borrowers’ internal credit ratings which are highly dependent on the
estimation of the borrowers’ performance and business sustainability in case the borrowers experience financial
problems. As the particular borrowers’ internal credit ratings are affected by changes in the borrowers’ external
and internal business environment, there is a high degree of uncertainty and subjective judgment made by
management.
In addition, the MUFG Group recognized a qualitative reserve for loan losses, specific to the Commercial
segment as a result of the estimated impact that COVID-19 had on borrowers’ credit risk which has been
incurred but did not appear on the individual borrower’s financials. The estimate included assumptions regarding
which borrowers (certain industries and regions) have suffered significant impacts on their performance as a
result of the COVID-19. Assumptions about the severity and duration of the COVID-19 were also used to
estimate the impact of the COVID-19 on the borrowers. There is a high degree of uncertainty and subjective
judgment made by management due to the lack of consensus relating to the severity and duration of the
COVID-19.
Thus, we identified the particular borrowers’ internal credit ratings used to determine the allowance for
credit losses for the Commercial segment and the qualitative reserve recorded in the Commercial segment as a
result of the COVID-19 as critical audit matters. Auditing the determination of the internal credit ratings and the
qualitative reserve required a high degree of auditor judgment and an increased extent of effort, including the
need to involve our credit specialists, when performing audit procedures to evaluate the reasonableness of the
internal credit ratings and the amount of the qualitative reserve.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the particular borrowers’ internal credit ratings used to determine the
allowance for credit losses for the Commercial segment and the qualitative reserve recorded in the Commercial
segment as a result of the COVID-19 included the following, among others:
‰ We tested the effectiveness of controls, including review and approval, over the borrowers’ internal
credit ratings and the determination of the amount of the qualitative reserve as a result of the
COVID-19.
‰ We tested the effectiveness of controls over the completeness and accuracy of the information used in
performing the aforementioned controls, including the borrowers’ underlying information.
‰ With the assistance of our credit specialists, we tested significant assumptions applied by management
to determine the internal credit ratings and the appropriateness of the borrowers’ underlying information
by comparing them with available relevant external information.
F-4
‰
For the borrowers in certain industries and regions who have suffered significant impacts on their
performance as a result of the COVID-19, with the assistance of our credit specialists, we tested the
reasonableness of these significant assumptions used to estimate the impact of the COVID-19 on the
borrowers by comparing the information which is the basis for management’s determination of the
qualitative reserve as a result of the COVID-19 with available relevant external information and
evaluating appropriateness of the information used by management.
Business Developments—Danamon’s Relationships with Agents and FSI’s Customer Relationships—Refer to
Note 2 to the Financial Statements
Critical Audit Matter Description
As part of the global strategies, the MUFG Group has executed multiple large-scale acquisitions,
investments, and capital alliances. The MUFG Group recorded intangible assets through these business
combinations. As the fair value measurement of the intangible assets includes complex estimates that require
specialized knowledge, there is a risk that fair value of the intangible assets is not properly estimated. The MUFG
Group completed the acquisition of PT Bank Danamon Indonesia, Tbk. (“Danamon”) on April 29, 2019 and the
acquisition of nine subsidiaries of Colonial First State Group Limited, which collectively, including their
subsidiaries, represent the global asset management business of Colonial First State Global Asset Management,
on August 2, 2019, which were renamed First Sentier Investors (“FSI”) after the acquisition. The MUFG Group
accounted for these acquisitions under the acquisition method of accounting for business combinations.
Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their
respective fair values, including Danamon’s relationships with agents of ¥79,552 million and FSI’s customer
relationships of ¥100,862 million, respectively. Management estimated the fair values of these intangible assets
using the multi-period excess earnings method, which is a specific discounted cash flow method.
The estimation of the fair values of these intangible assets required management to make significant
judgements related to the following assumptions due to the subjectivity and uncertainty:
For the Danamon’s relationships with agents,
‰
The growth rate of loan origination amounts reflecting market growth forecast
‰
‰
The attrition rate of the existing agents based on historical actual results
The discount rate in which the risk that the future cash flows differ from the estimate is taken into
consideration
For the FSI’s customer relationships,
‰
The growth rate of asset under management reflecting market growth forecast
‰
‰
The attrition rate of the existing customers based on historical actual results
The discount rate in which the risk that the future cash flows differ from the estimate is taken into
consideration
As determination of these assumptions require specialized knowledge of corporate valuation and are
affected by external factors such as market and customer conditions, there is a high degree of uncertainty and
subjective judgment made by management. If these assumptions are not appropriate, there is a potential risk that
fair values of the intangible assets at the time of the business combination are not properly measured.
Thus, we identified the aforementioned assumptions used to estimate the fair values of the Danamon’s
relationships with agents and the FSI’s customer relationships as critical audit matters because of the significant
judgments made by management to estimate the fair values of the intangible assets. Auditing these significant
assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to
involve our specialists, when performing audit procedures to evaluate the reasonableness of the significant
assumptions.
F-5
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant assumptions used to estimate the fair values of the
Danamon’s relationships with agents and the FSI’s customer relationships included the following, among others:
‰ We tested the effectiveness of controls related to the valuation of intangible assets, including review and
approval, over the growth rates of loan origination amounts and asset under management reflecting the
market growth forecast, the attrition rates of existing agents and customers based on historical actual
results, and the discount rates applied to estimation of future cash flows.
‰ We tested the effectiveness of controls over the completeness and accuracy of the key underlying data
used in performing the aforementioned controls.
‰ With the assistance of our fair value specialists, we evaluated the reasonableness of the growth rates of
loan origination amounts and assets under management reflecting the market growth forecast, the
attrition rates of existing agents and customers based on historical actual results, and the discount rates
applied to estimation of future cash flows by evaluating whether they were appropriately estimated to
reflect the circumstances inherent to the entity, which includes comparing them with available external
information.
Goodwill—Danamon and MUFG Americas Holdings Corporation Reporting Units—Refer to Notes 1 and 6 to
the Financial Statements
Critical Audit Matter Description
As part of the global strategies, the MUFG Group has executed multiple large-scale acquisitions,
investments, and capital alliances. The MUFG Group recorded a large amount of goodwill through these business
combinations. There is a risk of a large amount of loss by the goodwill impairment as the MUFG Group does not
obtain the expected synergy effects due to various factors such as unexpected changes in the region and industry
of investees. The MUFG Group’s consolidated goodwill balance was ¥517,626 million at March 31, 2020, which
was allocated to the MUFG Group’s reporting units. 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. The MUFG Group’s evaluation of goodwill for impairment involves the
comparison of the fair value of each reporting unit to its respective carrying value. The fair value of the Danamon
reporting unit was measured using Danamon’s market capitalization and a corresponding control premium as a
market approach, which was also corroborated by other valuation techniques. The MUFG Group determined that
the carrying value of Danamon exceeded the fair value as of the measurement date, resulting in the impairment
loss on goodwill of ¥241,356 million for the fiscal year ended March 31, 2020. In addition, the MUFG Group
measured the fair values of the MUFG Americas Holdings Corporation (“MUAH”) reporting units within the
Global Commercial Banking Business Group segment and Global Corporate & Investment Banking Business
Group segment (“MUAH reporting units”) using a combination of the income and the market approaches. The
income approach estimates the fair values of the reporting units by discounting management’s projections of
each reporting unit’s cash flows, including a terminal value to estimate the fair value of cash flows beyond the
final year of projected results, using a discount rate derived from the Capital Asset Pricing Model. The market
approach incorporates comparable public company price to tangible book value and price to earnings multiples.
The MUFG Group determined that the carrying values of the MUAH reporting units exceeded the fair values as
of the measurement date, resulting in the impairment loss on goodwill of ¥80,297 million for the fiscal year
ended March 31, 2020.
The estimation of the fair values of the Danamon and MUAH reporting units requires management to make
significant judgements related to the following significant assumptions due to the subjectivity and uncertainty:
For the Danamon reporting unit,
‰
The market capitalization to estimate the fair value of the Danamon reporting unit
‰
The control premium considered in relation to market capitalization
F-6
For the MUAH reporting units,
‰
Projected future operating cash flows based on forecasted future income in the income approach
If these assumptions are not appropriate, there is a potential risk that the valuation of the goodwill is not
properly measured.
Thus, we identified the aforementioned assumptions used to estimate the fair values of the Danamon and
MUAH reporting units as critical audit matters because of the significant judgments made by management to
develop the significant assumptions used in estimation of the fair values of the Danamon and MUAH reporting
units. Auditing these significant assumptions required a high degree of auditor judgment and an increased extent
of effort, including the need to involve our specialists, when performing audit procedures to evaluate the
reasonableness of the aforementioned significant assumptions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant assumptions used to estimate the fair values of the Danamon
and MUAH reporting units included the following, among others:
For the Danamon reporting unit,
‰ We tested the effectiveness of controls, including review and approval of determination whether an
adjustment to the market capitalization is necessary by assessing the volume and level of activity in the
market.
‰ We tested the effectiveness of controls, including review and approval of determination of comparable
transactions used to determine the control premium.
‰ We tested the effectiveness of controls, including review and approval of the comparison of the fair
value of the Danamon reporting unit calculated by market approach with the fair values calculated by
alternative valuation techniques.
‰ We tested the effectiveness of controls over the completeness and accuracy of the key underlying data
used in performing the aforementioned controls.
‰ We tested whether an adjustment to the market capitalization is necessary by assessing the volume and
level of activity in the market.
‰ With the assistance of our fair value specialists, for the estimation of the control premium, we evaluated
the relevance of the comparable transactions to Danamon acquisition by considering their industries,
sizes, and businesses, among other factors. In addition, we evaluated the reasonableness of the control
premium pertaining to the comparable transactions.
‰ With the assistance of our fair value specialists, in order to test the reasonableness of the valuation
technique used to calculate the fair value of the Danamon reporting unit, we compared management’s
fair value estimate with the fair values calculated by alternative valuation techniques.
For the MUAH reporting units,
‰ We tested the effectiveness of controls, including review and approval, over the projected future
operating cash flows based on forecasted future income in the income approach, including controls over
the assumptions used to estimate the projected future operating cash flows.
‰ We tested the effectiveness of controls over the completeness and accuracy of the key underlying data
used in performing the aforementioned controls.
F-7
‰ We evaluated the reasonableness of management’s projected future operating cash flows based on
forecasted future income by inquiring of management, comparing the projections to historical results,
and inspecting financial trends and metrics.
‰ We considered the impact of changes in macroeconomic and company specific factors on management’s
forecasts.
‰ With the assistance of our fair value specialists, we evaluated the reasonableness of management’s
projected future operating cash flows based on forecasted future income for each of the MUAH
reporting units.
/s/Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 10, 2020
We have served as the MUFG Group’s auditor since 1976.
F-8
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2019 AND 2020
(in millions)
ASSETS
Cash and due from banks (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2020
¥ 33,924,340
40,646,920
¥ 33,283,032
45,266,680
Cash, due from banks and interest-earning deposits in other banks . . . . . . . . . .
74,571,260
78,549,712
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 ¥7,512,025 and ¥6,709,467 in 2019 and 2020)
(including ¥18,597,303 and ¥20,964,024 measured at fair value under the fair
value option in 2019 and 2020) (Notes 9, 15, 23 and 31) . . . . . . . . . . . . . . . . . .
Investment securities (Notes 3, 9 and 31):
Available-for-sale debt securities (including assets pledged that secured
parties are permitted to sell or repledge of ¥6,981,664 and ¥4,490,360 in
2019 and 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity debt securities (including assets pledged that secured parties
are permitted to sell or repledge of ¥160,828 and ¥56,411 in 2019 and
2020) (fair value of ¥4,452,947 and ¥4,177,894 in 2019 and 2020) . . . . . . . .
Equity securities (including assets pledged that secured parties are permitted
1,109,995
10,974,740
2,758,573
1,168,515
23,995,961
3,443,959
40,576,618
47,504,058
33,518,503
34,200,203
4,441,901
4,165,781
to sell or repledge of ¥1,364 and ¥616 in 2019 and 2020) (including
¥6,413,867 and ¥4,850,376 in 2019 and 2020 measured at fair value)
. . . . .
6,977,600
5,385,258
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,938,004
43,751,242
Loans, net of unearned income, unamortized premiums and deferred loan fees
(including assets pledged that secured parties are permitted to sell or repledge
of ¥802,185 and ¥648,437 in 2019 and 2020) (Notes 4 and 9) . . . . . . . . . . . . . .
Allowance for credit losses (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,883,941
(658,184)
118,186,739
(809,540)
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,225,757
117,377,199
Premises and equipment—net (Note 5 and 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers’ acceptance liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets—net (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (Notes 7, 8, 9, 13, 14 and 31) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
973,600
247,996
927,196
433,891
11,491,269
929,529
167,257
1,239,526
517,626
13,108,699
¥305,228,899
¥331,753,283
Assets of consolidated VIEs included in total assets above that can be used
only to settle obligations of consolidated VIEs (Note 25)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
7
23,655
528,690
1,828,194
15,545,328
294,212
¥
846
30,047
695,069
1,804,459
16,072,595
244,645
¥ 18,220,086
¥ 18,847,661
F-9
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS—(Continued)
AS OF MARCH 31, 2019 AND 2020
(in millions, except shares)
LIABILITIES AND EQUITY
Deposits (Notes 9 and 10):
Domestic offices:
2019
2020
Non-interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 25,222,218
124,859,036
¥ 28,091,421
126,485,629
Overseas offices:
Non-interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased (Notes 9 and 11) . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements (Notes 9, 15 and 16) . . . . . . . . . . . . . . . . .
Payables under securities lending transactions (Notes 9, 15 and 16) . . . . . . . . . . .
Due to trust account and other short-term borrowings (including ¥289,755 and
¥377,133 measured at fair value under the fair value option in 2019 and 2020)
(Notes 9, 12 and 31) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account liabilities (Notes 15, 23 and 31) . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (including ¥325,808 and ¥304,067 measured at fair value
under the fair value option in 2019 and 2020) (Notes 7, 9, 12 and 31)
. . . . . . .
Other liabilities (Notes 1, 7, 8, 9, 13, 14, 15, 16, 26 and 31) . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,220,557
43,978,978
199,280,789
2,450,320
25,224,632
913,087
5,290,262
44,087,216
203,954,528
3,668,922
31,849,915
1,016,874
9,467,025
13,009,492
247,996
19,433,229
14,767,433
167,257
27,990,543
10,660,267
289,244,151
27,926,763
13,223,846
316,008,767
Commitments and contingent liabilities (Notes 24 and 26)
Mitsubishi UFJ Financial Group shareholders’ equity:
Capital stock (Notes 17 and 18)—common stock authorized, 33,000,000,000
shares; common stock issued, 13,667,770,520 shares and 13,581,995,120
shares at March 31, 2019 and 2020, with no stated value . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus (Note 18)
Retained earnings (Notes 19 and 33):
Appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes (Note 20) . . . . . . . . . .
Treasury stock, at cost—745,921,774 common shares and 741,772,308
2,090,270
5,577,186
2,090,270
5,533,520
239,571
8,094,026
(284,269)
239,571
8,079,530
(420,417)
common shares at March 31, 2019 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . .
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(517,236)
15,199,548
785,200
15,984,748
¥305,228,899
(505,987)
15,016,487
728,029
15,744,516
¥331,753,283
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 25)
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
¥
20,535
490,033
62,146
572,714
¥
¥
30,831
465,352
101,969
598,152
See the accompanying notes to Consolidated Financial Statements.
F-10
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(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
2018
2019
2020
¥2,271,219
126,608
¥2,576,417
183,327
¥2,597,932
167,267
198,715
145,186
432,595
10,808
237,378
160,825
499,724
10,354
242,123
172,382
489,842
11,286
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
73,885
3,259,016
145,354
3,813,379
246,311
3,927,143
Interest expense:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements and securities lending
514,868
5,248
717,366
3,913
836,081
3,270
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
165,512
333,632
357,382
Due to trust account, other short-term borrowings and trading account
Long-term debt
Total
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses (Note 4) . . . . . . . . . . . . . . . . . .
Net interest income after provision for (reversal of) credit losses . . .
Non-interest income:
Fees and commissions income (Note 27) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange losses—net (Note 28)
Trading account profits (losses)—net (Notes 28 and 31) . . . . . . . . . . . . .
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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on remeasurement of previously held equity method investment
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Non-interest expense:
Salaries and employee benefits (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy expenses—net (Notes 5 and 26) . . . . . . . . . . . . . . . . . . . . . . .
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 and 26)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
93,644
249,483
1,028,755
2,230,261
(240,847)
2,471,108
1,462,792
(49,561)
(73,114)
286,903
227,984
16,109
155,273
307,797
1,517,981
2,295,398
34,330
2,261,068
164,907
322,704
1,684,344
2,242,799
321,713
1,921,086
1,438,578
(95,987)
168,900
(252,307)
209,732
22,663
1,502,052
(281,790)
765,373
(532,248)
282,712
9,956
—
63,978
1,935,091
—
103,665
1,595,244
41,218
88,422
1,875,695
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
1,175,405
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
1,242,563
182,917
332,033
303,632
113,489
237,328
3,732
98,441
59,976
100,198
383,810
(62,279)
367,721
3,363,561
F-11
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(in millions, except per share amount)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (Note 8)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income before attribution of noncontrolling interests . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests
2018
2019
2020
1,661,819
407,823
1,253,996
25,836
870,842
133,237
737,605
18,960
433,220
114,505
318,715
12,760
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . .
¥1,228,160
¥ 718,645
¥ 305,955
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,228,160
¥ 718,645
¥ 305,955
Earnings per common share applicable to common shareholders of
Mitsubishi UFJ Financial Group (Notes 19 and 22):
Basic earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . .
¥
92.40
¥
55.03
¥
23.69
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 . . . . . . . . . . . . . . . .
92.10
18.00
13,292
13,293
54.74
21.00
13,059
13,059
23.47
23.50
12,913
12,913
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2019
2020
¥
¥
99
15
114
¥
¥
596
10
606
¥
¥
1,467
123
1,590
(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 from the fiscal year ended March 31, 2019. For additional information,
refer to Note 1.
See the accompanying notes to Consolidated Financial Statements.
F-12
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(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 gains (losses) on derivatives qualifying for cash
flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . .
2018
2019
2020
¥1,253,996
¥737,605
¥ 318,715
230,308
(2,178)
88,180
9,729
23,619
54,172
(7,025)
109,838
(104,778)
(4,890)
(88,940)
(42,212)
(38,133)
699,472
18,960
10,642
(131,523)
(81,065)
(124,155)
194,560
12,760
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226,165
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . .
Other comprehensive income attributable to noncontrolling
1,480,161
25,836
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,320
21,209
11,993
Comprehensive income attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,453,005
¥659,303
¥ 169,807
Note:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019 and 2020.
See the accompanying notes to Consolidated Financial Statements.
F-13
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(in millions, except per share amount)
2018
2019
2020
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,956,644
315
¥ 5,740,165
(180)
¥ 5,577,186
2,596
(34,751)
(190,054)
8,011
—
(162,720)
(79)
—
(58,626)
12,364
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,740,165
¥ 5,577,186
¥ 5,533,520
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 2018, ¥21.00 per share in
2019, and ¥23.50 per share in 2020 . . . . . . . . . . . . . . . . . . . .
Losses on sales of shares of treasury stock . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . .
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 . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on leases (Note 1) . . . . . . . . . . . . . .
¥
¥
239,571
239,571
¥
¥
239,571
239,571
¥
¥
239,571
239,571
¥ 3,931,612
1,228,160
¥ 4,945,733
718,645
¥ 8,094,026
305,955
(240,497)
(8)
(2,605)(1)
(275,551)
—
1,173(2)
(303,742)
(1)
(1,825)(3)
29,071
—
2,702,242
—
—
1,784
—
—
(14,883)
—
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,945,733
¥ 8,094,026
¥ 8,079,530
F-14
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(in millions)
2018
2019
2020
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 reclassification of certain tax
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on recognition and measurement of
. . . . . . . . . . . . . .
financial assets and financial liabilities (Note 1)
¥ 2,281,423
224,845
118
¥ 2,477,315
(59,342)
—
¥ (284,269)
(136,148)
—
(29,071)
—
— (2,702,242)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,477,315
¥ (284,269) ¥ (420,417)
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 resulting from changes in interests in consolidated
¥ (513,988) ¥ (522,872) ¥ (517,236)
(50,028)
2,635
58,626
(161,043)
3,775
162,720
(201,102)
2,098
190,054
subsidiaries, consolidated VIEs, and affiliated companies . . . . . . .
66
184
16
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (522,872) ¥ (517,236) ¥ (505,987)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . .
¥14,970,182
¥15,199,548
¥15,016,487
Noncontrolling interests:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial subscriptions of noncontrolling interests . . . . . . . . . . . . . . . . .
Transactions between the consolidated subsidiaries and the related
¥
779,176
48,828
¥
675,633
108,235
¥
785,200
58,228
noncontrolling interest shareholders . . . . . . . . . . . . . . . . . . . . . . . .
(120,216)
(2,830)
(8,627)
Decrease in noncontrolling interests related to deconsolidation of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,556)
(20,497)
(119,797)
Decrease in noncontrolling interests related to disposition of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(3,488)
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of taxes . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(15,390)
25,836
(21,675)
1,320
310
—
18,960
(15,853)
21,209
343
—
12,760
(8,487)
11,993
247
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
675,633
¥
785,200
¥
728,029
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,645,815
¥15,984,748
¥15,744,516
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”.
(3) The effect resulted from the adoption of new accounting guidance on “Measurement of Credit Losses on Financial Instruments”.
See the accompanying notes to Consolidated Financial Statements.
F-15
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(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 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 31)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in collateral for derivative transactions . . . .
Net decrease (increase) in margin for listed derivative
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in cash collateral for the use of Bank of Japan’s settlement
infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . .
Other—net
Cash flows from investing activities:
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) . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock in Bank Danamon, an equity method
investee of BK (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Bank Danamon, a subsidiary of BK, net of cash
acquired (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of FSI (formerly, Colonial First State Global Asset
Management), subsidiaries of TB, net of cash acquired
(Note 2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of DVB Bank’s Aviation Finance Division, net of cash
acquired (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
Net cash provided by (used in) investing activities . . . . . . . . . .
F-16
2018
2019
2020
¥ 1,253,996
¥
737,605
¥
318,715
330,556
—
21,900
(240,847)
(7,955)
(286,903)
118,863
(13,456)
(208,398)
(227,984)
120,595
333,950
—
118,108
34,330
(19,839)
252,307
78,509
13,880
565,304
(209,732)
(47,796)
350,817
383,810
3,732
321,713
(6,917)
532,248
65,078
2,894
544,763
(282,712)
(60,967)
5,653,904
(2,695,035)
(4,902,492)
(6,433,948)
259,287
1,370,846
(79,338)
2,217,808
(217,864)
165,383
(87,075)
(279,844)
(643,568)
(425,261)
(563,836)
(60,462)
(77,228)
228,334
(54,018)
(292,664)
(1,355,900)
30,995,426
31,283,601
60,731,107
40,011,298
26,448,801
24,335,639
(71,593,326)
1,085,603
(1,156,122)
(62,309,072)
560,646
(1,192,989)
(87,618,074)
708,068
(495,346)
2,377,333
2,722,948
3,871,908
(2,197,171)
(2,770,356)
(3,129,666)
—
—
—
—
(169,478)
4,187,093
12,211
(159,003)
(239,755)
39,710
122,962
(72,765)
3,244,016
(132,335)
—
—
—
(243,597)
(249,615)
—
330,198
(555,250)
(1,631,085)
627,327
26,191
(126,479)
(276,880)
161,566
64,395
(49,590)
(4,632,028)
(13,714,288)
64,400
(123,804)
(308,081)
171,882
168,970
(68,611)
(18,085,443)
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2018, 2019 AND 2020
(in millions)
Cash flows from financing activities:
2018
2019
2020
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in call money, funds purchased, and payables
5,720,011
3,602,674
5,746,624
under repurchase agreements and securities lending transactions . . . . . .
3,963,120
(303,042)
8,077,351
Net increase (decrease) in due to trust account and 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 shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . . . . . . .
Cash and cash equivalents:
Cash, due from banks and interest-earning deposits in other banks . . . . . .
Restricted cash included in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . .
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 finance lease arrangements (Note 7) . . . . . . . . . . . . . . . .
Assets acquired under operating lease arrangements (Note 7)
. . . . . . . . . . . . . .
Available-for-sale debt securities transferred to Held-to-maturity debt
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable Equity Securities issued by Bank Danamon transferred to
investments in subsidiaries and affiliates (Note 2) . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Bank Danamon, a subsidiary of BK (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of FSI (formerly, Colonial First State Global Asset Management),
subsidiaries of TB (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of DVB Bank’s Aviation Finance Division (Note 2):
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(906,702)
6,671,031
(5,485,894)
1,316
(201,102)
(768,649)
5,020,636
(4,236,887)
2,322
(159,962)
9,944,171
4,999,531
(4,983,073)
1,235
(50,028)
(318)
—
—
(50,000)
(240,514)
(21,675)
(87,067)
9,362,206
(188,149)
—
(275,581)
(15,853)
197,673
3,063,331
—
(303,728)
(8,487)
358,922
23,782,518
43,975
(362,652)
11,854,237
(1,296,388)
3,978,523
64,019,219
75,873,456
74,577,068
75,858,049
15,407
¥ 75,873,456
74,571,260
5,808
¥ 74,577,068
78,549,712
5,879
¥78,555,591
¥ 1,040,337
265,225
¥ 1,488,136
302,019
¥ 1,759,239
128,124
7,111
—
—
—
—
—
—
—
—
—
—
11,280
—
221,537
98,934
—
—
—
—
—
—
—
12,754
46,482
—
—
1,811,160
1,242,115
51,314
332,914
68,519
572,487
2,599
See the accompanying notes to Consolidated Financial Statements.
F-17
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 29 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, 2018, 2019 and 2020, 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 a decrease
of ¥10.76 billion, an increase of ¥19.97 billion, and a decrease of ¥142 – ¥164 billion to net income attributable
to Mitsubishi UFJ Financial Group, respectively. The decrease for the three-month period ended on March 31,
2020 was largely due to an additional allowance for loan losses caused by COVID-19 and goodwill impairment.
See Notes 4 and 6 for more information. MUFG concluded that these intervening events do not represent
substantial and permanent effects on its consolidated financial statements in any of the years presented.
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-18
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-19
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, 2018, 2019 and 2020, 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 31 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-20
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.
All qualifying hedging derivatives are valued at fair value and included in Other assets or Other liabilities, as
appropriate. For fair value hedges, the changes in the fair value of a hedging instrument are recognized in the
same income statement line as the hedged item. For cash flow hedges, the changes in the fair value of a hedging
instrument 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 is realized.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 earnings.
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”), Bank of
Ayudhya Public Company Limited (“Krungsri”), and Other 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
to minimize economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2020, the MUFG Group did not make any significant changes to the methodologies or policies used to
determine its allowance for credit losses.
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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 the major portfolio
segments 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. Since historical loss factors
are based on the historical loss experience, the formula allowance may include a qualitative reserve in order to
reflect the collectibility of the portfolio as of the balance sheet date by considering qualitative factors including,
among others, national and local economic trends and conditions, industry conditions, and effects of changes in
credit concentrations.
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.
F-24
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 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-25
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-26
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
3 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.
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
F-27
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 a reporting unit exceeds its
fair value, but not exceeding the total amount of goodwill allocated to that reporting unit.
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:
Useful lives
(years)
Amortization method
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 to 10
9 to 16
3 to 27
4 to 40
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
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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.
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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-30
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 22 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-31
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.
Accounting Changes
Recognition and Measurement of Financial Assets and Financial Liabilities—In January 2016, the Financial
Accounting Standards Board (“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.
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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.
The MUFG Group adopted this guidance on April 1, 2019 and recorded ¥428 billion of right-of-use assets
and ¥502 billion of lease liabilities on the MUFG Group’s consolidated balance sheet. The adoption resulted in a
decrease to retained earnings of ¥15 billion. The adoption of this guidance was not material to the MUFG
Group’s results of operations. Prior periods are presented under previous policies. Leases previously described as
capital leases are now referred as finance leases. As allowed by the guidance, the MUFG Group elected not to
reassess the following at transition: whether existing contracts are or contain leases, and for existing leases, lease
classification and initial direct costs.
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 adopted this
guidance on April 1, 2019, and there was no material impact on its financial position and results of operations.
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
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
F-33
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 adopted this guidance on April 1, 2019, and there was no material impact on its
financial position and results of operations. As permitted by this guidance, upon adoption the MUFG Group
transferred Held-to-maturity debt securities with a carrying amount of ¥18,606 million to Available-for-sale debt
securities.
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 adopted this guidance on
April 1, 2019, and there was no material impact on its financial position and results of operations.
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 adopted this guidance on April 1, 2019, and
there was no material impact on its financial position and results of operations.
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 early adopted this guidance in connection
with a quantitative impairment test of goodwill during the fiscal year ended March 31, 2020. Under this
guidance, the quantitative impairment test is performed by comparing the carrying amount of a reporting unit
with its fair value, and an impairment loss is recognized to the extent that the carrying amount of a reporting unit
F-34
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
exceeds its fair value, but not exceeding the total amount of goodwill allocated to that reporting unit. See Note 6
for details of the goodwill impairment.
Reference Rate Reform—In March 2020, the FASB issued new guidance which provides optional
expedients and exceptions for applying generally accepted accounting principles to contracts, hedging
relationships and other transactions affected by reference rate reform if certain criteria are met. This new
guidance can be adopted as of March 12, 2020 through December 31, 2022. The MUFG Group adopted this new
guidance in March 2020, and there was no material impact on its financial position, results of operations and cash
flows. This guidance will significantly ease the accounting implications of the reference rate reform.
Codification Improvements—In July 2018, the FASB issued new guidance to clarify, correct errors in, or
make minor improvements to various areas of the Codification. Some of the amendments in the guidance were
effective immediately, while others were effective for annual periods beginning after December 15, 2018,
including interim periods within those annual periods. Among other changes, the amendment to Subtopic 962-
325 in the guidance removes the stable value common collective trust fund from the illustrative example in
paragraph 962-325-55-17 to avoid the interpretation that such an investment would never have a readily
determinable fair value and, therefore, would always use the net asset value (“NAV”) per share practical
expedient. Rather, the entity is required to evaluate whether a readily determinable fair value exists to determine
whether those investments may qualify for the practical expedient to measure at net asset value in accordance
with Topic 820. Upon the adoption of this guidance, some common collective funds which have a readily
determinable fair value are reported within the fair value hierarchy as Level 2 while previously they were
reported within the tables showing plan assets measured using NAV per share (or its equivalent) as a practical
expedient. These common collective funds are redeemable at NAV, which is determined daily and is the readily
determinable fair value. The price per share is quoted on a private market based on the value of the underlying
investments. The amount of pension benefits and SIP investments impacted due to the amendment to Subtopic
962-325 was ¥112 billion and ¥136 billion as of March 31, 2019 and 2020, respectively. See Note 13 for the
changes in notes.
Recently Issued Accounting Pronouncements
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
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 and November 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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
periods within those fiscal years. The MUFG Group adopted the guidance on April 1, 2020. It will result in an
increase in the allowance for credit losses and the allowance for off-balance sheet credit instruments of
approximately ¥380 – ¥450 billion and a decrease in retained earnings of approximately ¥270 – ¥330 billion. The
presentation of a range for the April 1, 2020 adoption impact is due to provisional estimation mainly in response
to COVID-19 including macroeconomic variables under the circumstances and pending final review of the
adjustment, which may impact the allowance for credit losses as of such date.
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 does not expect
that the adoption of this guidance will have a material impact 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
within those fiscal years. Early adoption is permitted, including adoption in any interim period. 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.
2. BUSINESS DEVELOPMENTS
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.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, small and medium
enterprise (“SME”) and corporate customers, with a network of around 900 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.
This strategic investment by MUFG Bank was executed through three steps (the “Proposed Transaction”),
and the completion of the Proposed Transaction resulted 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 acquired an additional 54.0% equity interest in Danamon from AFI and other
shareholders on April 29, 2019, based on a price of IDR 9,590 (approximately ¥77(3)) per share, for an investment
amount of IDR 50 trillion (approximately ¥397 billion) in cash. As a result, equity interest in Danamon increased
to 94.0%, and Danamon became a consolidated subsidiary of MUFG Bank. The MUFG Group recorded goodwill
of ¥254,271 million, none of which is deductible for income tax purposes and intangible assets of
¥146,899 million. The MUFG Group also recorded noncontrolling interests of ¥51,314 million at fair value
determined by a quoted market price as of the acquisition date. The equity interest in Danamon held by MUFG
Bank immediately before the acquisition date was remeasured to the fair value of ¥271,830 million based on the
quoted market price, resulting in recognition of profits of ¥41,218 million which is included in Gain on
remeasurement of previously held equity method investment in the accompanying consolidated statements of
income for the fiscal year ended March 31, 2020. During the fiscal year ended March 31, 2020, the MUFG
Group incurred ¥869 million of acquisition-related costs. These expenses are included in Other non-interest
expenses in the accompanying consolidated statements of income for the fiscal year ended March 31, 2020. The
revenue and net loss of Danamon and its subsidiaries since the acquisition date were ¥119,331 million and
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
¥4,553 million for the fiscal year ended March 31, 2020. 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(3)) 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.
Notes:
(1) Calculated based on the exchange rate of IDR1 = ¥0.0084
(2) Calculated based on the exchange rate of IDR1 = ¥0.0077
(3) Calculated based on the exchange rate of IDR1 = ¥0.0080
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed of
Danamon and its subsidiaries as of the acquisition date:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits—Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
¥1,086,638
146,899
1,728,480
915,075
1,242,115
Note:
(1)
Intangible assets with a weighted average amortization period of 13.2 years primarily include ¥79,552 million of relationships with
agents with a weighted average amortization period of 13.1 years and ¥44,140 million of core deposit intangibles with a weighted
average amortization period of 10.1 years.
Included in the table above are loans with fair values totaling ¥1,068,906 million, which were not subject to
the guidance on loans and debt securities acquired with deteriorated credit quality. As of the acquisition date, the
gross contractual amounts receivable for these loans totaled ¥1,082,422 million, of which ¥34,363 million is not
expected to be collected.
Pro forma statements of income
The following unaudited pro forma statements of income present the result of operations for Danamon as if
the acquisition of Danamon had occurred on April 1, 2018:
Fiscal years ended
March 31,
2019
2020
(in millions)
Statement of income data:
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income—Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . . .
¥130,540
30,857
16,083
¥119,818
30,852
3,206
The unaudited pro forma statements of income include the pro forma adjustments to reflect the impact of
amortizing certain acquisition accounting adjustments such as intangible assets subject to amortization of
¥11,445 million and ¥11,299 million for the fiscal years ended March 31, 2019 and 2020, respectively.
F-38
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Acquisition of Colonial First State Global Asset Management
On August 2, 2019, Mitsubishi UFJ Trust and Banking acquired 100% of the shares in each of the nine
subsidiaries of Colonial First State Group Limited, for ¥312,225 million in cash, from Australian financial group
Commonwealth Bank of Australia and its wholly-owned subsidiary, Colonial First State Group Limited, and
thereby recorded goodwill of ¥177,065 million, none of which is deductible for income tax purposes and
intangible assets of ¥105,973 million with a weighted average amortization period of 18.7 years primarily
include ¥100,862 million of customer relationships with a weighted average amortization period of 18.0 years.
These nine subsidiaries collectively, including their subsidiaries, had represented the global asset management
business of Colonial First State Global Asset Management, and were renamed First Sentier Investors (“FSI”) on
September 16, 2019.
The MUFG Group is seeking the opportunities to enhance its competitive edge as well as expanding its
client base globally in asset management business. The acquisition of FSI is a milestone to strengthen its
capability and that is the reason such goodwill was paid which is allocated to the segment of Asset
Management & Investor Services Business Group. The MUFG Group will continue to respond to customer
expectations by leveraging the advantages and brands of FSI as well as the MUFG Group’s original asset
management arms, aiming to become an asset management service provider with a global presence.
The assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition
date. During the fiscal year ended March 31, 2020, the MUFG Group incurred ¥3,775 million of acquisition-
related costs. These expenses are included in Other non-interest expenses in the accompanying consolidated
statements of income for the fiscal year ended March 31, 2020. Total assets acquired amounted to
¥197,867 million, including cash and bank deposits of ¥42,019 million and intangible assets of ¥105,973 million,
and total liabilities assumed amounted to ¥68,519 million, including accrued bonuses of ¥18,769 million. The
revenue and net loss of FSI and its subsidiaries since the acquisition date were ¥38,508 million and ¥734 million
for the fiscal year ended March 31, 2020.
Pro forma statements of income
The following unaudited pro forma statements of income present the results of operations for FSI as if the
acquisition of FSI had occurred on April 1, 2018:
Fiscal years ended
March 31,
2019
2020
(in millions)
Statement of income data:
Non-interest income—Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . .
¥77,323
16,051
¥78,475
6,047
The unaudited pro forma statements of income include the pro forma adjustments to reflect the impact of
amortizing certain acquisition accounting adjustments relating to intangible assets subject to amortization of
¥6,622 million and ¥5,979 million for the fiscal years ended March 31, 2019 and 2020, respectively.
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.
F-39
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.
On November 18, 2019, MUFG Bank acquired DVB’s most of aviation finance client lending portfolio,
employees, and other part of the operation infrastructure for ¥555 billion in cash. MUFG Bank recorded goodwill
of ¥32,591 million. In addition, DVB’s aviation investment management and asset management businesses will
be transferred to a newly established subsidiary of BOT Lease, subject to applicable regulatory and other
approvals and certain conditions.
The following table summarizes the estimated fair values of the assets acquired and liabilities as of the
acquisition date:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
¥515,933
522,797
138
Pro forma statements of income
The following unaudited pro forma statements of income present the result of operations for DVB’s aviation
finance division as if the acquisition of DVB’s aviation finance division had occurred on April 1, 2018:
Statement of income data:
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income—Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended
March 31,
2019
2020
(in millions)
¥4,825
430
48
¥4,868
430
77
F-40
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
INVESTMENT SECURITIES
The following tables present the amortized cost, gross unrealized gains and losses, and fair value of
Available-for-sale debt securities and Held-to-maturity debt securities at March 31, 2019 and 2020:
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-41
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020:
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)
¥23,308,538
2,938,743
¥185,302
16,279
¥30,961
2,202
¥23,462,879
2,952,820
2,936,110
1,261,586
1,460,641
379,234
1,461,083
161,832
107,406
12,445
3,083
6,110
9,516
3,190
6,028
1,205
4,331
3,089
1,123
1,956
3,037,488
1,272,826
1,459,393
382,255
1,469,476
163,066
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥33,907,767
¥343,331
¥50,895
¥34,200,203
Held-to-maturity debt securities:
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
¥ 1,100,574
¥ 29,856
¥ — ¥ 1,130,430
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
151,555
737,242
146,039
2,030,371
243
10,478
2,993
277
689
3,012(2)
317(2)
27,716
151,109
744,708
148,715
2,002,932
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,165,781
¥ 43,847
¥31,734
¥ 4,177,894
Notes:
(1) Other debt securities in the table above mainly include ¥86,734 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 ¥8,215 million and ¥3,178 million, respectively, at March 31,
2020 and are not included in the table above.
F-42
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, 2020 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
24,013
1,202,901
591,471
2,347,396
Amortized
cost
Fair value
Fair value
¥
(in millions)
24,056
1,235,096
587,205
2,331,537
¥11,827,106
10,833,597
5,794,878
5,744,622
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,165,781
¥4,177,894
¥34,200,203
Realized Gains and Losses
For the fiscal year ended March 31, 2018, gross realized gains on sales of Available-for-sale debt securities
and marketable equity securities were ¥330,508 million and gross realized losses on sales of Available-for-sale
debt securities and marketable equity securities were ¥49,290 million.
For the fiscal years ended March 31, 2019 and 2020, gross realized gains on sales of Available-for-sale debt
securities were ¥45,244 million and ¥151,015 million, respectively, and gross realized losses on sales of
Available-for-sale debt securities were ¥16,541 million and ¥44,662 million, respectively.
Other-than-temporary Impairments of Investment Securities
For the fiscal year ended March 31, 2018, losses resulting from impairment of investment securities to
reflect the decline in value considered to be other-than-temporary were ¥8,196 million, which were included in
Investment securities gains (losses)—net in the accompanying consolidated statements of income. 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.
For the fiscal years ended March 31, 2019 and 2020, losses resulting from impairment of investment
securities to reflect the decline in value considered to be other-than-temporary were ¥606 million and
¥1,590 million, respectively, which were included in Investment securities gains (losses)—net in the
accompanying consolidated statements of income. These losses were recorded from Available-for-sale debt
securities which mainly comprised of corporate bonds for the fiscal years ended March 31, 2019 and 2020.
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.
F-43
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Gross Unrealized Losses and Fair Value
The following tables show the gross unrealized losses and fair value of Available-for-sale debt securities
and Held-to-maturity debt securities at March 31, 2019 and 2020, 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, 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
F-44
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, 2020:
Fair value
Available-for-sale debt securities:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . . ¥11,781,600
¥30,961
¥
— ¥ — ¥11,781,600
¥30,961
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 . . . . . .
935,540
2,202
—
—
935,540
2,202
564,620
522,941
5,481
1,191
114,407
25,228
547
14
679,027
548,169
6,028
1,205
114,057
530
388,064
3,801
502,121
4,331
182,887
189,775
53,070
3,087
503
132
1,304
86,605
30,657
2
620
1,824
184,191
276,380
83,727
3,089
1,123
1,956
202
340
153
154
402
39
94
24
Total
. . . . . . . . . . . . . . . . . . . . . . ¥14,344,490
¥44,087
¥ 646,265
¥ 6,808
¥14,990,755
¥50,895
1,408
Held-to-maturity debt securities:
Foreign government and
official institution
bonds . . . . . . . . . . . . . . . . ¥
Residential mortgage-
55,746
¥
689
¥
— ¥ — ¥
55,746
¥
689
backed securities . . . . . . .
108,478
1,033
360,841
1,979
469,319
3,012
Commercial mortgage-
backed securities . . . . . . .
Asset-backed securities . . . .
10,281
637,201
32
8,536
133,791
1,259,720
285
19,180
144,072
1,896,921
317
27,716
Total
. . . . . . . . . . . . . . . . . . . . . . ¥
811,706
¥10,290
¥1,754,352
¥21,444
¥ 2,566,058
¥31,734
9
281
31
77
398
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, 2020, 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. The credit loss components recognized
in earnings were ¥1,761 million and ¥1,535 million at March 31, 2019 and 2020, respectively.
Residential mortgage-backed securities
As of March 31, 2020, 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
F-45
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
mortgage loans. Unrealized losses mainly resulted from changes in interest rates and not from changes in credit
quality. The MUFG Group determined through analysis that no OTTI was identified on such securities as of
March 31, 2020 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, 2020, 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, 2020 and no impairment loss has been recorded.
Other debt securities
As of March 31, 2020, 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
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.
F-46
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 and 2020:
Net losses recognized during the period(1)
Less:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended
March 31,
2019
2020
(in millions)
¥(278,746) ¥(639,813)
Net losses recognized during the period on equity securities sold during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,303)
(37,541)
Net unrealized losses recognized during the reporting period still held at the reporting
date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(275,443) ¥(602,272)
Note:
(1)
Included in Investment securities gains (losses)—net.
Measurement Alternative of Equity Securities
The following table presents the carrying value of nonmarketable equity securities held at March 31, 2019
and 2020:
Measurement alternative balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 563,733
¥ 534,882
The related adjustments for these securities for the fiscal years ended March 31, 2019 and 2020 were as
follow:
2019
2020
(in millions)
Fiscal years ended
March 31,
2019
2020
(in millions)
Measurement alternative impairment losses(1)(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Measurement alternative downward changes for observable prices(1)(2)(3)(5)
Measurement alternative upward changes for observable prices(1)(2)(3)(6) . . . . . . . . . . . . . .
¥
¥
¥ 53,077
(2,292) ¥
— ¥
¥
(3,099)
(953)
6,223
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.
F-47
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(3) The MUFG Group applied measurement alternative downward or upward changes to certain nonmarketable equity securities, resulting
from observable prices in orderly transactions, such as partial repurchase and transactions by other entities.
(4) The cumulative impairment losses at March 31, 2019 and 2020 were ¥2,292 million and ¥5,007 million, respectively.
(5) The cumulative downward changes for observable prices at March 31, 2019 and 2020 were nil and ¥953 million, respectively.
(6) The cumulative upward changes for observable prices at March 31, 2019 and 2020 were ¥53,077 million and ¥34,466 million,
respectively.
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans at March 31, 2019 and 2020 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.
2019
2020
(in millions)
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
¥ 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
¥ 11,448,778
733,212
12,054,671
2,585,111
7,504,561
5,161,093
1,572,344
8,673,871
15,319,721
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,156,790
65,053,362
Foreign:
Governments and official institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
841,695
11,641,373
31,951,169
7,597,502
726,347
11,788,225
32,565,030
8,404,062
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,031,739
53,483,664
Unearned income, unamortized premiums—net and deferred loan fees—net . . . .
(304,588)
(350,287)
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥116,883,941
¥118,186,739
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 ¥291,794 million and ¥344,790 million at March 31, 2019 and 2020, respectively.
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial,
Residential, Card, MUFG Americas Holdings, Krungsri, and Other 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
F-48
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2019 and 2020 are 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2020
(in millions)
¥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
—
¥312,972
93,776
8,484
21,790
51,195
94,037
994
10,539
20,234
11,923
127,001
63,998
61,172
35,840
149,732
27,754
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥687,670
¥778,469
Note:
(1) The above table does not include loans held for sale of ¥12,702 million and ¥330 million at March 31, 2019 and 2020, respectively, and
loans acquired with deteriorated credit quality of ¥6,284 million and ¥25,427 million at March 31, 2019 and 2020, respectively.
F-49
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, 2019 and 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential(4) . . . . . . . . . . . . . . . . . . . . . . .
Card(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(4) . . . . . . . . . . . . . . . . . . . . . . . . .
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
¥560,474
349,597
8,366
20,848
30,239
118,253
1,012
8,794
13,772
9,593
127,521
8,136
97,176
64,691
46,552
57,066
(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
¥227,004
92,919
6,574
5,704
20,059
84,503
21
1,033
1,033
830
6,929
17,989
9,761
34,484
—
6,495
330
23,208
26,193
15,723
31,761
19,354
162,005
8,136
103,671
65,021
69,760
83,259
16,587
38,342
25,857
183,133
14,990
120,526
72,226
83,300
90,377
6,817
6,874
2,724
85,966
5,450
14,357
21,829
8,294
28,254
Total(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥961,616
¥248,175
¥1,209,791
¥1,323,951
¥391,154
F-50
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Wholesale and retail
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential(4) . . . . . . . . . . . . . . . . . . . . . . .
Card(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(4) . . . . . . . . . . . . . . . . . . . . . . . . .
Other(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
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)
¥ 598,737
375,716
6,609
20,739
55,293
113,288
1,069
7,971
10,558
7,494
141,897
12,906
88,075
65,240
33,884
68,126
22,749
¥147,890
32,057
5,261
28,928
13,114
38,897
¥ 746,627
407,773
11,870
49,667
68,407
152,185
¥ 784,298
414,091
12,023
55,303
72,708
160,508
¥268,070
119,070
5,026
6,649
40,987
80,996
39
1,108
1,262
855
5,808
16,449
7,337
56,464
—
4,822
280
33,835
30,833
1,091
13,779
27,007
14,831
198,361
12,906
92,897
65,520
67,719
98,959
23,840
14,698
33,229
20,476
220,283
19,947
107,629
72,714
84,737
106,265
26,091
6,009
6,434
2,044
96,009
4,767
12,770
19,799
5,977
30,198
6,152
Total(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,031,614
¥275,215
¥1,306,829
¥1,421,964
¥443,742
(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, 2019 and 2020 are accrual TDRs as follows: ¥497,013 million and ¥505,681 million—
Commercial; ¥34,449 million and ¥28,450 million—Residential; ¥26,183 million and ¥25,492 million—Card; ¥33,155 million and
¥42,910 million—MUFG Americas Holdings; ¥26,851 million and ¥35,226 million—Krungsri; and nil and ¥8,401 million—Other,
respectively.
In addition to impaired loans presented in the above table, there were impaired loans held for sale of ¥12,702 million and ¥330 million at
March 31, 2019 and 2020, respectively.
Impaired Loans for Residential, Card, MUAH, Krungsri and Other segments in the above table include loans acquired with deteriorated
credit quality.
(4)
(3)
F-51
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, 2018, 2019 and 2020:
2018
2019
2020
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
(in millions)
¥ 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
¥ 726,794
387,470
13,093
48,740
58,704
157,751
¥ 8,722
4,085
218
731
759
2,195
Commercial
Domestic . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . .
1,729
8
1,330
8
1,094
6
Communication and
information services . . . . .
Other industries . . . . . . . . . . .
. . . . . . . . . . . . . . .
Consumer
Foreign . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,461
50,377
28,621
209,297
8,591
119,409
69,831
83,504
75,370
—
388
215
475
4,244
492
1,563
1,993
1,993
3,899
—
22,478
39,178
21,933
159,999
7,814
107,165
66,187
71,162
83,165
—
491
234
341
3,127
182
1,620
1,614
2,292
4,995
—
14,804
28,345
16,793
174,831
9,395
98,238
65,270
82,832
91,577
11,854
322
170
236
3,013
74
1,252
1,241
2,801
5,274
494
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,484,095
¥23,625
¥1,262,339
¥26,213
¥1,260,791
¥22,871
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-52
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, 2018, 2019 and 2020:
2018
2019
2020
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 819,819
144,368
(25,122)
(39,378)
(229,432)
¥ 670,255
71,033
(19,053)
(26)
(104,558)
¥ 617,651
171,740
(39,646)
(11,220)
(92,365)
Balance at end of fiscal year(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 670,255
¥ 617,651
¥ 646,160
Other impaired loans (including nonaccrual TDRs):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (new other impaired loans (including nonaccrual TDRs)
¥ 896,031
¥ 660,868
¥ 592,140
status)(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-off
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to accrual TDRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
281,275
(98,355)
(43,858)
(31,581)
(342,644)
222,003
(55,309)
(22,110)
(26,022)
(187,290)
373,091
(52,935)
(45,310)
(29,928)
(176,389)
Balance at end of fiscal year(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 660,868
¥ 592,140
¥ 660,669
Notes:
(1) 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. For the fiscal year ended March 31, 2020, lease receivables of ¥3,647 million and ¥465 million in the
Krungsri segment, and ¥68 million and nil in the Other 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 ¥6,946 million and ¥3,810 million in the Krungsri segment, and ¥66 million and nil in the Other segment are also excluded
from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2020.
Included in the additions of other impaired loans for the fiscal years ended March 31, 2018, 2019 and 2020 are nonaccrual TDRs as
follows: ¥12,002 million, ¥13,493 million and ¥14,685 million—Card; ¥12,799 million, ¥12,738 million and ¥15,135 million—MUFG
Americas Holdings; ¥12,280 million, ¥10,519 million and ¥9,828 million—Krungsri; and nil, nil and ¥1,031 million—Other,
respectively.
(2)
F-53
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,
2018, 2019 and 2020:
2018
2019
2020
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)
¥ 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
¥ 61,735
27,435
289
2,714
6,487
¥ 61,735
27,435
289
2,714
6,487
Commercial(1)(3)
Domestic . . . . . . . . . . . . . .
Manufacturing . . . . . .
Construction . . . . . . . .
Real estate . . . . . . . . .
Services . . . . . . . . . . .
Wholesale and
retail . . . . . . . . . . . .
16,280
14,921
19,315
19,315
20,813
20,813
Banks and other
financial
institutions . . . . . . .
Communication and
information
services . . . . . . . . . .
Other industries . . . . .
Consumer . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . .
Loans acquired with
deteriorated credit
quality . . . . . . . . . . . . . .
Residential(1)(3)
. . . . . . . . . . . . .
Card(2)(3) . . . . . . . . . . . . . . . . . . .
MUAH(2)(3) . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Krungsri(2)(3)
Other(2)(3) . . . . . . . . . . . . . . . . . .
246
246
—
—
—
—
9,643
761
1,068
25,522
—
9,763
17,436
40,578
24,015
—
9,643
761
1,068
25,522
—
9,763
16,912
38,224
23,929
—
268
472
1,192
5,692
50
7,379
19,685
19,837
24,392
—
268
472
1,192
5,692
50
7,379
18,837
19,837
24,330
—
376
3,279
342
39,827
10,786
5,137
22,625
33,782
31,238
12,781
376
3,279
342
39,827
10,786
5,137
21,561
33,564
31,209
12,780
Total . . . . . . . . . . . . . . . . . . . . . .
¥187,694
¥183,371
¥113,728
¥112,818
¥217,911
¥216,599
F-54
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2018
2019
2020
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(2)(3)
¥ 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
—
¥ 8,857
3,094
6
73
43
5,421
—
9
123
88
2,337
—
31
3,320
4,656
7,305
15
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,771
¥23,081
¥26,521
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, Krungsri and Other segments include accrual and nonaccrual loans.
(3) 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. For the fiscal year ended March 31, 2020, extension of the stated maturity date of loans
was the primary concession type in the Commercial, Residential, MUFG Americas Holdings and Krungsri segments and reduction in the
stated rate was the primary concession type in the Card and Other segments.
F-55
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, 2019 and 2020:
Commercial(1)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(2)
2019
2020
(in millions)
¥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
—
¥433,783
313,996
3,435
27,877
17,287
58,148
113
3,244
6,775
2,908
71,898
28,450
65,520
62,151
76,831
9,525
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥707,591
¥748,158
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, Krungsri and Other segments include accrual and nonaccrual loans. Included in the
outstanding recorded investment balances as of March 31, 2019 and 2020 are nonaccrual TDRs as follows: ¥38,838 million and ¥40,028
million—Card; ¥14,973 million and ¥19,241 million—MUFG Americas Holdings; ¥31,069 million and ¥34,659 million—Krungsri; and
nil and ¥1,058 million—Other, 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, 2018, 2019 and 2020 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.
F-56
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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, Krungsri and Other 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 ¥169,819 million and ¥90,097 million at March 31, 2019 and 2020, respectively. See Note 24
for further discussion of commitments to extend credit.
Credit Quality Indicator
Credit quality indicators of loans by class at March 31, 2019 and 2020 are shown below:
At March 31, 2019:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit
¥49,391,991
10,819,594
672,152
11,403,613
2,436,489
7,240,801
5,199,889
¥1,242,075
279,801
37,236
222,791
174,784
329,249
7,654
1,465,652
8,610,464
1,543,337
35,418,267
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
Total(1)
¥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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,661,794
516,983
¥
(in millions)
¥66,290
¥61,599
¥13,728,084
578,582
¥
Accrual
Nonaccrual
Total(1)
F-57
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
Classified
Total(1)(2)
MUAH . . . . . . . . .
¥
4,752,021
¥
15,540
¥ 4,699,698
51,948
¥
88,356
¥
9,607,563
(in millions)
¥
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,682,245
¥199,070
¥129,222
¥6,010,537
Normal
Special
Mention
Substandard or
Doubtful or
Doubtful
of Loss
Total(1)
(in millions)
At March 31, 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit
¥49,695,889
10,997,241
696,491
11,790,467
2,390,210
7,124,098
5,146,320
¥1,186,044
317,018
28,350
190,972
158,851
301,965
13,237
1,530,887
8,540,144
1,480,031
34,719,041
32,366
112,813
30,472
636,523
¥220,245
58,615
6,927
20,080
21,802
71,778
926
8,880
19,292
11,945
128,073
Total(1)
¥51,102,178
11,372,874
731,768
12,001,519
2,570,863
7,497,841
5,160,483
1,572,133
8,672,249
1,522,448
35,483,637
quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,255
9,739
18,978
36,972
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥84,423,185
¥1,832,306
¥367,296
¥86,622,787
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,256,744
504,357
¥
(in millions)
¥61,746
¥61,286
¥13,318,490
565,643
¥
Accrual
Nonaccrual
Total(1)
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 millions)
MUAH . . . . . . . . . . . . . . . . . . . . . . .
¥4,590,805
¥15,119
¥4,877,863
¥87,648
¥84,033
¥9,655,468
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥6,513,615
¥246,328
¥151,647
¥6,911,590
F-58
Normal
Special
Mention
Substandard or
Doubtful or
Doubtful
of Loss
Total(1)
(in millions)
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,086,517
(in millions)
¥31,376
¥1,117,893
Accrual
Nonaccrual
Total(1)
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 ¥689 million and
¥365 million as of March 31, 2019 and 2020, 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, the Other 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
F-59
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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, Krungsri and Other 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, 2019 and 2020 are shown below:
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 . . . . . . . . . . . . . . .
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
F-60
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020:
Commercial
Domestic . . . . . . . . . . . . .
Manufacturing . . . . . . .
Construction . . . . . . . . .
Real estate . . . . . . . . . .
Services . . . . . . . . . . . .
Wholesale and retail . . .
Banks and other
financial
institutions . . . . . . . .
Communication and
information
services . . . . . . . . . . .
Other industries . . . . . .
Consumer . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in millions)
Total
Loans(1)
Recorded
Investment>
90 Days and
Accruing
¥
9,215
820
143
880
812
2,598
¥ 26,971
2,762
100
3,300
908
2,603
¥ 36,186
3,582
243
4,180
1,720
5,201
¥ 51,065,992
11,369,292
731,525
11,997,339
2,569,143
7,492,640
¥ 51,102,178
11,372,874
731,768
12,001,519
2,570,863
7,497,841
¥ 4,720
620
—
1,181
5
19
—
54
54
5,160,429
5,160,483
—
336
171
3,455
9,927
48,404
14,735
31,052
160,253
16,442
57
12,889
4,298
23,548
15,443
29,997
14,435
129,186
24,348
393
13,060
7,753
33,475
63,847
44,732
45,487
289,439
40,790
1,571,740
8,659,189
1,514,695
35,450,162
13,248,278
518,008
9,603,339
6,616,104
1,069,186
1,572,133
8,672,249
1,522,448
35,483,637
13,312,125
562,740
9,648,826
6,905,543
1,109,976
—
97
2,798
164
6,288
—
2,101
—
—
Total . . . . . . . . . . . . . . . . . . . . .
¥290,028
¥263,928
¥553,956
¥117,571,069
¥118,125,025
¥13,273
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.
F-61
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Allowance for Credit Losses
Changes in the allowance for credit losses by portfolio segment for the fiscal years ended March 31, 2018,
2019 and 2020 are shown below:
Fiscal year ended March 31, 2018:
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 . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other(1)
¥ 900,686
¥
67,336
¥ 30,165
¥ 73,733
¥ 110,268
¥ 1,182,188
(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 . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other(1)
¥ 491,098
¥
42,546
¥ 32,119
¥ 53,765
¥ 144,596
¥
764,124
(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
9,491
(970)
49,574
59,569
21,053
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
Fiscal year ended March 31, 2020:
Commercial Residential
Card
MUAH
Krungsri
Other
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 . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other(1)
¥389,615
¥38,626
¥32,550
¥52,581
¥144,812
¥ — ¥658,184
153,782
85,326
26,427
58,899
(2,223)
(1,028)
3,227
375
2,852
—
26,542
25,149
1,237
23,912
—
30,825
27,934
4,173
23,761
(650)
70,023
77,907
23,170
54,737
9,528
41,569
23,592
8,476
15,116
2,265
321,713
243,135
63,858
179,277
8,920
Balance at end of fiscal year
. . .
¥482,275
¥34,746
¥35,180
¥58,995
¥169,626
¥28,718
¥809,540
Note:
(1) Other is principally comprised of gains or losses from foreign exchange translation.
F-62
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, 2019 and
2020 are shown below:
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
At March 31, 2020:
Commercial
Residential
Card
MUAH
Krungsri
Other
Total
(in millions)
Allowance for credit
losses:
Individually evaluated for
impairment . . . . . . . . . . ¥
364,079 ¥
12,651 ¥ 19,799 ¥
5,977 ¥
30,198 ¥
5,073 ¥
437,777
Collectively evaluated for
impairment . . . . . . . . . .
Loans acquired with
deteriorated credit
quality(2) . . . . . . . . . . . .
108,100
21,130
15,369
53,013
139,401
22,566
359,579
10,096
965
12
5
27
1,079
12,184
Total . . . . . . . . . . . . . ¥
482,275 ¥
34,746 ¥ 35,180 ¥
58,995 ¥ 169,626 ¥
28,718 ¥
809,540
Loans:
Individually evaluated for
impairment . . . . . . . . . . ¥
944,988 ¥
92,448 ¥ 65,292 ¥
67,719 ¥
98,959 ¥
17,512 ¥
1,286,918
Collectively evaluated for
impairment . . . . . . . . . . 85,640,827 13,219,677 497,448 9,581,107 6,806,584 1,092,464 116,838,107
Loans acquired with
deteriorated credit
quality(2) . . . . . . . . . . . .
36,972
6,365
2,903
7,007
6,047
7,917
67,211
Total(1)
. . . . . . . . . . . ¥86,622,787 ¥13,318,490 ¥565,643 ¥9,655,833 ¥6,911,590 ¥1,117,893 ¥118,192,236
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-63
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 ¥12.2 billion and ¥19.4 billion for the fiscal
years ended March 31, 2018 and 2020, 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 ¥1,409 billion, ¥1,769 billion and ¥2,136 billion of loans within the Commercial
segment during the fiscal years ended March 31, 2018, 2019 and 2020, respectively.
The allowance for credit losses on the consolidated balance sheets for the year-ended March 31, 2020
included a qualitative reserve for loan losses of ¥46 billion on a pre-tax basis, specific to the Commercial
segment, as a result of the estimated impact that COVID-19 had on borrowers’ credit risk which has been
incurred but did not appear on the individual borrower’s financials. The estimate included assumptions regarding
which borrowers (certain industries and regions) have suffered significant impacts on their performance as a
result of COVID-19. Assumptions about the severity and duration of COVID-19 were also used to estimate the
impact of COVID-19 on the borrowers.
The MUFG Group consolidates certain subsidiaries based on financial information for the year ended
December 31 as this date and MUFG’s fiscal year which ends on March 31 have been treated as coterminous.
For the fiscal year ended March 31, 2020, the effect of recording a provision for credit losses and a provision for
off-balance sheet credit instruments as an intervening event primarily due to economic environment triggered by
COVID-19 for the three-month period ended March 31 2020 would have been approximately ¥84 billion and
would have resulted in a decrease of ¥58 billion to net income attributable to Mitsubishi UFJ Financial Group.
This amount was estimated using the expected credit losses method in accordance with Measurement of Credit
Losses on Financial Instruments (see “Recently Issued Accounting Pronouncements” in Note 1). This
intervening event occurring during the three-month period ended March 31, 2020, if recorded, would not have
had a substantial and permanent effects on consolidated total assets, net income or total equity as of March 31,
2020, and therefore, the intervening event was not recognized for the fiscal year ended March 31, 2020.
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, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
(in millions)
¥1,922,339
27,468
(299,283)
Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,650,524
See Note 7 Lease Transactions for the components of the investment in direct financing leases as of
March 31, 2020.
F-64
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5.
PREMISES AND EQUIPMENT
Premises and equipment at March 31, 2019 and 2020 consisted of the following:
2019
2020
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 362,742
829,606
648,598
305,281
34,002
¥ 380,477
782,367
623,676
310,957
35,594
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,180,229
1,206,629
2,133,071
1,203,542
Premises and equipment-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 973,600
¥ 929,529
For the fiscal years ended March 31, 2018, 2019 and 2020, the MUFG Group recognized ¥39,358 million,
¥31,345 million and ¥16,575 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, ¥213 million, ¥411 million and ¥194 million
of impairment losses were recognized for real estate held for sale for the fiscal years ended March 31, 2018, 2019
and 2020, 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,
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.
F-65
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2019 and 2020:
Balance at March 31, 2018:
Goodwill(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Accumulated impairment losses(2)
Foreign currency translation adjustments and
other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at March 31, 2019:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . .
Goodwill acquired during the fiscal year(1)
. .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments and
other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at March 31, 2020:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . .
Global
Corporate &
Investment
Banking
Business
Group
Global
Commercial
Banking
Business
Group
Asset
Management &
Investor
Services
Business
Group
Global
Markets
Business
Group
Total
(in millions)
¥107,237
—
¥ 496,191
(177,750)
¥ 27,724
(14,368)
107,237
318,441
13,356
¥2,300
—
2,300
¥ 633,452
(192,118)
441,334
(1,898)
(5,308)
(237)
—
(7,443)
105,339
—
105,339
34,553
(32,868)
490,883
(177,750)
313,133
260,639
(350,942)
27,487
(14,368)
13,119
178,308
—
2,300
—
2,300
—
—
626,009
(192,118)
433,891
473,500
(383,810)
(1,354)
(12,877)
8,276
—
(5,955)
138,538
(32,868)
738,645
(528,692)
214,071
(14,368)
2,300
—
1,093,554
(575,928)
¥105,670
¥ 209,953
¥199,703
¥2,300
¥ 517,626
Notes:
(1) See Note 2 for the goodwill acquired in connection with acquisitions.
(2) 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
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.
F-66
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(3) The balance as of March, 31 2018 reflected the organization change in 2018 appropriately and was erroneously disclosed. Such amount
has been restated from the amount previously reported as follows:
Global
Corporate &
Investment
Banking
Business
Group
Global
Commercial
Banking
Business
Group
As
previously
reported
As
restated
As
previously
reported
As
restated
(in millions)
Balance at March 31, 2018:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments and other . . . . . . . . . . . .
Balance at March 31, 2019:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥—
—
—
¥107,237
(1,898)
¥603,428
(7,206)
¥496,191
(5,308)
105,339
596,222
490,883
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 process that compares the carrying
amount of a reporting unit with its fair value. An impairment loss is recognized to the extent that the carrying
amount of a reporting unit exceeds its fair value, but not exceeding the total amount of goodwill allocated to
that reporting unit.
For the fiscal years ended March 31, 2018 and 2019, there were no impairment losses recognized. For the
fiscal year ended March 31, 2020, the MUFG Group recognized ¥241,356 million of an impairment of goodwill
relating to Danamon reporting unit within the Global Commercial Banking Business Group Segment, which is
included in impairment of goodwill in the accompanying consolidated statements of income. In determining the
acquisition price of Bank Danamon, the results of multiple valuation techniques were considered with an
expectation to benefit from Danamon’s foothold in the developing local retail and SME segments to deepen its
banking franchise in Indonesia. After the acquisition of Danamon by MUFG Bank, Danamon’s market
capitalization decreased. As a result, the fair value of the reporting unit as an exit price was measured on June 30,
2019 for the quantitative goodwill impairment test, and led to impairment of goodwill as the fair value had fallen
below the carrying amount of the reporting unit, including goodwill, reflecting a reduction in stock price as well
as changes in the inputs to the valuation techniques in comparison to those considered in determining the
acquisition price such as discount rate. The measurement of the fair value of the reporting unit was primarily
based on a market approach, and was also corroborated by multiple valuation techniques.
For the fiscal year ended March 31, 2020, the MUFG Group recognized ¥62,157 million of impairment of
goodwill relating to Krungsri reporting unit within the Global Commercial Banking Business Group segment.
The global economic slowdown led to slowing economic growth in Thailand and the decline of Krungsri’s stock
price. As a result, the fair value of the reporting unit was measured on December 31, 2019 for the quantitative
goodwill impairment test, and led to impairment of goodwill as the fair value had fallen below the carrying
amount of the reporting unit. The measurement of the fair value of the reporting unit was primarily based on a
market approach, and was also corroborated by multiple valuation techniques.
For the fiscal year ended March 31, 2020, the MUFG Group recognized ¥80,297 million in impairment of
goodwill relating to MUAH reporting unit within the Global Commercial Banking Business Group segment and
Global Corporate & Investment Banking Business Group segment. Due to the decline in interest rates and slower
growth than previously forecasted, cash flow projections for reporting units were lowered. The combination of
these events led management to believe that the fair values of certain reporting units were below carrying value.
As a result, the fair value of the reporting unit was measured on December 31, 2019 for the quantitative goodwill
F-67
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
impairment test, and led to impairment of goodwill with the fair value fallen below the carrying amount of the
reporting unit. The MUFG Group estimated the fair value of its reporting units using a combination of the
income and the market approaches. The income approach estimates the fair value of the reporting units by
discounting management’s projections of each reporting unit’s cash flows, including a terminal value to estimate
the fair value of cash flows beyond the final year of projected results, using a discount rate derived from the
Capital Asset Pricing Model. The market approach incorporates comparable public company price to tangible
book value and price to earnings multiples.
The MUFG Group consolidates certain subsidiaries, including MUAH, based on financial information for
the year ended December 31 as this date and MUFG’s fiscal year which ends on March 31 have been treated as
coterminous.
For the fiscal year ended March 31, 2020, the effect of recording a goodwill impairment intervening event
due to economic environment triggered by COVID-19 for the three-month period ended March 31 2020 on
MUFG’s GCB segment related to MUAH would have been approximately ¥80 - ¥110 billion and would have
resulted in a decrease of ¥80 - ¥110 billion to net income attributable to Mitsubishi UFJ Financial Group. This
intervening event occurring during the three-month period ended March 31, 2020, if recorded, would not have had
a substantial and permanent effects on consolidated total assets, net income or total equity as of March 31, 2020,
and therefore, the intervening event was not recognized for the fiscal year ended March 31, 2020.
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, 2019 and 2020:
2019
2020
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
(in millions)
Intangible assets subject to amortization:
Software . . . . . . . . . . . . . . . . . . . . . . ¥2,703,413 ¥2,029,775 ¥673,638 ¥2,852,273 ¥2,096,635 ¥ 755,638
303,250
Customer relationships . . . . . . . . . . .
74,780
Core deposit intangibles . . . . . . . . . .
56,693
Trade names . . . . . . . . . . . . . . . . . . .
11,605
. . . . . . . . . . . . . . . . . . . . . . . .
Other
246,526 141,410
38,153
88,643
42,921
34,283
5,381
4,220
567,886
174,802
94,748
17,374
387,936
126,796
77,204
9,601
264,636
100,022
38,055
5,769
Total . . . . . . . . . . . . . . . . . . . . . ¥3,304,950 ¥2,403,447 901,503 ¥3,707,083 ¥2,505,117 1,201,966
Intangible assets not subject to
amortization:
Other(1) . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,693
¥927,196
37,560
¥1,239,526
Note:
(1)
Intangible assets not subject to amortization includes ¥17,431 million and ¥29,641 million of mortgage servicing rights accounted for at
fair value at March 31, 2019 and 2020, respectively.
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
F-68
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
assets not subject to amortization acquired during the fiscal year ended March 31, 2019 amounted to
¥11,172 million.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2020 amounted to
¥538,925 million, which primarily consisted of ¥291,821 million of software, ¥44,140 million of core deposit
intangibles, ¥180,414 million of customer relationships and ¥16,402 million of trade names. The weighted
average amortization periods for these assets are 5 years, 10 years, 17 years and 23 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, 2020 amounted to ¥23,804 million.
For the fiscal years ended March 31, 2018, 2019 and 2020, the MUFG Group recognized ¥21,900 million,
¥118,108 million and ¥3,732 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)
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥263,056
228,137
188,358
150,702
108,504
F-69
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7. LEASE TRANSACTIONS
Lease transaction as a lessee
Right-of-use assets of finance leases, which are principally related to data processing equipment and
included in Premises and equipment in the accompanying consolidated balance sheets, amounted to
¥18,497 million at March 31, 2020. Lease liabilities of these finance leases, which are included in Long-term
debt in the accompanying consolidated balance sheets, amounted to ¥25,186 million at March 31, 2020.
Right-of-use assets of operating leases, which are principally related to office space and equipment are
included in Other assets in the accompanying consolidated balance sheets, amounted to ¥393,435 million at
March 31, 2020. Lease liabilities of these operating leases, which are included in Other liabilities in the
accompanying consolidated balance sheets, amounted to ¥482,813 million at March 31, 2020.
The discount rates used in determining the present value of leases are the MUFG Group’s incremental
borrowing rate, developed based upon each lease’s term and currency of payment. The lease term includes
options to extend or terminate the lease when it is reasonably certain that the MUFG Group will exercise that
option. The MUFG Group has elected to exclude leases with original terms of less than one year from the
operating lease right-of-use assets and lease liabilities. The MUFG Group’s lease arrangements that have not yet
commenced as of March 31, 2020 are not material. Variable lease costs did not have a material impact on the
MUFG Group’s results of operations.
The following table presents profit or loss of lease transactions as a lessee for the fiscal year ended
March 31, 2020:
Finance lease cost:
2020
(in millions)
Amortization of right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease cost
¥ 5,455
460
99,939
The following table presents information of lease transactions as a lessee for the fiscal year ended March 31,
2020:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets obtained in exchange for new finance lease liabilities . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets obtained in exchange for new operating lease liabilities . . . . . . . . . . . . . . . . . . . .
Weighted-average remaining lease term:
2020
(in millions)
¥
482
106,103
7,090
12,754
46,482
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4 years
9.5 years
Weighted-average discount rate:
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.99%
1.16%
F-70
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Maturities of lease liabilities as of March 31, 2020 are as follows:
Finance
leases
Operating
leases
(in millions)
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,835
6,794
4,755
3,073
1,304
2,655
¥107,270
80,460
57,057
40,902
35,827
195,540
Total undiscounted cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference between undiscounted and discounted cash flows . . . . . . . . . . . . . . . . . . . .
26,416
(1,230)
517,056
(34,243)
Amount on balance sheet
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥25,186
¥482,813
Lease transactions as a lessor
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 various
types of data processing equipment, office equipment and transportation equipment. Direct financing leases are
presented in loans. In certain case, the MUFG Group requests lessees to deposit in advance an amount nearly
equal or equal to the residual value of leased assets.
The following table presents profit or loss of lease transactions as a lessor for the fiscal year ended
March 31, 2020:
Direct financing leases:
2020
(in millions)
Finance income on net investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥119,010
Operating leases:
Lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,856
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥126,866
Finance income on net investment is included in Interest income—Loans, including fees in the consolidated
statements of income. Lease income from operating lease transactions is included in Other non-interest income in
the consolidated statements of income.
The following table presents the components of direct financing lease transactions as of March 31, 2020.
Lease receivables (undiscounted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments:
2020
(in millions)
¥2,193,360
Discounted unguaranteed residual value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial direct cost on direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred selling profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,515
29,562
(364,206)
Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,874,231
F-71
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents maturity of the lease payment receivables of direct financing lease transactions
as of March 31, 2020:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total undiscounted cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference between undiscounted cash flows and the lease receivables recognized on balance
Lease
receivables
(in millions)
¥ 567,342
485,810
382,135
295,263
207,067
255,743
2,193,360
sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(319,129)
Amount on balance sheet
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,874,231
8.
INCOME TAXES
Income before Income Tax Expense
Income before income tax expense by jurisdiction for the fiscal years ended March 31, 2018, 2019 and 2020
was as follows:
Domestic income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 803,057
858,762
(in millions)
¥228,018
642,824
¥ 89,440
343,780
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,661,819
¥870,842
¥433,220
2018
2019
2020
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income Tax Expense (Benefit)
The detail of current and deferred income tax expense (benefit) for the fiscal years ended March 31, 2018,
2019 and 2020 was as follows:
2018
2019
2020
(in millions)
Current:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥180,109
107,119
¥ 57,303
123,730
¥ 28,128
147,344
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
287,228
181,033
175,472
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,873
3,722
(32,746)
(15,050)
(18,949)
(42,018)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120,595
(47,796)
(60,967)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) reported in Accumulated OCI relating to:
407,823
133,237
114,505
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives qualifying for cash flow hedges . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
120,588
(960)
(4,421)
50,774
(34,527)
15,590
4,293
(1,845)
(38,229)
15,148
(29,747)
23,908
4,012
(57,685)
(20,693)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
131,454
(5,043)
(80,205)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥539,277
¥128,194
¥ 34,300
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 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
30.6%, 30.6%, and 30.6% for the fiscal years ended March 31, 2018, 2019 and 2020, respectively. Foreign
subsidiaries are subject to income taxes of the countries in which they operate.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2018, 2019 and
2020 is as follows:
2018
2019
2020
30.6% 30.6% 30.6%
0.5
0.2
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 26.1
(9.2)
Foreign tax credit and payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3.2)
Lower tax rates applicable to income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.9
Realization of previously unrecognized tax effects of subsidiaries . . . . . . . . . . . . . . . . . — — (19.8)(1)
Nontaxable dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and interest expense for uncertainty in income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in tax laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expiration of loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net
(15.6)
3.6
0.0
(0.1)
—
1.9
3.0
(9.1)
0.6
0.6
0.2
0.0
0.1
(1.0)
(2.0)
0.7
0.0
0.1
(0.6)
0.4
0.2
(3.3)
(2.5)
(1.4)
(1.7)
(0.4)
(3.0)
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24.5% 15.3% 26.4%
Note:
(1)
In October 2019, a wholly owned subsidiary of the MUFG Group was sold. The sale resulted in the realization of tax benefits that were
not previously recognized as deferred tax assets, resulting in a ¥85,588 million reduction of income tax expense and a 19.8% reduction in
the effective tax rate for the fiscal year ended March 31, 2020.
F-74
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, 2019 and 2020 were as follows:
2019
2020
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 301,222
177,143
691
236,363
158,144
101,118
5,238
—
(218,191)
¥ 317,770
94,326
2,022
277,807
150,116
96,761
57,836
133,812
(151,530)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
761,728
978,920
Deferred tax liabilities:
Investment securities (including trading account assets at fair value under the fair
value
option) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries and affiliates(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets of operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
911,483
38,772
65,115
217,429
—
63,272
788,614
87,063
54,349
279,583
106,995
90,653
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,296,071
1,407,257
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (534,343) ¥ (428,337)
Note:
(1) Certain reclassifications have been made to prior period to conform to the current presentation.
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, 2019 and 2020
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
F-75
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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, 2020, the MUFG Group had operating loss carryforwards for corporate tax of ¥228,637 million
and tax credit carryforwards of ¥72,360 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:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 and thereafter
No definite expiration date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 11,024
16,306
5,867
5,524
81,967
51,271
25,770
30,908
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥228,637
¥12,534
6,137
219
185
168
130
47,943
5,044
¥72,360
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, 2018, 2019 and 2020:
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 other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2019
2020
¥ 7,851
427
6,642
(455)
(1,074)
(253)
(221)
(in millions)
¥12,917
313
8,836
(1,090)
—
(1,540)
(276)
¥19,160
399
212
—
(81)
(297)
(144)
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12,917
¥19,160
¥19,249
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2018, 2019 and 2020:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest and penalties in the consolidated statements of income . . . . . . . . . . . . .
Total cash settlements, foreign exchange translation and other . . . . . . . . . . . . . . . . . .
¥4,054
694
(184)
(in millions)
¥ 4,564
(1,655)
147
¥3,056
(398)
(46)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,564
¥ 3,056
¥2,612
2018
2019
2020
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 and forward
2016 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 ¥2.4 billion during the next twelve months.
9.
PLEDGED ASSETS AND COLLATERAL
Pledged Assets
At March 31, 2020, assets mortgaged, pledged, or otherwise subject to lien were as follows:
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020
(in millions)
¥10,264,854
14,096,841
13,354,396
34,590
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥37,750,681
F-77
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020
(in millions)
134,704
¥
15,286,574
22,312,888
16,515
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥37,750,681
At March 31, 2020, certain investment securities, principally Japanese national government and Japanese
government agency bonds, loans, and other assets with a combined carrying value of ¥18,254,788 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, 2019 and 2020 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 ¥2,568,340 million and
¥2,606,464 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, 2020, the
MUFG Group pledged ¥36,223 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-78
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, 2019 and 2020, the fair value of the collateral accepted by the MUFG Group that is
permitted to be sold or repledged was ¥22,927 billion and ¥38,858 billion, respectively, of which ¥16,514 billion
and ¥32,095 billion, respectively, was sold or repledged.
At March 31, 2019 and 2020, the cash collateral pledged for derivative transactions, which is included in
Other assets, was ¥1,276,897 million and ¥1,696,108 million, respectively, and the cash collateral received for
derivative transactions, which is included in Other liabilities, was ¥844,234 million and ¥1,125,305 million,
respectively.
10. DEPOSITS
The balances of time deposits, including CDs, issued in amounts of ¥10 million (approximately
U.S.$93 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 31, 2020) or more with
respect to domestic deposits and issued in amounts of U.S.$100,000 or more with respect to foreign deposits
were ¥25,899,780 million and ¥23,858,381 million, respectively, at March 31, 2019, and ¥23,957,076 million
and ¥23,329,855 million, respectively, at March 31, 2020.
The maturity information at March 31, 2020 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,655,230
4,522,580
2,430,995
546,578
654,135
799,180
¥23,574,644
722,461
275,303
112,962
17,950
32,726
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥40,608,698
¥24,736,046
Domestic
Foreign
(in millions)
11. CALL MONEY AND FUNDS PURCHASED
A summary of funds transactions for the fiscal years ended March 31, 2019 and 2020 is as follows:
Outstanding at end of fiscal year:
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal range of maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2,450,320
1 day to 30 days
¥
3,668,922
1 day to 30 days
0.12%
0.04%
2019
2020
(in millions, except percentages and days)
F-79
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
12. DUE TO TRUST ACCOUNT, SHORT-TERM BORROWINGS AND LONG-TERM DEBT
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, 2019 and 2020 is as follows:
Amount outstanding at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate on outstanding balance at end of fiscal year . . . . .
2019
2020
(in millions, except percentages)
¥3,377,747
¥2,735,952
0.00%
0.00%
At March 31, 2019 and 2020, the MUFG Group had unused lines of credit for financing amounting to
¥5,525,069 million and ¥7,519,582 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, 2019 and 2020 were comprised of the following:
2019
2020
(in millions, except percentages)
Domestic offices:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from the Bank of Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from other financial institutions . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign offices:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from other financial institutions . . . . . . . . . . . . . . . . . . . . . . .
Short-term debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less unamortized discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings—net
¥1,033,568
241,070
227,482
122,166
1,624,286
3,929,636
967,901
68,492
141,803
5,107,832
6,732,118
1,045
¥6,731,073
¥ 1,160,758
9,800,800
191,453
170,044
11,323,055
3,836,459
631,502
24,009
241,168
4,733,138
16,056,193
711
¥16,055,482
Weighted average interest rate on outstanding balance at end of fiscal year . . .
1.97%
0.67%
F-80
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, 2019 and 2020 was comprised
of the following:
MUFG:
2019
2020
(in millions)
Obligations under finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
Unsubordinated debt(1):
1,725
¥
6,552
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 0.34%-1.75% . . . . . . . . . . . . . .
Fixed rate bonds, payable in other currencies, due 2024-2029, principally 2.08%-4.05%(2)
. . .
Floating rate bonds, payable in US dollars, due 2021-2023, principally 1.70%-3.46% . . . . . . .
Floating rate bonds, payable in Euro, due 2023, principally 0.13% . . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds, payable in other currencies, due 2024, principally 2.17%(2) . . . . . . . . . . . .
2,949,022
301,124
21,257
765,188
43,596
—
3,864,822
408,825
28,382
734,254
41,843
26,436
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,080,187
5,104,562
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 2025-2030, principally 0.29%-0.63% . . .
Adjustable rate bonds, payable in Japanese yen, no stated maturity, principally
618,925
890,359
685,663
1,043,336
0.82%-3.52% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,706,695
1,756,087
Adjustable rate borrowings, payable in Japanese yen, due 2025-2029, principally
0.30%-0.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,500
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally
0.85%-1.17% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds, payable in Japanese yen, no stated maturity, principally 3.02% . . . . . . . . .
Floating rate borrowings, payable in Japanese yen, due 2025-2028, principally
45,960
3,500
0.57%-0.79% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86,000
47,500
66,649
3,500
86,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,383,939
3,688,735
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,465,851
8,799,849
MUFG Bank:
Obligations under finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
Obligation under sale-and-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt(1):
7,704
40,732
¥
5,636
—
Fixed rate bonds, payable in Japanese yen, due 2020-2027, principally 0.36%-2.57% . . . . . . .
Fixed rate bonds, payable in US dollars, due 2020-2050, 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 2020-2028, principally 0.00%-0.25% . . .
Fixed rate borrowings, payable in US dollars, due 2030, principally 2.93% . . . . . . . . . . . . . . .
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 borrowings, payable in US dollars, due 2020-2031, principally 0.79%-2.38% . . .
Floating rate borrowings, payable in Euro, due 2021-2030, principally 0.00%-0.20% . . . . . . .
Floating rate borrowings, payable in other currencies, due 2028, principally 3.23%(2)
. . . . . . .
234,500
1,284,812
112,687
19,084
10,786,372
—
9,483
1,110
1,008,949
15,382
5,240
141,700
1,104,504
108,252
17,620
10,440,217
8,367
—
—
897,170
102,123
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,477,619
12,819,953
Subordinated debt(1):
Fixed rate bonds, payable in Japanese yen, due 2020-2031, principally 1.31%-2.91% . . . . . . .
Fixed rate borrowings, payable in Japanese yen, due 2022-2035, principally 0.26%-2.24% . . .
Adjustable rate borrowings, payable in Japanese yen, due 2025-2028, principally
513,420
73,400
490,590
73,400
0.38%-1.04% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000
12,000
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally
2.67%-3.52% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in Japanese yen, due 2027, principally 0.14% . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
355,000
15,000
976,820
13,500
15,000
604,490
Obligations under loan securitization transaction accounted for as secured borrowings due 2020-
2080, principally 0.12%-6.14% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
639,037
791,139
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,141,912
14,221,218
F-81
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2019
2020
(in millions)
Other subsidiaries:
Obligations under finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
UnSubordinated debt(1):
13,107
¥
12,998
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2020-2050, principally
0.00%-20.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate borrowings, bonds and notes, payable in US dollars, due 2020-2037, principally
1,291,537
940,691
0.00%-26.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,385,936
1,106,465
Fixed rate borrowings, bonds and notes, payable in Euro, due 2020-2026, principally
0.00%-1.61% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,479
2,965
Fixed rate borrowings, bonds and notes, payable in Thai baht, due 2020-2026, principally
0.00%-7.15% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
334,586
387,799
Fixed rate borrowings, bonds and notes, payable in other currencies, due 2020-2037,
principally 0.00%-15.33%(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
219,781
360,558
Floating/Adjustable rate borrowings, bonds and notes, payable in Japanese yen, due 2020-
2050, principally 0.00%-7.70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, bonds and notes, payable in US dollars, due 2020-2028, principally
0.00%-16.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds and notes, payable in Euro, due 2020-2022, principally 0.00% . . . . . . . . .
Floating/Adjustable rate borrowings, bonds and notes, payable in other currencies, due 2020-
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024, principally 0.00%-7.30%(2)
1,425,387
1,259,427
244,253
—
378,217
835
6,241
6,804
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,910,200
4,443,761
Subordinated debt(1):
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2020-2030, principally
1.14%-2.61% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate bonds and notes, payable in US dollars, due 2022-2027, principally
269,373
223,095
7.50%-9.90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,409
737
Fixed rate bonds and notes, payable in Thai baht, due 2020-2029, 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,
principally 2.83% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in Japanese yen, due 2021, principally 0.73% . . . . . . . . . . .
Floating rate bonds and notes, payable in US dollars, due 2020-2036, principally
143,212
7,347
4,500
41,000
3.59%-10.92% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,172
220,756
7,179
—
2,000
4,575
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
472,013
458,342
Obligations under loan securitization transaction accounted for as secured borrowings due 2021-
2024, principally 0.25%-2.25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,813
6,453
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,398,133
4,921,554
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,005,896
27,942,621
Debt Isuance Cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
(15,353) ¥
(15,858)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥27,990,543
¥27,926,763
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.
(2) Minor currencies, such as Australian dollar, British pound, Indonesian rupiah, Brazilian real, Russian ruble etc., excluding Japanese yen,
US dollars, Euro and Thai baht, 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
F-82
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2019 and 2020.
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, 2020:
MUFG
BK
Other
subsidiaries
Total
(in millions)
Fiscal year ending March 31:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 303,428
778,600
876,475
731,255
719,364
5,390,727
¥ 8,550,560
2,165,072
637,647
1,072,061
292,304
1,503,574
¥1,270,513
919,608
1,059,402
411,279
267,980
992,772
¥10,124,501
3,863,280
2,573,524
2,214,595
1,279,648
7,887,073
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥8,799,849
¥14,221,218
¥4,921,554
¥27,942,621
New Issuances of Bonds for Basel III
For the fiscal year ended March 31, 2020, the MUFG Group issued to institutional investors in Japan
¥273,000 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, 2020, the MUFG Group issued $10,340 million (approximately
¥1,125,302 million), €1,000 million (approximately ¥119,550 million), AUD 500 million (approximately
¥33,045 million) and HK$232 million (approximately ¥3,257 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.
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
F-83
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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”).
Net periodic cost of pension benefits and other benefits for the fiscal years ended March 31, 2018, 2019 and
2020 include the following components:
Domestic subsidiaries
Foreign offices and subsidiaries
2018
Pension
benefits
and SIP
2019
Pension
benefits
and SIP
2020
Pension
benefits
and SIP
2018
2019
2020
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Service cost—benefits
earned during the
fiscal year . . . . . . . . ¥ 47,064 ¥ 48,352 ¥ 49,194 ¥ 10,169 ¥
676 ¥ 12,395 ¥
525 ¥ 14,406 ¥
366
Interest cost on
projected benefit
obligation . . . . . . . .
Expected return on
14,383
13,504
10,969
15,359
1,079
14,958
1,046
17,370
1,159
plan assets . . . . . . . .
(68,432)
(74,270)
(74,744)
(32,110)
(2,122)
(33,266)
(2,314)
(31,382)
(1,882)
Amortization of net
actuarial loss . . . . . .
7,309
731
5,641
8,847
1,124
9,993
707
8,685
1,162
Amortization of prior
service cost . . . . . . .
(1,094)
(1,210)
(1,204)
(3,090)
(2,775)
(3,039)
(2,020)
(2,633)
(1,881)
Loss (gain) on
settlements and
curtailment
. . . . . . .
(4,394)
(5,980)
(2,366)
52
—
49
—
223
—
Net periodic benefit
cost (income)
. . . . . ¥ (5,164) ¥(18,873) ¥(12,510) ¥
(773) ¥(2,018) ¥ 1,090 ¥(2,056) ¥ 6,669 ¥(1,076)
F-84
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
2018
2019
2020
2018
2019
2020
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 . . . . . . . . . . . . . . . . . . .
0.82% 0.76% 0.61% 3.52% 3.61% 3.19% 3.27% 3.80% 3.87%
Discount rates in determining
benefit obligation . . . . . . . . . . .
0.76
0.61
0.63
3.38
3.43
3.87
3.99
3.05
2.96
Rates of increase in future
compensation level for
determining expense . . . . . . . . .
Rates of increase in future
compensation level for
determining benefit
obligation . . . . . . . . . . . . . . . . .
Expected rates of return on plan
3.23
3.21
3.21
4.65
— 4.65
— 5.01
—
3.21
3.21
3.46
4.65
— 5.01
— 5.12
—
assets . . . . . . . . . . . . . . . . . . . . .
2.87
2.83
2.89
6.71
7.50
6.70
7.50
6.25
7.00
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%
2027
4.14%
3.77%
2027
7.00%
4.50%
2027
6.50%
4.50%
2027
MUAH
Other than MUAH
2019(1)
2020(1)
2019(1)
2020(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 . . .
¥ 152
2,823
¥ (128)
(2,394)
¥
42
838
¥ (33)
(665)
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, 2018 and 2019, respectively.
F-85
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, 2019 and 2020:
Domestic subsidiaries
Foreign offices and subsidiaries
2019
2020
2019
2020
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
¥1,821,794
48,352
13,504
—
(160)
—
43,527
(66,539)
(18,594)
—
¥1,841,884
49,194
10,969
—
(94)
—
(3,053)
(66,771)
(24,224)
—
525
1,046
452
¥502,056 ¥34,347 ¥469,080 ¥31,510
366
1,159
455
—
—
1,648
(2,326)
—
(429)
14,406
17,370
28
— 13,000
3,721
—
58,831
(2,354)
(21,120)
(2,221)
— (2,284)
(6,019)
12,395
14,958
37
(17)
64
(28,466)
(19,894)
(1,750)
(10,303)
(285)
Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . . . .
1,841,884
1,807,905
469,080
31,510
547,013
32,383
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
2,603,329
13,664
44,427
(93)
—
(66,539)
—
2,594,788
(123,802)
28,653
(21)
—
(66,771)
—
542,646
(21,353)
3,117
—
37
(19,894)
(11,058)
32,466
(1,948)
102
—
452
(2,221)
(593)
493,495
92,087
2,887
791
28
(21,120)
(8,660)
28,258
5,695
186
—
455
(2,326)
(349)
Fair value of plan assets at end of fiscal year . . . . . . . . . . . . . .
2,594,788
2,432,847
493,495
28,258
559,508
31,919
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 770,564
(17,660)
¥ 643,520
(18,577)
¥ 67,821 ¥ 1,372 ¥ 81,301 ¥ 4,378
(4,842)
(68,806)
(43,406)
(4,624)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 752,904
¥ 624,943
¥ 24,415 ¥ (3,252) ¥ 12,495 ¥ (464)
The aggregated accumulated benefit obligations of these plans at March 31, 2019 and 2020 were as follows:
Aggregated accumulated benefit obligations . . . . . . . . . . . . . .
¥1,800,992
¥1,773,042
¥457,048
¥523,078
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, 2019 and 2020 were as follows:
Domestic
subsidiaries
Foreign offices
and subsidiaries
2019
2020
2019
2020
(in millions)
Domestic
subsidiaries
Foreign offices
and subsidiaries
2019
2020
2019
2020
(in millions)
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥23,108
23,108
5,629
¥26,442
26,442
7,980
¥63,273
52,249
19,866
¥89,829
67,609
21,014
F-86
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, 2018, 2019 and 2020 were ¥10,153 million, ¥9,325 million and ¥13,883 million,
respectively.
The following table presents the amounts recognized in Accumulated OCI of the MUFG Group at
March 31, 2019 and 2020:
Domestic subsidiaries
Foreign offices and subsidiaries
2019
Pension
benefits
and SIP
2020
Pension
benefits
and SIP
Net actuarial loss . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . .
¥ 245,037
(5,459)
¥ 437,254
(4,255)
Gross amount recognized in
2019
2020
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
¥
¥126,238
(14,536)
8,628
(4,263)
¥114,167
(7,875)
¥ 5,164
(2,304)
Accumulated OCI . . . . . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
239,578
(115,816)
432,999
(174,915)
111,702
(29,875)
4,365
(1,282)
106,292
(27,974)
2,860
(874)
Net amount recognized in
Accumulated OCI . . . . . . . . . . . . . . . . .
¥ 123,762
¥ 258,084
¥ 81,827
¥
3,083
¥ 78,318
¥ 1,986
The following table presents OCI for the fiscal years ended March 31, 2019 and 2020:
Domestic subsidiaries
Foreign offices and subsidiaries
2019
Pension
benefits
and SIP
2020
Pension
benefits
and SIP
2019
2020
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
¥ 104,132
¥ 195,492
¥ 26,155
¥
1,908
¥ (1,732) ¥(2,166)
Net actuarial loss (gain) arising during the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost arising during the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
65
—
3,722
—
Losses (gains) due to amortization:
Net actuarial loss . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . .
Curtailment and settlement . . . . . . . . . . . .
Foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . . . .
(731)
1,210
5,980
(5,641)
1,204
2,366
(9,993)
3,039
(49)
(707)
2,020
—
(8,685)
2,633
(223)
(1,162)
1,881
—
—
—
(1,399)
(68)
(1,125)
(58)
Total changes in Accumulated OCI . . . . .
¥ 110,591
¥ 193,421
¥ 17,818
¥
3,153
¥ (5,410) ¥(1,505)
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:
F-87
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(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, 2020 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
35.9%
33.6
15.0
10.4
1.4
3.7
Pension
benefits
Other
benefits
0.4%
—
49.2
38.3
10.4
1.7
—%
—
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.
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.
F-88
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter (2026-2030) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 83,009
82,073
82,115
81,988
81,902
397,860
¥ 21,368
22,901
23,747
24,893
25,614
165,065
¥2,023
2,075
2,111
2,125
2,089
9,040
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 31.
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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, 2019 and
2020:
Pension benefits and SIP Investments:
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020
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 . . . . . . . . . . . ¥147,926 ¥
Non-Japanese government bonds . . . . . .
Other debt securities . . . . . . . . . . . . . . . .
Japanese marketable equity securities . . .
Non-Japanese marketable equity
—
7,014
690,741
— ¥ — ¥ 147,926 ¥
— —
325
— —
19,452
690,741
12,113
— 42,135
— ¥
— ¥ — ¥
—
5,185 — 47,320
— 105,096 — 105,096
—
— —
—
securities . . . . . . . . . . . . . . . . . . . . . . .
Other investment funds . . . . . . . . . . . . . .
Japanese general account of life
insurance companies(1) . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . .
47,655
—
235 —
— —
47,890
26,981
— 81,803
616 — 27,597
150,121 — 231,924(2)
— 217,898 —
32,150 —
6,547
217,898
38,697
—
480
— —
250
1,937
—
2,667
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥899,883 ¥262,396 ¥325 ¥1,162,604 ¥151,399 ¥262,955 ¥250 ¥414,604
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, 2018 to March 31, 2019 and 1.24% from April 1, 2019 to March 31, 2020.
(2) Other investment funds of the foreign offices and subsidiaries include mutual funds and common collective funds of ¥68,556 million and
nil, respectively, which were held by MUFG Americas Holdings at December 31, 2018 and ¥81,768 million and ¥119,307 million,
respectively, at December 31, 2019. Based on guidance contained in Codification Improvements, issued by FASB in July 2018, some of
common collective funds are reported within the fair value hierarchy as Level 2, which were previously included in the tables presenting
fair values of certain investments valued at net asset value per share (or its equivalent) as a practical expedient. The amount of Pension
benefits and SIP Investments impacted by the change in reporting was ¥136,316 million as of March 31, 2020. See Note 1 for more
information.
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, 2019 and 2020:
Assets category
Japanese pooled funds:
Domestic subsidiaries
Foreign offices and
subsidiaries
2019
2020
2019
2020
(in millions)
Japanese marketable equity securities . . . . . . . . . . . . .
Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese marketable equity securities . . . . . . . .
Non-Japanese debt securities . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 109,915
184,121
162,901
155,792
134,306
¥ 125,218
212,727
146,796
169,978
100,798
¥
Total pooled funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
747,035
755,517
— ¥
—
—
—
—
—
—
—
—
—
—
—
Other investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
525,083(1)
514,726(1)
241,559(2)
144,904(2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,272,118
¥1,270,243
¥241,559 ¥ 144,904
Notes:
(1) Other investment funds of the domestic subsidiaries include mutual funds and real estate funds of ¥500,850 million and ¥12,058 million,
respectively, at March 31, 2019 and ¥486,496 million and ¥13,891 million, respectively, at March 31, 2020.
(2) Other investment funds of the foreign offices and subsidiaries include mutual funds, real estate funds and common collective funds of
¥53,775 million, ¥46,818 million and ¥140,728 million, respectively, at March 31, 2019 and ¥56,125 million, ¥54,474 million and
¥34,098 million, respectively, at March 31, 2020. Based on guidance contained in Codification Improvements, issued by FASB in July
2018, some of common collective funds are reported within the fair value hierarchy as Level 2, which were previously included in the
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
tables presenting fair values of certain investments valued at net asset value per share (or its equivalent) as a practical expedient. The
amount of Pension benefits and SIP Investments impacted by the change in reporting was ¥136,316 million as of March 31, 2020. See
Note 1 for more information.
Other debt securities and Japanese debt securities in the above Pension benefits and SIP tables include
¥1,224 million (0.04% of plan assets) of debt securities issued by the MUFG Group at March 31, 2019 and
¥942 million (0.03% of plan assets) at March 31, 2020, respectively. Japanese marketable equity securities in the
above Pension benefits and SIP tables include ¥5,414 million (0.18% of plan assets) of common stock issued by
the MUFG Group at March 31, 2019 and ¥5,843 million (0.20% of plan assets) at March 31, 2020, respectively.
14. OTHER ASSETS AND LIABILITIES
Major components of other assets and liabilities at March 31, 2019 and 2020 were as follows:
2019
2020
(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 9) . . . . . . . . . . . . . . .
Cash collateral for the use of Bank of Japan’s settlement infrastructure . . . . . .
Accrued interest(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 8)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets of operating leases (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,141,075
1,394,794
2,487,389
839,757
1,276,897
911,528
359,648
89,719
—
2,990,462
¥ 1,191,690
1,212,511
2,421,154
729,199
1,696,108
965,546
308,448
113,031
393,435
4,077,577
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,491,269
¥13,108,699
Other liabilities:
Accounts payable:
Payables to brokers, dealers and customers for securities transactions . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,289,672
1,308,733
¥ 1,078,653
1,251,260
Obligations to return securities received as collateral (Notes 15, 16
and 31)(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 8)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for off-balance sheet credit instruments . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantees and indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash collateral received for derivative transactions (Note 9) . . . . . . . . . . . . . . .
Obligations under operating leases (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,087,026
214,735
624,062
119,307
65,690
45,346
844,234
—
3,061,462
4,806,171
187,096
541,368
56,995
92,225
39,601
1,125,305
482,813
3,562,359
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,660,267
¥13,223,846
Note:
(1) Certain reclassifications have been made to prior period to confirm to the current presentation.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investments in equity method investees include marketable equity securities carried at ¥1,936,468 million
and ¥1,809,161 million at March 31, 2019 and 2020, respectively. Corresponding aggregated market values were
¥2,702,838 million and ¥1,987,008 million, respectively. Marketable equity securities include Morgan Stanley’s
common stock carried at ¥1,326,339 million and ¥1,411,131 million at March 31, 2019 and 2020, respectively.
As of March 31, 2020, the MUFG Group held approximately 23.93% of its common stock. Investments in equity
method investees also include investments in Morgan Stanley MUFG Securities, Co., Ltd. at ¥178,679 million
and ¥185,255 million at March 31, 2019 and 2020, respectively.
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
¥29,442 million, ¥51,645 million and ¥21,672 million for the fiscal years ended March 31, 2018, 2019 and 2020
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, 2019 and 2020, and for each of the three years ended March 31, 2020 is as
follows:
Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2020
(in billions)
¥29,392
10,718
15,416
97,223
19,948
21,431
21,165
88,134
130
¥ 29,484
11,405
7,868
103,149
25,601
21,556
21,206
93,656
149
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . .
Net income applicable to Morgan Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,354
3,133
1,221
759
(in billions)
¥4,365
3,170
1,195
944
¥4,415
3,275
1,140
903
2018
2019
2020
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.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized financial information of the MUFG Group’s equity method investees, other than Morgan
Stanley as of March 31, 2019 and 2020, and for each of the three years ended March 31, 2020 is as follows:
2019
2020
(in billions)
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,772
28,910
9,103
23,423
1,135
¥15,190
29,255
8,898
24,025
1,005
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥901
329
572
136
337
229
(in billions)
¥1,036
430
606
157
205
135
¥1,093
419
674
171
366
285
2018
2019
2020
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
15. OFFSETTING OF DERIVATIVES, REPURCHASE AGREEMENTS, AND SECURITIES
LENDING TRANSACTIONS
The following tables present, as of March 31, 2019 and 2020, the gross and net amounts of 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, 2019
Financial assets:
Derivative assets . . . . . . . .
Receivables under resale
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
agreements . . . . . . . . . . .
13,885
(2,910)
10,975
(9,793)
(20)
1,162
Receivables under
securities borrowing
transactions . . . . . . . . . .
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)
F-95
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020
Financial assets:
Derivative assets . . . . . . . .
Receivables under resale
agreements . . . . . . . . . . .
Receivables under
securities borrowing
transactions . . . . . . . . . .
Total . . . . . . . . . . . . . .
Financial liabilities:
Derivative liabilities . . . . .
Payables under repurchase
agreements . . . . . . . . . . .
Payables under securities
lending transactions . . . .
Obligations to return
securities received as
collateral
. . . . . . . . . . . .
Total . . . . . . . . . . . . . .
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)
¥14,958
¥ —
¥14,958
¥(11,282)
¥ (874)
¥2,802
25,884
(1,888)
23,996
(23,195)
(21)
780
3,444
¥44,286
—
¥(1,888)
3,444
¥42,398
(3,336)
¥(37,813)
—
¥ (895)
108
¥3,690
¥14,034
¥ —
¥14,034
¥(11,296)
¥(1,140)
¥1,598
33,733
1,017
(1,883)
31,850
(31,569)
—
1,017
(986)
(34)
—
247
31
4,806
¥53,590
—
¥(1,883)
4,806
¥51,707
(1,966)
¥(45,817)
—
¥(1,174)
2,840
¥4,716
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, 2019 and 2020. 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
collateral
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
March 31, 2019
Remaining Contractual Maturity
Overnight
and open
30 days
or less
31-90
days
¥3,892
913
2,572
¥7,377
¥18,586
—
396
¥18,982
(in billions)
¥2,824
—
117
¥2,941
Over
90 days
¥2,823
—
2
¥2,825
Total
¥28,125
913
3,087
¥32,125
F-96
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, 2020
Remaining Contractual Maturity
Overnight
and open
30 days
or less
31-90
days
¥ 9,685
934
¥16,608
64
(in billions)
¥4,496
19
Over
90 days
¥2,944
—
Total
¥33,733
1,017
collateral
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,856
599
276
75
4,806
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,475
¥17,271
¥4,791
¥3,019
¥39,556
Secured borrowing by the class of collateral pledged at March 31, 2019 and 2020 was as follows:
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 . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
March 31, 2020
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 . . . . . . . . . . . . . . . . . .
¥10,687
¥
38
¥2,241
¥12,966
Foreign government and official institution
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,326
784
4,248
157
506
25
57
—
—
—
914
8
873
183
10
2
1,497
—
18,256
967
4,258
159
2,917
33
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥33,733
¥1,017
¥4,806
¥39,556
F-97
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, 2020.
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, 2018, 2019 and 2020, 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, 2018,
2019 and 2020 were as follows:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . .
Retirement of shares of common stock . . . . . . . . . . . . . . . .
14,168,853,820
(268,825,800)
(shares)
13,900,028,020
(232,257,500)
13,667,770,520
(85,775,400)
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . .
13,900,028,020
13,667,770,520
13,581,995,120
2018
2019
2020
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, 2020, 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-98
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 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.
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
F-99
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
From November 14, 2019 to December 23, 2019, MUFG repurchased 85,775,400 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 November 13, 2019. 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 0.77% 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 January 20, 2020,
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, 2019.
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.
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.
F-100
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2020, was ¥4,298,735 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.
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.
F-101
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2018, 2019 and 2020:
2018
2019
2020
(in millions)
Accumulated other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on investment securities(1):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,032,807 ¥ 2,270,346 ¥(369,369)
24,584
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . . . . .
—
Effect of adopting new guidance on reclassification on certain tax
244,249
118
60,616
—
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,828)
—
Effect of adopting new guidance on recognition and measurement of
financial assets and financial liabilities (Note 1) . . . . . . . . . . . . . . . . .
— (2,700,331)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,270,346 ¥ (369,369)¥(344,785)
Net debt valuation adjustments:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (10,632)¥
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax
(2,178)
(16,488)¥
9,729
(8,670)
54,172
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,678)
—
Effect of adopting new guidance on recognition and measurement of
financial assets and financial liabilities (Note 1) . . . . . . . . . . . . . . . . .
—
(1,911)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (16,488)¥
(8,670)¥ 45,502
Net unrealized 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
(8,729)¥
(7,025)
(19,250)¥ (24,140)
10,797
(4,890)
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,496)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (19,250)¥
(24,140)¥ (13,343)
Defined benefit plans:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (214,062)¥ (119,593)¥(208,273)
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(88,680) (129,645)
Effect of adopting new guidance on reclassification on certain tax
109,012
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,543)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (119,593)¥ (208,273)¥(337,918)
Foreign currency translation adjustments:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 482,039 ¥
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax
(119,213)
362,300 ¥ 326,183
(96,056)
(36,117)
effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(526)
—
—
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 362,300 ¥
326,183 ¥ 230,127
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,477,315 ¥ (284,269)¥(420,417)
Note:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal years ended March 31, 2019 and 2020.
F-102
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, 2018, 2019 and 2020:
2018
2019
2020
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) . . . . . . . . . . . . . . . . . ¥ 631,154 ¥(204,916) ¥ 426,238 ¥ 132,723 ¥(24,690) ¥ 108,033 ¥ 100,974 ¥ (2,260) ¥ 98,714
Reclassification adjustment for
gains included in net income
before attribution of
noncontrolling interests . . . . . . .
(280,258)
84,328
(195,930)
(28,953)
9,100
(19,853) (107,102)
32,007
(75,095)
Net change . . . . . . . . . . . . . . .
350,896
(120,588) 230,308
103,770
(15,590)
88,180
(6,128)
29,747
23,619
Net change . . . . . . . . . . . . . . .
(3,138)
417
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 . . . . . . .
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 gains (losses) on
derivatives qualifying for cash
flow hedges . . . . . . . . . . . . . . . .
Reclassification adjustment for
losses (gains) included in net
income before attribution of
noncontrolling interests . . . . . . .
(8,016)
Net change . . . . . . . . . . . . . . .
(11,446)
Net unrealized losses on
derivatives qualifying for cash
flow hedges attributable to
noncontrolling interests . . . . . . .
Net unrealized gains (losses) on
derivatives qualifying for cash
flow hedges attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . .
(13,941)
244,249
27,564
60,616
(965)
24,584
(3,555)
1,088
(2,467)
13,006
(3,982)
9,024
77,765
(23,812)
53,953
(128)
960
289
1,016
(311)
705
315
(96)
219
(2,178)
14,022
(4,293)
9,729
78,080
(23,908)
54,172
—
(2,178)
—
9,729
—
54,172
(3,430)
1,571
(1,859)
(10,397)
2,825
(7,572)
1,375
(560)
815
2,850
4,421
(5,166)
(7,025)
3,662
(980)
2,682
13,279
(3,452)
9,827
(6,735)
1,845
(4,890)
14,654
(4,012)
10,642
—
—
(155)
(7,025)
(4,890)
10,797
F-103
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Defined benefit plans:
Defined benefit plans . . . . . . . . . . .
Reclassification adjustment for
losses (gains) included in net
income before attribution of
noncontrolling interests . . . . . . .
2018
2019
2020
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)
154,708
(48,537) 106,171
(126,001)
37,655
(88,346) (195,851)
59,426
(136,425)
5,904
(2,237)
3,667
(1,168)
574
(594)
6,643
(1,741)
4,902
Net change . . . . . . . . . . . . . . .
160,612
(50,774) 109,838
(127,169)
38,229
(88,940) (189,208)
57,685
(131,523)
Defined benefit plans attributable
to noncontrolling interests . . . . .
Defined benefit plans attributable
to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation
adjustments:
Foreign currency translation
826
(260)
(1,878)
109,012
(88,680)
(129,645)
adjustments . . . . . . . . . . . . . . . .
(137,811)
32,767
(105,044)
(18,062)
(17,932)
(35,994)
(99,520)
19,588
(79,932)
Reclassification adjustment for
losses (gains) included in net
income before attribution of
noncontrolling interests . . . . . . .
(1,494)
1,760
266
(9,002)
2,784
(6,218)
(2,238)
1,105
(1,133)
Net change . . . . . . . . . . . . . . .
(139,305)
34,527
(104,778)
(27,064)
(15,148)
(42,212) (101,758)
20,693
(81,065)
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 . . . . . . . . . . . . . . . . .
14,435
(6,095)
14,991
(119,213)
(36,117)
(96,056)
¥ 224,845
¥ (59,342)
¥(136,148)
Note:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal years ended March 31, 2019 and 2020.
F-104
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, 2018, 2019 and 2020:
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
securities . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net debt valuation adjustments . . . . . . . . . . .
2018
2019
2020
Amount reclassified out of
Accumulated OCI
Line items in the consolidated
statements of income
(in millions)
¥(287,279) ¥ (29,182) ¥(108,193)
6,759
262
596
(367)
1,590
(499)
Investment securities gains
(losses)—net
Investment securities gains
(losses)—net
(280,258)
84,328
(28,953)
9,100
(107,102) Total before tax
32,007
Income tax expense
¥(195,930) ¥ (19,853) ¥ (75,095) Net of tax
417
¥
1,016
¥
315
Equity in earnings of equity
method investees—net
417
(128)
1,016
(311)
315 Total before tax
(96)
Income tax expense
289
¥
705
¥
219 Net of tax
¥
¥
Net unrealized losses (gains) on derivatives
qualifying for cash flow hedges
Interest rate contracts . . . . . . . . . . . . . . .
¥
(7,782) ¥
3,739
¥
9,878
Foreign exchange contracts . . . . . . . . . .
—
—
3,399
Interest income on Loans,
including fees
Interest expense on Long-
term debt or Foreign
exchange losses—net
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans
Net actuarial loss(2)
Prior service cost(2)
Gain on settlements and curtailment,
. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
and other(2) . . . . . . . . . . . . . . . . . . . . .
(234)
(8,016)
2,850
(77)
3,662
(980)
2
13,279 Total before tax
(3,452)
Income tax expense
¥
(5,166) ¥
2,682
¥
9,827 Net of tax
¥ 17,280
(6,959)
¥ 11,431
(6,269)
¥ 15,488 Other non-interest expenses
(5,718) Other non-interest expenses
(4,417)
5,904
(2,237)
(6,330)
(1,168)
574
(3,127) Other non-interest expenses
6,643 Total before tax
(1,741)
Income tax expense
¥
3,667
¥
(594) ¥
4,902 Net of tax
F-105
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Details of Accumulated OCI components
Foreign currency translation adjustments . . .
¥
2018
2019
2020
Amount reclassified out of
Accumulated OCI
Line items in the consolidated
statements of income
(in millions)
(5,743) ¥
4,249
(9,004) ¥
2
(5,003) Other non-interest income
2,765 Other non-interest expenses
(1,494)
1,760
(9,002)
2,784
(2,238) Total before tax
1,105
Income tax expense
¥
266
¥
(6,218) ¥
(1,133) Net of tax
Total reclassifications for the period . . . . . . .
¥(283,447) ¥ (34,445) ¥ (89,103) Total before tax
86,573
11,167
27,823
Income tax expense
¥(196,874) ¥ (23,278) ¥ (61,280) Net of tax
Notes:
(1)
Included unrealized gains (losses) related to only debt securities for the fiscal years ended March 31, 2019 and 2020 while included
unrealized gains (losses) related to both debt and equity securities for the fiscal year ended March 31, 2018.
(2) These Accumulated OCI components are components of net periodic benefit cost. See Note 13 for more information.
21. 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, 2019 and 2020 in accordance
with Basel III.
F-106
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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”).”
“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.
F-107
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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. In addition to the 4.50% minimum
Common Equity Tier 1 capital ratio, MUFG is required to maintain a capital conservation buffer of 2.5% and a
G-SIB surcharge of 1.5% as of March 31, 2019 and 2020, and a countercyclical buffer of 0.04% and 0.01% as of
March 31, 2019 and 2020, 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.
F-108
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 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
Tier 1 capital (to risk-weighted assets):
MUFG(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,276,301
12,639,454
1,928,955
Common Equity Tier 1 capital (to risk-weighted assets):
MUFG(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,322,407
10,990,820
1,775,565
Leverage ratio(2):
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
At March 31, 2020:
Total capital (to risk-weighted assets):
MUFG(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,279,566
14,285,601
1,889,973
15.87% ¥13,827,788
7,917,895
14.43
593,652
25.46
12.01%
8.00
8.00
Tier 1 capital (to risk-weighted assets):
MUFG(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,623,321
12,170,005
1,625,712
Common Equity Tier 1 capital (to risk-weighted assets):
MUFG(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,708,333
10,597,133
1,444,348
Leverage ratio(2):
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,623,321
12,170,005
1,625,712
13.56
12.29
21.90
11.90
10.70
19.46
4.42
4.21
4.51
11,525,076
5,938,421
445,239
10.01
6.00
6.00
9,798,042
4,453,816
333,929
10,593,527
8,656,169
1,079,863
8.51
4.50
4.50
3.00
3.00
3.00
F-109
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, 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
Tier 1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,773,839
1,911,237
13.53
21.12
5,219,405
542,965
Common Equity Tier 1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,172,206
1,758,237
11.69
19.42
3,914,554
407,224
Leverage ratio(2):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,773,839
1,911,237
4.84
5.55
7,284,812
1,031,484
6.00
6.00
4.50
4.50
3.00
3.00
At March 31, 2020:
Total capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12,092,262
2,131,514
14.76% ¥ 6,550,969
670,714
25.42
8.00%
8.00
Tier 1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,254,608
1,867,723
12.52
22.27
4,913,227
503,035
Common Equity Tier 1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,738,975
1,686,723
10.67
20.11
3,684,920
377,276
Leverage ratio(2):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,254,608
1,867,723
4.02
5.87
7,644,928
953,353
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 2.5% and a G-SIB
surcharge of 1.5% as of March 31, 2019 and 2020, and the countercyclical buffer of 0.04% and 0.01% as of March 31, 2019 and 2020,
respectively.
(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.
F-110
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019, Mitsubishi UFJ Morgan Stanley Securities’s 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. At March 31,
2020, its capital accounts less certain fixed assets of ¥440,520 million on a stand-alone basis and ¥465,343
million on a consolidated basis, were 313.0% and 316.2% of the total amounts equivalent to market, counterparty
credit and operational risks, respectively.
Management believes, as of March 31, 2020, 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.
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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, 2019.
The figures on the table below are calculated according to U.S. Basel III as of December 31, 2018 and 2019.
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, 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) . . . .
At December 31, 2019:
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) . . . .
$14,904
14,256
14,256
14,256
$15,769
15,086
15,086
15,086
14.60% $10,081
8,039
13.96
6,502
8.77
6,508
13.96
9.875%
7.875
4.000
6.375
14.73% $11,237
9,097
14.10
6,792
8.88
7,492
14.10
10.500%
8.500
4.000
7.000
Notes:
(1) The minimum capital requirement includes a capital conservation buffer of 1.875% at December 31, 2018 and 2.5% at December 31,
2019.
(2) Excludes certain deductions.
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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, 2018 and 2019.
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, 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-
$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
weighted assets) . . . . . . . . . . . . . . . . . . . . . .
13,316
14.45
5,876
6.375
5,991
6.50
At December 31, 2019:
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-
$14,746
14,115
14,115
15.11% $10,244
8,293
14.47
5,304
10.65
10.500% $9,756
7,805
8.500
6,629
4.000
10.00%
8.00
5.00
weighted assets) . . . . . . . . . . . . . . . . . . . . . .
14,115
14.47
6,829
7.000
6,342
6.50
Notes:
(1) Beginning January 1, 2018 and 2019, the minimum capital requirement includes a capital conservation buffer of 1.875% and 2.5%,
respectively.
(2) Excludes certain deductions.
Management believes, as of December 31, 2019, that MUFG Americas Holdings and MUFG Union Bank
met all capital adequacy requirements to which they are subject.
As of December 31, 2018 and 2019, 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, 2018 and 2019, a Tier 1 risk-based capital ratio of 8% as of December 31, 2018 and 2019, a Tier 1
capital to quarterly average assets of 5% as of December 31, 2018 and 2019, and Common Equity Tier 1 risk-
based capital ratio of 6.5% as of December 31, 2018 and 2019, 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.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
22. 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, 2018, 2019 and 2020 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
2018
2019
2020
(in millions)
¥ 1,228,160
¥
718,645
¥
305,955
Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,826)
(3,745)
(2,861)
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group and assumed conversions . . . . . . . . . . . . . . . . . . .
¥ 1,224,334
¥
714,900
¥
303,094
Shares (Denominator):
Weighted average common shares outstanding . . . . . . . . . . . . . . . . .
Effect of dilutive instruments:
Stock acquisition rights and the common shares of MUFG
2018
2019
2020
(thousands of shares)
13,291,842
13,058,698
12,912,790
under the Board Incentive Plan(1)
. . . . . . . . . . . . . . . . . . . . . .
1,650
484
166
Weighted average common shares for diluted computation . . . . . . . .
13,293,492
13,059,182
12,912,956
2018
2019
(in yen)
2020
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
92.40
¥
55.03
¥
23.69
Diluted earnings per common share:
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
92.10
¥
54.74
¥
23.47
Note:
(1) For the fiscal years ended March 31, 2019 and 2020, 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.
23. 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-114
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 mainly by MUFG Americas Holdings whose fiscal period ends on December 31.
Cash Flow Hedges
From time to time, MUFG Americas Holdings uses interest rate derivatives to hedge the risk of changes in
cash flows attributable to changes in the designated interest rate on LIBOR indexed loans, and to a lesser extent,
to hedge interest rate risk on rollover debt.
F-115
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG Americas Holdings used interest rate derivatives with an aggregate notional amount of
¥1,457.1 billion at December 31, 2019 to hedge the risk of changes in cash flows attributable to changes in the
designated interest rates from variable rate loans. MUFG Americas Holdings used interest rate derivatives with
an aggregate notional amount of ¥7.6 billion at December 31, 2019 to hedge the risk of changes in cash flows
attributable to changes in the designated interest rate on LIBOR indexed short-term borrowings. At December 31,
2019, the weighted average remaining life of the active cash flow hedges was 3.1 years.
For cash flow hedges, changes in the fair value of the hedging instruments are reported as a component of
other comprehensive income and reclassified into earnings in the same period or periods during which the
hedged cash flows are recognized in net interest income. At December 31, 2019, MUFG Americas Holdings
expects to reclassify approximately ¥7.3 billion of losses from Accumulated OCI as a reduction to net interest
income during the twelve months ending December 31, 2020. 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, 2019.
Fair Value Hedges
MUFG Americas Holdings engaged in an interest rate hedging strategy in which one or more interest rate
derivatives 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 interest rate, LIBOR.
For the fiscal year ended December 31, 2018, MUFG Americas Holdings recorded losses on the hedging
instruments and gains on the hedged liability, both of which were less than ¥1 billion. For the fiscal year ended
December 31, 2019, MUFG Americas Holdings did not have any fair value hedges.
Notional Amounts of Derivative Contracts
The following table summarizes the notional amounts of derivative contracts at March 31, 2019 and 2020:
Notional amounts(1)
2019
2020
(in trillions)
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,409.6
230.5
6.4
0.2
7.2
3.0
¥1,553.5
230.2
8.1
0.1
8.7
3.1
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,656.9
¥1,803.7
Note:
(1)
Includes both written and purchased positions.
F-116
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, 2019 and 2020:
Fair value of derivative instruments
2019(1)(5)
2020(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 . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,108
2,795
188
27
84
2
¥
Total derivative assets . . . . . . . . .
¥13,204
¥
1
—
—
—
—
—
1
Derivative liabilities:
Interest rate contracts . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . .
Other(6) . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 9,896
2,671
183
27
69
(136)
Total derivative liabilities . . . . . .
¥12,710
¥ —
—
—
—
—
—
¥ —
¥10,109
2,795
188
27
84
2
¥13,205
¥ 9,896
2,671
183
27
69
(136)
¥
¥
¥
¥10,847
3,734
236
26
114
1
¥14,958
¥10,205
3,604
277
26
95
(177)
— ¥10,847
3,734
—
236
—
26
—
114
—
1
—
— ¥14,958
— ¥10,205
3,608
4
277
—
26
—
95
—
(177)
—
¥12,710
¥14,030
¥
4
¥14,034
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 certain
subsidiaries. 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 31.
(6) Other mainly includes bifurcated embedded derivatives carried at fair value, which are presented in Deposits and Long-term debt.
F-117
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impact of Derivatives on the Consolidated Statements of Income
The following table provides more detailed information regarding the derivative-related impact on the
accompanying consolidated statements of income for the fiscal years ended March 31, 2018, 2019 and 2020:
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)
2018
2019
2020
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)
Interest rate
contracts . . . . . . . .
¥ —
¥ 51
¥ 51
¥ —
¥ 6
¥
6
¥ —
¥(173)
¥(173)
Foreign exchange
contracts . . . . . . . .
(163)
—
(163)
(347)
Equity
contracts . . . . . . . .
Commodity
contracts . . . . . . . .
Credit derivatives . . . .
Other . . . . . . . . . . . . .
—
—
—
3
(260)
(260)
6
(2)
(22)
6
(2)
(19)
—
—
—
(7)
—
80
—
(40)
(70)
(347)
(429)
80
—
(40)
(77)
—
—
—
(5)
—
30
—
15
(31)
(429)
30
—
15
(36)
Total
. . . . . . . . .
¥(160)
¥(227)
¥(387)
¥(354)
¥(24)
¥(378)
¥(434)
¥(159)
¥(593)
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.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The table below summarizes certain information regarding protection sold through credit derivatives as of
March 31, 2019 and 2020:
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)
F-119
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020:
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)
¥303,870
93,671
2,453
399,994
¥2,125,006
279,892
6,826
2,411,724
¥494,040
49,681
—
543,721
¥2,922,916
423,244
9,279
3,355,439
¥(63,855)
3,358
(18)
(60,515)
—
—
—
28,296
99,035
127,331
—
—
—
28,296
99,035
127,331
(3)
(1,195)
(1,198)
Investment grade(2) . . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000
—
28,296
48,296
182,306
7,595
190,398
380,299
14,950
—
5,316
20,266
217,256
7,595
224,010
448,861
(1,820)
(165)
(5,205)
(7,190)
Total index and basket credit default swaps
sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total credit default swaps sold . . . . . . . . . . . . . . . .
Other credit derivatives sold
Investment grade . . . . . . . . . . . . . . . . . . . . . .
Total credit derivatives . . . . . . . . . . . . . . . . . . . . . .
48,296
448,290
507,630
2,919,354
20,266
563,987
576,192
3,931,631
(8,388)
(68,903)
—
¥448,290
—
¥2,919,354
—
¥563,987
—
¥3,931,631
—
¥(68,903)
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-120
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 ¥35 billion
and ¥2,687 billion, respectively, at March 31, 2019, and approximately ¥65 billion and ¥3,544 billion,
respectively, at March 31, 2020.
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, 2019 and 2020 was approximately ¥0.6 trillion and ¥0.6 trillion, respectively, for which the MUFG
Group has posted collateral of approximately ¥85 billion and ¥152 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 ¥84 billion and ¥56 billion, respectively, as of March 31,
2019 and ¥58 billion and ¥80 billion, respectively, as of March 31, 2020.
24. 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,
2019 and 2020. 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 ¥468.9 billion and ¥455.8 billion at
March 31, 2019 and 2020, respectively, which are syndicated out to third parties. The contractual or notional
F-121
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, 2019:
Maximum
potential/
Contractual
or Notional
amount
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,901
3,256
58,025
11,520
53
¥76,755
At March 31, 2020:
Maximum
potential/
Contractual
or Notional
amount
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,098
3,058
58,836
13,142
88
¥79,222
Note:
(1) Credit derivatives sold by the MUFG Group are excluded from this presentation.
Amount by expiration period
1 year
or less
1-5 years
(in billions)
¥
¥ 2,792
2,332
29,734
5,884
12
¥40,754
838
784
20,921
420
13
¥22,976
1 year
or less
1-5 years
(in billions)
¥
¥ 3,109
2,160
36,021
6,752
8
¥48,050
763
738
14,543
451
73
¥16,568
Over
5 years
¥
271
140
7,370
5,216
28
¥13,025
Over
5 years
¥
226
160
8,272
5,939
7
¥14,604
Amount by expiration period
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-122
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, 2019 and 2020 are excluded from this presentation, as they are disclosed in Note 23.
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, 2019 and 2020, there
were liabilities of ¥11,520 billion and ¥13,142 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, 2019 and 2020, the carrying amounts of the liabilities related to guarantees and similar
instruments set forth above were ¥1,051,297 million and ¥1,130,522 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 ¥1,005,951 million and ¥1,090,921 million as of
March 31, 2019 and 2020, respectively. Credit derivatives sold by the MUFG Group at March 31, 2019 and 2020
are excluded from this presentation, as they are disclosed in Note 23. In addition, Other liabilities include an
allowance for off-balance sheet instruments of ¥96,946 million and ¥30,911 million at March 31, 2019 and 2020,
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-123
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, 2019 and 2020. 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, 2019:
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At March 31, 2020:
Standby letters of credit and financial guarantees . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
Amount by borrower grade
Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2)
¥17
36
¥53
Normal
¥3,984
2,904
Close
Watch(1)
(in billions)
¥ 93
96
¥6,888
¥189
Not
rated
¥ 3
29
¥32
Not
rated
¥ 4
22
¥26
Maximum
potential/
Contractual
or Notional
amount
¥3,901
3,256
¥7,157
Maximum
potential/
Contractual
or Notional
amount
¥4,098
3,058
¥7,156
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-124
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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,
2020, approximately 67% of these commitments will expire within one year, 30% 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, 2019 and 2020:
2019
2020
(in billions)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit
Commercial letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to make investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥77,273
1,057
240
5
¥76,398
757
247
5
Commitments to extend credit, which generally have fixed expiration dates or other termination clauses, are
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 25.
25. 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-125
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, 2019 and 2020:
Consolidated VIEs
Consolidated assets
At March 31, 2019:
Total
Cash and
due from
banks
Interest-earning
deposits in
other banks
Trading
account
assets
(in millions)
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 . . . . . . .
Other . . . . . . . . . . . . . . . . . .
—
—
362
Total consolidated assets
¥ 26,101
14,113
¥ 3,005 ¥1,424,444 ¥ 5,124,462 ¥ 27,824
— 171,452
477,239
18,118
2,214
—
—
8,953
1,635
—
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
Asset-backed conduits . . . . . . . . . . . . . . . . . ¥ 6,691,362 ¥
Investment funds . . . . . . . . . . . . . . . . . . . . .
Special purpose entities created for
6,852
(in millions)
— ¥ 4,678,588
—
—
¥ 1,552,572 ¥ 460,202
1,694
5,158
structured financing . . . . . . . . . . . . . . . . .
Repackaged instruments . . . . . . . . . . . . . . .
Securitization of the MUFG Group’s
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust arrangements . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated liabilities before
114,469
277,179
—
—
609
48,014
111,523
174,215
2,337
54,950
10,167,632
7,881,332
32,584
—
7,616,575
—
— 10,162,231
—
8,611
5,401
— 264,757
22,499
1,474
elimination . . . . . . . . . . . . . . . . . . . . . . . .
25,171,410
7,616,575
4,735,822
12,007,173
811,840
The amounts eliminated in
consolidation . . . . . . . . . . . . . . . . . . . . . .
(14,676,389)
(50,396)
(2,996,041)
(11,517,019)
(112,933)
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 . . . . . . . . . . . . . . . . . . ¥
(9,922,307)
(7,566,179)
(1,719,246)
(121)
(636,761)
572,714 ¥
— ¥
20,535
¥
490,033 ¥ 62,146
F-126
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidated VIEs
Consolidated assets
At March 31, 2020:
Total
Cash and
due from
banks
Interest-earning
deposits in
other banks
Trading
account
assets
(in millions)
Investment
securities
Loans
All other
assets
493,757
Asset-backed conduits . . . . ¥ 6,263,082 ¥ 102,781
—
Investment funds . . . . . . . .
Special purpose entities
created for structured
financing . . . . . . . . . . . .
Repackaged instruments . .
Securitization of the
MUFG Group’s
assets . . . . . . . . . . . . . . . 10,956,261
7,527,539
31,295
Trust arrangements . . . . . .
Other . . . . . . . . . . . . . . . . .
204,047
249,529
—
—
350
—
1,330
¥ 31,625
16,482
¥ 12,989 ¥1,195,283 ¥ 4,913,939 ¥
34,121
314,074
6,465
— 129,080
2,658
—
—
42,052
—
118,776
119,348
86,859
82,041
512
—
654
2,055
—
336,546
—
— 10,933,580
6,441,864
6,885
745,846
—
22,681
2,629
22,005
Total consolidated assets
before elimination . . . . . 25,725,510
104,461
53,474
705,661 2,094,026 22,502,475 265,413
The amounts eliminated in
consolidation . . . . . . . . .
Total consolidated
(6,877,849) (103,615)
(23,427)
(10,592)
(289,567)
(6,429,880)
(20,768)
assets . . . . . . . . . . . . . . . ¥18,847,661 ¥
846
¥ 30,047
¥695,069 ¥1,804,459 ¥16,072,595 ¥244,645
Consolidated liabilities
Total
Deposits
Other short-term
borrowings
Long-term
debt
All other
liabilities
Asset-backed conduits . . . . . . . . . . . . . . . ¥ 6,253,318 ¥
Investment funds . . . . . . . . . . . . . . . . . . . .
Special purpose entities created for
15,817
(in millions)
— ¥ 4,327,685
—
—
¥ 1,478,921 ¥
5,546
446,712
10,271
structured financing . . . . . . . . . . . . . . .
Repackaged instruments . . . . . . . . . . . . . .
Securitization of the MUFG Group’s
assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust arrangements . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated liabilities before
114,357
251,056
—
—
10,924,830
7,522,190
27,302
—
6,743,261
—
—
65,965
16,008
—
5,989
112,474
163,833
10,077,839
—
1,321
1,883
21,258
830,983
778,929
19,992
elimination . . . . . . . . . . . . . . . . . . . . . .
25,108,870
6,743,261
4,415,647
11,839,934
2,110,028
The amounts eliminated in
consolidation . . . . . . . . . . . . . . . . . . . . .
The amount of liabilities with recourse to
the general credit of the MUFG
Group . . . . . . . . . . . . . . . . . . . . . . . . . .
(15,045,398)
(703)
(2,526,893)
(11,374,581) (1,143,221)
(9,465,320) (6,742,558)
(1,857,923)
(1)
(864,838)
Liabilities of consolidated VIEs for which
creditors or beneficial interest holders
do not have recourse to the general
credit of the MUFG Group . . . . . . . . . . ¥
598,152 ¥
— ¥
30,831
¥
465,352 ¥
101,969
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In general, the creditors or beneficial interest holders of consolidated VIEs have recourse not only to the
assets of those VIEs of which they are creditors or beneficial interest holders, but also to other assets of the
MUFG Group, since the MUFG Group is also contractually required to provide credit enhancement or program-
wide liquidity to these VIEs.
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, 2019 and 2020:
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 . . .
Other . . . . . . . . . .
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
44,806
478,252
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
Non-consolidated VIEs
At March 31, 2020: 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 . . . . . . ¥ 27,700,099 ¥ 5,836,895 ¥ 4,797,551 ¥
190 ¥1,737,979 ¥3,059,382 ¥
— ¥
— ¥
—
Investment
funds . . . . . . . .
55,644,434
1,918,403
1,712,037
437,858
525,022
724,253
24,904 356,679 356,679
Special purpose
entities created
for structured
financing . . . . .
Repackaged
37,026,192
3,601,834
2,764,156
392,588
35,774 2,317,128
18,666
6,058
6,058
instruments . . .
Other . . . . . . . . . .
8,215,327
54,962,702
3,030,263
2,940,349
2,931,617
2,314,142
394,478 2,123,058
191,646
361,184
52,897
— 1,995,985 126,511
—
41,693
—
41,693
Total . . . . . . ¥183,548,754 ¥17,327,744 ¥14,519,503 ¥1,416,760 ¥4,421,833 ¥8,457,932 ¥222,978 ¥404,430 ¥404,430
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
on-balance sheet assets and the maximum exposure to loss primarily comprises the remaining undrawn
commitments.
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
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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, mainly, 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
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
Other
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.
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
F-135
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
26. COMMITMENTS AND CONTINGENT LIABILITIES
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 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 ¥24,983 million and
¥29,438 million as of March 31, 2019 and 2020, 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, 2018, 2019 and 2020, there was a negative impact of nil, ¥15,632 million and
¥7,800 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.
F-136
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
27. FEES AND COMMISSIONS INCOME
Disaggregation of Contract Revenue
Details of fees and commissions income for the fiscal years ended March 31, 2018, 2019 and 2020 were as
follows:
2018
2019
2020
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)
¥
53,483
169,300
78,239
212,515
258,728
159,481
112,399
44,160
49,223
40,573
284,691
¥
(in millions)
52,624
¥
168,756
73,176
225,877
233,448
147,597
115,002
44,962
46,918
45,160
285,058
53,684
169,407
66,025
238,112
221,494
184,559
119,919
46,322
44,415
49,764
308,351
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,462,792
¥1,438,578
¥1,502,052
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 29. 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 29 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 Business 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 Business Group (“JCIB”), Global Corporate Investment Banking
Business 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-137
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 and 2020, receivables from contracts with customers of ¥185 billion and ¥192 billion,
respectively, were included primarily in Other assets. As of March 31, 2019 and 2020, contract liabilities of
¥8 billion and ¥25 billion, respectively, were included in Other liabilities.
Among the balance of contract liabilities as of March 31, 2020, ¥12 billion is a remaining performance
obligation related to an insurance agency service which a certain subsidiary of the MUFG Group entered into as a
single performance obligation to be satisfied as the service is rendered over the next 20 years.
28. 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-138
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net trading gains (losses) for the fiscal years ended March 31, 2018, 2019 and 2020 were comprised of the
following:
Interest rate and other derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities, excluding derivatives . . . . . . . . . . . . . . . . . . . . .
2018
2019
2020
(in millions)
¥(226,788) ¥ (24,031) ¥(159,045)
924,418
192,931
153,674
Trading account profits (losses)—net
Foreign exchange derivative contracts(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(73,114)
(159,986)
168,900
(354,401)
765,373
(434,052)
Net trading gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(233,100) ¥(185,501) ¥ 331,321
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 gains (losses) related to the fair value option.
For further information on the methodologies and assumptions used to estimate fair value, see Note 31,
which also shows fair values of trading account securities by major category. Note 23 discloses further
information regarding the derivative-related impact on Trading account profits (losses)—net by major category.
29. 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 30 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-139
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. From the fiscal year ended March 31, 2020, this business group also covers
Bank Danamon. 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.
The MUFG Group made modifications to the MUFG Group’s internal management accounting rules and
practices to clarify the responsibility for profits of each business segment, effective April 1, 2019. Major rule
changes are (i) reallocation of overseas Japanese corporates business in MUFG Americas Holdings previously
included in the Global Commercial Banking Business Group into the Japanese Corporate & Investment Banking
Business Group due to the refinement of definition, (ii) reallocation of operating expenses among Business
Groups based on cost drivers due to the refinement of definition, and (iii) allocation of adjustments related to the
F-140
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
derivative counterparty risk previously included in Other to the Customer Business Groups and the Global
Markets Business Group that held the derivative assets. These modifications had the following impact for the
fiscal years ended March 31, 2018 and 2019:
‰
‰
increasing the operating profits of the Global Corporate & Investment Banking Business Group by
¥1.8 billion for the fiscal year ended March 31, 2018, the Retail & Commercial Banking Business
Group by ¥1.9 billion for the fiscal year ended March 31, 2019, the Global Markets Business Group and
Other by ¥6.3 billion and ¥29.7 billion, respectively for the fiscal year ended March 31, 2018, and
¥5.1 billion and ¥30.6 billion, respectively for the fiscal year ended March 31, 2019; and
reducing the operating profits of the Retail & Commercial Banking Business Group by ¥0.5 billion for
the fiscal year ended March 31, 2018, the Global Corporate & Investment Banking Business Group by
¥10.4 billion for the fiscal year ended March 31, 2019, the Japanese Corporate & Investment Banking
Business Group and the Global Commercial Banking Business Group by ¥18.6 billion and ¥18.7 billion,
respectively for the fiscal year ended March 31, 2018, and ¥13.8 billion and ¥13.4 billion, respectively
for the fiscal year ended March 31, 2019.
Prior period business segment information has been restated to enable comparison between the relevant
amounts for the fiscal years ended March 31, 2018, 2019 and 2020.
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
(in billions)
¥1,582.5
781.6
463.4
246.4
71.8
800.9
1,226.3
¥ 356.2
¥1,522.0
737.1
457.2
243.8
36.1
784.9
1,221.3
¥ 300.7
¥1,501.6
721.1
439.0
248.0
34.1
780.5
1,203.0
¥ 298.6
¥523.2
433.0
148.9
225.1
59.0
90.2
314.8
¥208.4
¥545.2
415.0
150.2
210.3
54.5
130.2
309.3
¥235.9
¥551.1
420.7
164.2
205.0
51.5
130.4
315.8
¥235.3
¥652.8
(3.3)
(3.3)
—
—
656.1
468.8
¥184.0
¥690.5
(1.3)
(1.3)
—
—
691.8
483.5
¥207.0
¥190.4
83.8
—
83.8
—
106.6
119.4
¥ 71.0
¥203.0
93.2
—
93.2
—
109.8
124.6
¥ 78.4
¥804.6
0.1
¥243.0
94.6
0.9
—
(0.8)
804.5
571.8
¥232.8
2.5
92.2
(0.1)
148.4
171.7
¥ 71.3
¥364.3
236.9
92.1
146.8
(2.0)
127.4
226.7
¥137.6
¥383.8
254.0
110.9
142.4
0.7
129.8
241.5
¥142.3
¥376.8
270.5
115.2
137.6
17.7
106.3
247.8
¥129.0
F-141
¥3,313.2 ¥574.5 ¥ 30.4 ¥3,918.1
2,029.9
1,532.0
369.3
128.6
701.1
702.1
128.8
235.1
(12.0)
146.2
183.5
(22.9)
(32.0)
1,119.7
667.2
243.0
1,781.2
2,356.0
(98.2) 1,888.2
2,717.5
132.8
¥ 957.2 ¥345.8 ¥(102.4) ¥1,200.6
205.2
228.7
¥3,344.5 ¥479.8 ¥ (11.9) ¥3,812.4
1,861.0
1,498.0
303.9
59.1
717.0
689.7
91.3
227.8
(13.9)
90.0
200.4
(54.9)
(86.4)
1,145.2
620.9
94.9
1,846.5
2,380.2
(71.0) 1,951.4
2,740.1
136.4
¥ 964.3 ¥256.3 ¥(148.3) ¥1,072.3
175.9
223.5
¥3,477.1 ¥575.2 ¥ 15.7 ¥4,068.0
1,878.1
1,507.0
358.4
12.7
721.8
682.8
102.4
123.1
(12.6)
247.9
85.4
(64.8)
(7.9)
930.3
605.4
342.4
1,970.1
2,510.1
2,189.9
2,893.0
¥ 967.0 ¥343.0 ¥(135.0) ¥1,175.0
3.0
150.7
216.8
232.2
Fiscal year ended
March 31, 2018:
Net revenue: . . . . . . . . . . . .
BK and TB(1): . . . . . . .
Net interest
income . . . . . .
Net fees . . . . . . .
. . . . . . . . .
Other
Other than BK
and TB . . . . . . . . . .
Operating expenses . . . . . .
Operating profit (loss) . . . .
Fiscal year ended
March 31, 2019:
Net revenue: . . . . . . . . . . . .
BK and TB(1): . . . . . . .
Net interest
income . . . . . .
Net fees . . . . . . .
. . . . . . . . .
Other
Other than BK
and TB . . . . . . . . . .
Operating expenses . . . . . .
Operating profit (loss) . . . .
Fiscal year ended
March 31, 2020:
Net revenue: . . . . . . . . . . . .
BK and TB(1): . . . . . . .
Net interest
income . . . . . .
Net fees . . . . . . .
. . . . . . . . .
Other
Other than BK
and TB . . . . . . . . . .
Operating expenses . . . . . .
Operating profit (loss) . . . .
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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, 2018, 2019 and 2020 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
2018
2019
2020
¥1,201
241
(287)
215
71
7
228
—
(22)
96
(88)
(in billions)
¥1,175
¥1,072
(322)
(34)
920
182
(618)
(305)
(403)
(3)
(145)
47
210
283
— (384)
(4)
62
(131)
(118)
(38)
(142)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,662
¥ 871
¥ 433
30. 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-142
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, 2018, 2019 and 2020, 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)
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, 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
year . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2020:
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
194,070,495
49,987,389
21,535,278
27,992,986
11,642,751
305,228,899
1,596,794 ¥ 2,223,984 ¥
2,565,895
1,051,164
89,412 ¥ 1,326,426 ¥
218,623
1,174,200
566,222 ¥
359,736
5,802,838
5,369,618
(969,101)
1,172,820
(129,211)
152,226
206,486
433,220
(1,001,477)
1,113,913
(140,372)
142,568
191,323
305,955
year . . . . . . . . . . . . . . . . . . . .
207,532,337
60,587,867
19,099,410
30,845,864
13,687,805
331,753,283
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-143
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,
2019 and 2020:
2019
2020
(in millions)
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
828,839
8,453,191
¥
971,870
12,662,558
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 9,282,030
¥13,634,428
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥26,991,984
¥31,374,451
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,779,340
¥ 9,040,512
Loans—net of unearned income, unamortized premiums and deferred loan fees . . .
¥51,678,674
¥53,079,542
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥49,044,234
¥49,291,478
Funds borrowed:
Call money, funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under securities lending transactions . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
¥
67,246
9,459,547
47,886
5,107,832
2,697,463
¥
276,040
13,476,026
176,998
4,733,138
2,733,242
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥17,379,974
¥21,395,444
Trading account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,897,844
¥ 6,575,570
31. 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-144
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
F-145
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
securities include CLOs backed by general corporate loans, which are classified in asset-backed securities. The
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 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.
F-146
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 included in Other
liabilities 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-147
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.
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, 2019 and 2020:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Available-for-sale 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 . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Nonmarketable equity securities(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(4)
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
22,550,086
10,684,983
283,434
33,518,503
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
F-148
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2019
Level 1
Level 2
Level 3
Fair Value
(in millions)
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(5) . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(6)
¥
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
At March 31, 2020
Assets
Trading account assets:
Level 1
Level 2
Level 3
Fair Value
(in millions)
Trading securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,891,635
¥17,061,985
¥
525,946
¥32,479,566
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Available-for-sale 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 . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Nonmarketable equity securities(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(4)
3,805,039
—
9,356,427
11
—
—
—
—
1,730,158
216,834
74,488
1,550
140,796
—
—
350,128
93,479
417,766
2,537,559
9,037,539
590,556
7,787
2,959,580
1,067,591
14,680,632
10,758,790
3,723,087
87,285
10
111,460
—
—
1,052
144
—
416,259
6,651
—
101,840
60,108
13,329
9,046
7,491
27,492
2,750
4,155,167
93,479
9,775,245
2,537,714
9,037,539
1,006,815
14,438
2,959,580
2,899,589
14,957,574
10,846,607
3,733,683
235,572
27,502
114,210
22,126,881
11,798,392
274,930
34,200,203
19,897,187
—
2,229,694
—
—
—
—
—
4,471,499
4,471,499
—
1,054,186
3,565,692
2,952,820
792,027
1,262,718
1,459,378
380,278
1,328,601
56,878
296,819
296,819
—
45,913
— 23,462,879
2,952,820
—
3,037,488
15,767
1,272,826
10,108
1,459,393
15
382,255
1,977
1,469,476
140,875
163,066
106,188
4,808,281
39,963
4,768,318
—
39,963
39,963
1,136,800
36,701
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥42,761,035
¥43,883,741
¥
937,648
¥87,582,424
F-149
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020
Level 1
Level 2
Level 3
Fair Value
(in millions)
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(5) . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(6)
¥
555,664
300,215
153,098
3,360
143,757
—
—
4,663,068
—
¥
3,718
13,851,205
10,038,198
3,596,589
121,229
14
95,175
143,103
514,003
¥
— ¥
56,631
14,079
4,041
11,713
26,775
23
—
6,606
559,382
14,208,051
10,205,375
3,603,990
276,699
26,789
95,198
4,806,171
520,609
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,518,947
¥14,512,029
¥
63,237
¥20,094,213
Notes:
(1)
(2) Excludes certain investments valued at net asset value of private equity funds whose fair values were ¥40,400 million and ¥66,918
Includes securities measured under the fair value option.
million at March 31, 2019 and 2020, respectively. The amounts of unfunded commitments related to these private equity funds were
¥94,483 million and ¥102,743 million at March 31, 2019 and 2020, respectively.
(3) Excludes certain investments valued at net asset value of real estate funds and private equity and other funds whose fair values at
March 31, 2019 were ¥17,583 million and ¥9,921 million, respectively, and those at March 31, 2020 were ¥23,233 million and ¥18,862
million, respectively. The amounts of unfunded commitments related to these real estate funds and private equity and other funds at
March 31, 2019 were ¥2,054 million and nil, respectively, and those at March 31, 2020 were ¥1,494 million and nil, respectively.
(4) Mainly comprises securities received as collateral that may be sold or repledged under securities lending transactions, money in trust for
(5)
(6)
segregating cash deposited by customers on security transactions and derivative assets designated as hedging instruments.
Included in Other liabilities.
Includes other short-term borrowings, long-term debt, bifurcated embedded derivatives carried at fair value and derivative liabilities
designated as hedging instruments.
F-150
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, 2019 and
2020. 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,
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)
Debt securities
. . . . . . . . . . . . . . . ¥ 827,493 ¥ 23,848(2)
¥ (1,341)
¥454,048 ¥ — ¥(316,384) ¥(213,944) ¥ 29,445
¥ (17,839)
¥ 785,326
¥ 18,299(2)
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 securities . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,430
161,172
160,814
28,359
28,359
8,660
—
6,760
—
(2,298)(3)
(2,298)
(1,022)(7)
1,047
23,092
863
611
41,141
684,637
33,450
44,126
12,119
14,596
6,736
(10,685)
683
789
(282)
18,692
1,698
2,266
(5,871)(2)
12,397
(10,997)
18,756
32
(26,059)
—
—
—
(1,341)
—
—
(744)
57
(419)
(374)
6
(14)
117,619
2,040
—
315,865
—
18,524
787
—
210
13
564
—
350,660
6,415(3)
(9,791)
273,201
— (118,377)
(1,798)
—
(317)
(4,188)
—
29,423(5)
(43)
(17,796)(5)
792
31,384
5
286
—
—
— (195,851)
—
—
(358)
—
—
(682)
—
(119)
—
—
—
(228)
—
(335)
—
—
(5,678)
(194,324)
—
(9,437)
37
(25,601)
(322)
(17,680)
(1)
43,641
—
—
—
22
20,192
(7,013)
27,230(5)
(25)
—
—
—
—
—
—
10,332
1,494
(4,247)
13,085
—
—
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)
— (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
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
(25,528) ¥(19,629)(4)
¥ 6,670
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
(25,528) ¥(19,629)
¥ 6,670
¥
¥
— ¥16,759 ¥
— ¥ (18,499) ¥ 44,727(6) ¥ 35,230(6) ¥
65,648
¥(10,778)(4)
— ¥16,759 ¥
— ¥ (18,499) ¥ 44,727
¥ 35,230
¥
65,648
¥(10,778)
F-151
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total gains (losses)
for the period
March 31,
2019
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,
2020
Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2020
Assets
Trading account assets:
Trading securities(1)
Debt securities
. . . . . . . . . . . . . . . ¥ 785,326 ¥(22,419)(2)
¥
—
¥227,656 ¥ — ¥(214,183) ¥(225,980) ¥ 52,140
¥ (76,594)
¥ 525,946
¥(18,915)(2)
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
792
31,384
589
(279)
35,181
627,678
35,148
55,143
36,170
(4,189)
18,191
2,862
949
18,357
(695)
(23,494)
(1,239)
2,699
4,503(2)
21,290
(21,429)
5,188
(174)
(372)
—
—
—
—
—
—
178
(24)
89
110
(1)
4
93,957
631
—
113,239
—
19,829
714
—
3
96
615
—
— (92,748)
(3,937)
—
(18)
(4,721)
—
24,882(5)
(1,520)
(47,816)(5)
1,052
144
(12)
(13)
— (23,837)
— (93,655)
—
—
(6)
—
—
(1,449)
—
—
—
—
—
(777)
—
(672)
—
—
(10,649)
(207,509)
—
(3,083)
(33,463)
(12,025)
4,858
(11,305)
—
(14,991)
—
—
—
27,258(8)
40,857
2,254
35,444(5)
(41)
—
3,200
—
—
(27,258)(8)
—
(44,033)
(8,056)
(32,151)(5)
(355)
—
(3,471)
—
416,259
6,651
101,840
3,477
(750)
5,005
(4,222)
717
2,727
—
(18,815)
(387)
312
(16,742)(2)
8,046
(21,483)
(2,846)
(167)
(292)
283,434
(2,402)(3)
804
281,041
(24)
(300,023)
15,201
(3,101)
274,930
(934)(3)
19,246
4,196
—
(458)
(5,932)
(6,734)
—
15,201(5)
—
(3,101)(5)
15,767
10,108
—
(934)
1,625
342
—
125
(1,085)
(203)
—
—
(375)
828
663
—
—
274,110
5,440
12,718
12,718
44,324
—
—
—
—
—
(1)
—
—
(23)
(163)
—
— (261,661)
—
(25,533)
—
—
(35)
(2,527)
—
(35)
—
(2,527)
(187)
— (29,334)
—
—
—
—
—
—
—
—
—
—
—
(598)
(598)
—
15
—
1,977
140,875
106,188
39,963
39,963
36,701
—
—
—
863(3)
863
(10,136)(7)
607
¥566,453 ¥ (1,449) ¥(246,068) ¥(559,688) ¥108,198
¥(124,326)
¥ 881,017
¥(45,864)
(414)
(414)
¥
¥
— ¥ 2,258 ¥
— ¥ (21,133) ¥
333(6) ¥ (46,302)(6) ¥
6,606
¥ 9,648(4)
— ¥ 2,258 ¥
— ¥ (21,133) ¥
333
¥ (46,302)
¥
6,606
¥ 9,648
securities . . . . . . . . . . . . . . . . . . .
15
—
Commercial mortgage-backed
securities . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . .
Other debt securities . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . .
Nonmarketable equity securities . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,038
131,455
126,484
27,820
27,820
32,378
—
(1,944)
—
2,585(3)
2,585
(10,105)(7)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,165,128 ¥(27,838)
Liabilities
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
65,648 ¥ (5,388)(4)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
65,648 ¥ (5,388)
¥
¥
¥
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 (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 vendors. Transfers into (out of) Level 3 for Foreign exchange contracts—net were mainly caused by the
valuation using certain unobservable input.
(6) Transfers into (out of) Level 3 for bifurcated embedded derivatives in Other 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 Fees and commissions income and Other non-interest income.
(7)
(8) Transfers relate to the reclassification of certain securities.
F-152
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, 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
F-153
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
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020
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 . . . . .
¥ 15,767 Return on equity method Probability of default
0.2%~1.3%
Recovery rate
55.0%~90.0%
Market-required return on capital 8.0%~10.0%
92,025 Discounted cash flow
389,170
Internal model(4)
6,651 Discounted cash flow
86,734 Return on equity method Probability of default
Probability of default
Recovery rate
Asset correlations
Discount factor
Prepayment rate
Probability of default
Recovery rate
Liquidity premium
1.2%~5.3%
60.0%~76.0%
1.0%
1.1%~1.4%
21.0%
0.0%~99.0%
57.8%
2.4%
0.0%~25.0%
Recovery rate
60.0%~90.0%
Market-required return on capital 8.0%~10.0%
Liquidity premium
1.0%
0.4%
69.9%
9.9%
5.0%
68.2%
1.0%
1.4%
21.0%
—(3)
57.8%
2.4%
0.3%
79.8%
9.4%
1.0%
Equity securities . . . . . . . .
27,144 Discounted cash flow
At March 31, 2020
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Trading derivatives—net:
Interest rate contracts—net . . . .
(728) Option model
(in millions)
Foreign exchange
contracts—net . . . . . . . . . . . .
5,005
Option model
Equity contracts—net . . . . . . . .
(10,038) Option model
6,166
Discounted cash flow
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Volatility
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Correlation between underlying assets
Volatility
Correlation between foreign exchange
rate and equity
Correlation between equities
Volatility
Term of litigation
32.9%~62.5%
16.7%~60.0%
0.0%~100.0%
30.0%~70.0%
15.8%~60.0%
60.0%
7.5%~17.0%
(58.4)%~56.9%
19.5%~81.0%
24.2%~32.0%
0.1 year~1.1 years
Notes:
(1) The fair value as of March 31, 2019 and 2020 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.”
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)
F-154
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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.
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.
F-155
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
F-156
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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
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, 2019 and 2020:
2019
Total
2020
Level 1
Level 2
Level 3
carrying value Level 1 Level 2
Level 3
Total
carrying value
(in millions)
Assets
. . . . ¥
Investment securities(1)(2)
Loans . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . .
Collateral dependent
— ¥ 80,779 ¥
4,208
9,104 250,678
— 77,506
2,656
—
¥ 84,987
262,438
77,506
¥ — ¥15,473
9,199
—
2,548
—
¥
2,703
260,282
73,573
¥ 18,176
272,029
73,573
2,656
loans . . . . . . . . . . . . . .
—
Premises and equipment . . . . .
—
Intangible assets . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . .
—
Other assets . . . . . . . . . . . . . . . 136,528
9,104 173,172
— 35,352
— 19,635
—
—
9,774
49,756
184,932
35,352
19,635
—
196,058
Investments in equity
method investees(1) . . . 136,528
—
Other . . . . . . . . . . . . . . . .
49,756
— 9,774
— 186,284
9,774
2,548
—
—
—
73,015
73,015
—
186,709
9,199
37,109
—
—
453
— 283,032
18,609
—
198,456
37,109
453
283,032
91,624
—
—
5,911
12,698
78,926
12,698
Total . . . . . . . . . . . . ¥139,184 ¥139,639 ¥319,647
¥598,470
¥75,563 ¥24,672
¥602,188
¥702,423
Notes:
(1) Excludes certain investments valued at net asset value of ¥8,866 million and ¥12,935 million at March 31, 2019 and 2020, respectively.
The unfunded commitments related to these investments are ¥12,242 million and ¥17,216 million at March 31, 2019 and 2020,
respectively. These investments are in private equity funds.
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, 2019 and 2020:
2019
2020
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral dependent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,153
4,762
25,391
31,345
118,108
(in millions)
¥ (50,785) ¥ (2,171)
47,359
4,688
42,671
16,517
3,732
— 383,810
46,237
21,672
24,565
59,557
51,645
7,912
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥188,378
¥495,484
F-157
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investment securities for the year ended March 31, 2019 and 2020 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-158
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.
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, 2018, 2019
and 2020 related to the eligible instruments for which the MUFG Group elected the fair value option:
2018
2019
2020
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)
. . . . . ¥(148,242)
¥(267,507) ¥(415,749) ¥208,952
¥186,578
¥395,530
¥837,832
¥(596,017) ¥241,815
Total
. . . . . . . . ¥(148,242)
¥(267,507) ¥(415,749) ¥208,952
¥186,578
¥395,530
¥837,832
¥(596,017) ¥241,815
Financial liabilities:
Other short-term
borrowings(2) . . . . ¥
Long-term debt(2)
. .
5,902
7,554
Total
. . . . . . . . ¥ 13,456
¥
¥
— ¥
—
5,902
7,554
¥ (5,559)
(8,322)
— ¥ 13,456
¥ (13,881)
¥
¥
— ¥ (5,559) ¥
—
(8,322)
5,194
(8,087)
— ¥ (13,881) ¥ (2,893)
¥
¥
— ¥
5,194
— (8,087)
— ¥ (2,893)
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.
The following table presents the differences between the aggregate fair value and the aggregate remaining
contractual principal balance outstanding as of March 31, 2019 and 2020 for long-term debt instruments for
which the fair value option has been elected:
Financial liabilities:
Long-term debt
. . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . .
2019
2020
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
¥358,730
¥358,730
¥325,808
¥325,808
¥(32,922)
¥(32,922)
¥319,149
¥319,149
¥304,067
¥304,067
¥(15,082)
¥(15,082)
F-159
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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, 2019 and 2020:
At March 31, 2019
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 . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for credit losses(1)
. . . . . .
. . . . . . . . . . . . . . . . . . . . .
Other financial assets(2)
¥ 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 and other short-term
borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . .
¥ 30,443
168,846
199,289
2,450
25,225
913
¥ 30,443
168,899
199,342
2,450
25,225
913
¥ — ¥ 30,443
— 168,899
— 199,342
2,450
—
25,225
—
913
—
¥
9,177
27,790
6,781
9,177
27,968
6,781
—
—
—
9,177
27,968
6,781
—
—
—
—
—
—
—
—
—
F-160
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2020
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 . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for credit losses(1)
. . . . . .
. . . . . . . . . . . . . . . . . . . . .
Other financial assets(2)
¥ 33,283
45,267
1,169
23,996
¥ 33,283
45,267
1,169
23,996
¥33,283
—
—
—
3,444
4,166
117,373
8,494
3,444
4,178
118,497
8,494
—
1,134
3
—
¥
— ¥
45,267
1,169
23,996
3,444
1,042
259
8,494
—
—
—
—
—
2,002
118,235
—
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 and other short-term
borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . .
¥ 33,382
170,574
203,956
3,669
31,850
1,017
¥ 33,382
170,631
204,013
3,669
31,850
1,017
¥ — ¥ 33,382
— 170,631
— 204,013
3,669
—
31,850
—
1,017
—
¥
19,057
27,772
7,139
19,057
27,941
7,139
—
—
—
19,057
27,941
7,139
—
—
—
—
—
—
—
—
—
Notes:
(1)
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.
(2) Excludes investments in equity method investees of ¥2,487 billion and ¥2,421 billion at March 31, 2019 and 2020, 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, 2019 and 2020 was not material.
32. 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 ¥6,077 billion and ¥5,247 billion,
in accordance with the statutory reserve requirements under the Companies Act at March 31, 2019 and 2020,
respectively. See Notes 19 and 21 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, 2019 and 2020, approximately ¥5,160 billion and ¥5,696 billion, respectively, of net assets of
consolidated subsidiaries may be restricted as to payment of cash dividends and loans to the parent company.
F-161
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,
2019
2020
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
203,713
16,668,232
12,754,653
3,913,579
7,199,052
6,864,309
334,743
223,725
¥
185,668
16,116,568
12,361,190
3,755,378
8,746,231
8,222,278
523,953
241,441
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥24,294,722
¥25,289,908
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,425,682
277,138
7,187,469
204,885
¥ 1,255,991
30,686
8,758,646
228,098
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,095,174
10,273,421
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,199,548
15,016,487
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
¥24,294,722
¥25,289,908
F-162
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Income
Fiscal years ended March 31,
2018
2019
2020
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 576,332
487,491
88,841
26,073
80,670
24,726
(26,749)
¥306,879
207,161
99,718
28,305
127,117
(20,598)
(8,078)
¥ 376,376
277,472
98,904
33,543
174,500
4,834
(37,272)
— 252,253
3,199
1,508
67,406
14,968
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
682,560
689,077
634,355
Expense:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense to subsidiaries and affiliated companies . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,016
31,426
65,068
1,791
28,168
34,594
108,756
1,657
30,431
26,244
155,774
15,024
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124,301
173,175
227,473
Equity in undistributed net income (loss) of subsidiaries and affiliated
companies—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
672,421
194,390
(108,069)
Income before income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,230,680
2,520
710,292
(8,353)
298,813
(7,142)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,228,160
¥718,645
¥ 305,955
F-163
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Cash Flows
Fiscal years ended March 31,
2018
2019
2020
(in millions)
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,228,160
(799,571)
¥
718,645
(351,775)
¥
305,955
(1,704)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .
428,589
366,870
304,251
Investing activities:
Proceeds from redemption of other investment securities . . . . . .
Proceeds from sales of investment in subsidiaries and affiliated
companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of equity investment in subsidiaries and an affiliated
—
—
—
240,000
455,605
135,581
company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in loans to subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(53,000)
(1,682,576)
(4,361)
(18,346)
(2,112,711)
(9,009)
—
(1,547,178)
(12,572)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,739,937)
(1,684,461)
(1,184,169)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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 . . . . . . . . . . . . . . . . . . . . . . .
1,267,529
1,406,520
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . .
(43,819)
158,603
88,929
114,784
(164,272)
1,844,488
(214,994)
(241,000)
2
(50,022)
(304,538)
(7,791)
861,873
(18,045)
203,713
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . .
¥
114,784
¥
203,713
¥
185,668
33. SUBSEQUENT EVENTS
Approval of Dividends
On June 29, 2020, the shareholders approved the payment of cash dividends of ¥12.5 per share of Common
stock, totaling ¥160,919 million, that were payable on June 30, 2020, to the shareholders of record on March 31,
2020.
* * * * *
F-164
Exhibit
Description
EXHIBIT INDEX
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,
2020***
Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ
Financial Group, Inc. as of and for the fiscal year ended March 31, 2020****
99(c)
Financial Statements and Supplementary Data of Morgan Stanley*****
101.INS
Inline XBRL Instance Document—the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
Exhibit
Description
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page for the Company’s Annual Report on From 20-F for the year ended March 31,
2020, has been formatted in Inline XBRL
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 27, 2020.
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/ HIRONORI KAMEZAWA
Hironori Kamezawa
President & Group Chief Executive Officer
Date: July 10, 2020
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 second
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) 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
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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. Currently, there are
no limits to the number of matters that can be proposed by an eligible shareholder. However, the number of
matters to be proposed by an eligible shareholder will be limited to 10 by an amendment to the Companies Act
which is expected to take effect in 2021. 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:
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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:
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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;
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the consolidation of shares;
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.
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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:
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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.
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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
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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;
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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.
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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.
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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,
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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:
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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;
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‰ 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
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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
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
13
dividends in respect of the deficiency in any subsequent fiscal year, and we will have no obligation to pay the
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 2020 MU FG
01 Be the compa ny w ith e nduring trust Me ssa ge from the Group CE O Allow me to pose t his question to all of you, my MU FG collea gues: What do you consi de r the most important asset for fi na nc ial instituti ons? M y a nsw er? “Trust” – of our c ustomers a nd society. Our c ompany is a ble to do business because of the indispensable trust of our custome rs and soc iety – the trust that our pre de cessors ea rned and be stow ed on us over our long history. T rust is e spe cially relevant right now . H ardly a day passes that we do not hear of new digital tec hnologie s and the deep disruptions they bring t o industry and society. The se disruptions can be unset tling to financia l cust omers in particular, and trust is indispe nsa ble i f they are to use our servic es with confidence . O ur manda te is clea r at M UFG : “Be the compa ny w ith e nduring trust” unde r all c ircumstance s. T his is the re ason for our Code of Conduc t. It lays steppi ng stone s to define the pa th of responsible deci sion-ma king through unc ertain time s. It also informs our da y-to-day behavior and he lps guide us to do the ri ght thing at a ll time s. In other words, our trust is founded on the “right a ctions” you and I take every da y. T he re are times whe n w e struggle to make a dec ision. In such cases, we should refer to the Code of Conduct as our guide. One good w ay to gauge if w e are doing the right t hing is t o ask ourselves: Can we e xpla in our choice s w ith honor to our family and frie nds? If you notice anything that might c ontravene our standards of conduc t – even slightly – re port it immedia tely to your supe rvisor or interna l whistleblowing system. Do not hesita te. Re porting these mat ters is the right thing to do, and is e ve ryone ’s sacred re sponsibility. M UFG Group entities are fully commit ted to cultivating an atmosphere of speaking fre ely without fear. Your coura ge is a ppreciat ed by the firm, w hic h is responsible for responding appropriate ly. N o repercussi ons will eve r be taken against a collea gue w ho makes a sincere, honest report in order to protect w hat’s right. Put simply, the Code of Conduc t is not just for re ading. It is for acti on – l itera lly. Bei ng the compa ny w ith the enduring trust of our custome rs and socie ty depends on ea ch of us – all of us – doing the right thing in our day-to-day work. A lways. ruest standards are wit hin our own he arts. When struggl ing to at work, we should A pril 2020 Hironori K ameza wa M ember of t he Board of Directors, President & G roup CE O
02 Conte nts Contents Messa ge from the Group CEO 01 Introduction Corporate V ision and Code of Conduct 03 Corporate V ision 04 A bout the Code of Conduct · 06 Failure to A bide by the Code of Conduct 07 Role s and Responsi biliti es of Ma na ge rs · 08 Code of Conduc t S tructure of the Code of Conduc t 09 Chapter 1. Customer Focus 10 - Honesty a nd Inte grity11 E nsuring Qual ity 12 Excee ding Customer Expecta tions 13 Chapte r 2. Responsibility as a Corporat e Citizen 14 A dhe rence to L aws and Rules ··· 15 Prevention of Financial Crime 16 Contributing to Society · 17 Cha pte r 3. Atti tudes and Behaviors in the W orkpla ce 18 Chall enge O urselves to Grow 19 Collaborat ive a nd Professional Working E nvironme nt20 Prote cting M UFG ’s Asse ts a nd Property 21 Reporting Problem Situations a nd Se eking Advice 22
3 Corpora te Vision and of Code Conduct Chapter The diagra m below illustrates the relationship betw een our Corporate V ision and Code of Conduc t. O ur Corporat e Vision se rves as a set of values that illustrate our basic policy in conduc ting our busine ss a ctivities, as well a s a guideline for all ac tivit ies of the group. Our Code of Conduct serves as the standard for all group employees to ma ke de cisions 2 and a ct on a dail y basis, and is esse ntia l to realiz ing our Corporat e Vision. Chapter Our M ission 1 Vision Chapte r Our V ision Corpora te Our V alues Chapter 1 Chapter 2 Chapter 3 Conduct of Code Conduct Custome r Responsibility Attitudes in the of Focus a s a Corporate Workplac e Citizen Code Acting to a chieve the Corpora te Vision “ Cul ture” Culture refers to the patterns of thinking a nd behavior share d by all staff. This includes both Introduction explic it written documents, suc h a s our Corpora te Vision and Code of Conduct, and norms that are shared i mplici tly among a ll staff. 03 Corporat e Vision T he corpora te vision serve s as the ba sic polic y in conducting our business act ivitie s, a nd provides guidelines for all group a ctivities. The c orporate vision a lso is the founda tion for management decisions, including formulating ma na ge me nt strategie s a nd management plans, a nd serve s a s the c ore value for all staff. Our M ission T o be a foundation of stre ngth, committe d to meeting the needs of our customers, se rving socie ty, and fostering shared and sustainable grow th for a better worl d.
2 Our Vision — Be the worl d’s most trusted fina nc ial group— Work toge the r to excee d the expec tations of our customers Strive to understand a nd re spond t o the diverse ne eds of our c ustomers. M aintain and expe ct the highest le ve ls of professionalism and e xpertise, supporte d by our c onsolidated stre ngth. Provide re liable and consta nt support to our customers G ive the highest priority to protec ting the interests of our cust omers. P romote he althy, sustainable ec onomic growt h. M aintain a robust orga niz ation tha t i s e ffective, professional , a nd re sponsive. Expand a nd stre ngthen our gl obal pre sence L everage our strengths a nd ca pa bilities to a ttra ct a loya l global customer base . A da pt rapidly to changes in the global ec onomy a nd their i mpac t on the needs of our custome rs. 04
O ur Va lue s Cha pte r Inte grity and Responsibility Strive to be fair, transpare nt, and honest. Alw ays act responsibly i n the best interests of customers and socie ty, building long-term stake holder rela tionships a nd giving back to our communities. 2 Profe ssionalism and T ea mw ork Respect the diversity of our fe llow worke rs and foster a strong spirit of te amwork. Expect the highest levels of professional ism. Chapter Challe nge O urselves to Grow Adopt a global perspec tive to a nti cipate trends and opportunities for growth. Crea te and sustain a responsive and dynamic w orkpla ce w he re e ve ryone can focus on providing outstandi ng custome r service and embrac e new chall enge s. 1 Chapter Conduc t of Code Introduct ion 05
A bout the Code of Conduct (1) T he Code of Conduct is de signed to provide guidance in times of doubt, or when we find it difficult to know if we are making the right choice . (In some cases, the Code of Conduct may be supplemented by additiona l entity or loc ation spec ific guidelines, which provide further spe cific guidance .) (2) In situa tions where you feel uncertain, you should consider the following: Is the conduct in line with the Code of Conduct, and inte rnal and externa l l aws, rules, and regulations? Am I dec eiving myself to rationa lize my be ha vi or? Is there any possibility t ha t others might re ga rd the conduct a s inappropria te? Would I do the same thing to my family or those t ha t a re c lose to me? (3) Al l sta ff must undergo training on the Code of Conduc t once a ye ar, as a general rule . In addition, eac h member of st aff must make an atte st ation, in a form dete rmined by the relevant Group entity, tha t he or she w ill abide by the M UFG Code of Conduct. Phrases to Wa tch Out For Be ca reful if you ca tch yourse lf or others using la nguage such as: “Just this once… ” “E ve ryone else is doing it” “D on’t argue” “ It’s urge nt so we nee d to make an exce ption” “It wouldn’t be ma ture to rock the boa t” Do not fall into the trap of fa iling to think critica lly. T ake the time to think carefully, and do the right thing. 06
4 Fa ilure to Abide by the Code of Conduct All sta ff must abide by the Code of Conduct, as wel l a s a pplic able law s a nd Chapter regulations, a nd rule s, protocols, and proc edures, and other guidelines dete rmined by Group M UFG e nti ties. Any c onduct that fa ils to meet these sta nda rds ma y result in disciplinary mea sures, up to and inc luding t ermination of employment, in a ccorda nc e with the employment regula tions and othe r rules e sta blishe d separate ly by individua l MU FG companies. Staff may be he ld 2 personally re sponsible for c onduct that damages the re putation and t rust of an MU FG company or dama ge s the c ompany’s interests. Chapte r Staff may also be he ld responsible for the action or inaction of othe rs if they fail to ta ke action de spit e knowing about inappropria te behavior or conduc t on the part of others tha t is likely to ha ve a serious negative impa ct on the trust or inte rests of any Group entity, or if they ignore any such conduct despite being in a position 1 of responsibility requiri ng them to know about it. Chapter In additi on, staff conduct may be re ported to the relevant authoritie s, w hic h c ould re sult in a fine , loss of the qua lific ation to work in the financia l industry, and/or even imprisonment. What happens if I ca nnot excee d c ustomer expe ctations or achieve grow th a nd new c ha llenges? Does that mea n I w ill be subje ct to disciplinary me asures for fail ing to abide by the Code of Conduct? T he c ode of conduct contains a mixt ure of different guidelines. Ite ms like “ Acting with honesty and inte grity,” and “Pre vention of fina nc ial crime” must be follow ed at all times. Conduct Ot he rs, inc luding “E xc eeding c ustomer expe ctations” and “growth and challenges” a re of more like t argets that you should aim towa rd. But no me mber of staff will be subject to disciplinary measure s me rely for fai ling to me et these targets. Code Conduct Risk In addition to viola tion of e xisting rules (suc h as regulations), be ha vior tha t i.) is contrary to social norms, ii.) contra ve ne s business cust oms or marke t practic es, or iii.) does not consider things from the customers’ perspe ctive, could be detrimental to the inte rests of Introduc tion stakeholders, such as custome rs and shareholders, and as a re sult, have a negative impact on our corporate va lue , profit, and reputation. T his risk i s c alled “conduc t risk.” 07
Role s a nd Responsibilitie s of M anagers Ma na ge rs have several additiona l roles and responsibilitie s. (“M anager” he re refers pri ma rily to M anaging Directors, Direc tors, a nd general, chief a nd senior managers with re sponsibi lity for leading a team.) 1 L ead by example a nd be proactive a bout acti ng ethica lly in ac cordance w ith the M UF G Corporate V ision a nd the Code of Conduct. 2 Work to ensure that staff unde r your supervision unde rstand the conte nt of the M UF G Corporate Vision a nd the Code of Conduct in a ma nner appropria te to the respective orga niz ation. 3 Foster a n e nvironment where all sta ff feel c omfortable raising c onc erns when they are struggling to reac h a w ork-rela ted de cision or facing a problem. 4 Strictly avoid a ny conduc t tha t c ould be construed as an abuse of your position. T ake appropriate , t ime ly a ction w hen a proble m has arisen, either a ddressing the issue direc tly or escala ting appropriately. The Importa nce of L istening As a supervisor, how do you respond whe n one of your team comes to you w ith a probl em? Do you give the m your atte ntion, or simply ask what they want w ithout even looking up from your desk? When someone comes to you for advice , it is important to ta ke the time to liste n c are fully and w ith a n open mind to w hat they ha ve t o say. Particularly in the ca se of a problem tha t might touc h on the Code of Conduc t, it is vital to take appropria te measure s promptly be fore the proble m gets out of ha nd. Remember: the be tter you a re a s a list ener, the more e ffective you w ill be as a ma nager. 08
3 Structure of the Code of Conduct Chapter The Code of Conduct is organize d into three c ha pte rs. Chapter 1 deals wit h the atti tude w e should adopt wit h our customers. A cting with honesty and i nte grity and pursuing the best interests of our 2 c ustomers is a c ore component of our busine ss practice s. Honesty and Inte grity Cha pt er E nsuring Qua lity E xceeding Customer E xpectati ons Cha pter 2 prese nts a set of sta nda rds de si gned to he lp us fulfill our 1 responsibilities as a good corporate citi zen. M UFG ’s re puta tion depends upon the trust a nd confidence of our Cha pte r customers and ot he r stakeholders, including local c ommunit ies, a nd w e are responsi ble t o society on a global level. A dherence to L aws and Rule s P revention of Financial Crime Contributing to S oc iety Cha pte r 3 de scribe s the ac tions and mindset that w ill cre ate a stimulating Conduct and supportive working environme nt a s M UF G continues to grow. of Our succe ss depends on building and ma inta ining a dyna mic workplace Code w he re a ll sta ff can re ach their full potential in wa ys that support our c ustomers and make a valuable c ontribution to socie ty a s a whole . Chal lenge Ourselves to Grow Col laborative and Professiona l Working E nvironment Prote cting M UF G’s A sse ts and Prope rty Reporting Problem Situations a nd See ki ng Advice N ote Explanations in ea ch chapter a re desc ribed in 1 4 or Introduction 09
Chapte r 1. Customer Focus Our c ustomers are a t the center of everything we do, a nd should alw ays be the foc us of our thoughts. Our a im should be to win the trust and c onfide nc e of our custome rs at al l time s. M UFG exists today because of the trust a nd confidenc e tha t custome rs have pl aced in us over many years. O ur role is to inc re ase and strengthen t his bedrock of trust a nd confidence . O ur acti vitie s a re not driven by the prospect of short-term gains. Instea d, we look to build ongoing re lationships with our custome rs to support their long-te rm growth. 3
H one sty a nd Integrity Chapter O ur customers are at the ce nt er of e ve rything we do. We ca rry out fair and t ransparent c orporate activities w ith honesty a nd integrit y. We treat customer a sse ts with care and respec t a nd strive alwa ys to ensure that our ac tions do not unjustly da ma ge our c ustomers’ interests. 2 Ac ting w ith H one sty and Integrity Chapter We pla ce our custome rs at the ce nte r of e ve rything we do. Our thoughts are alw ays of how best to help our c ustomers, a nd we work fa irly and honestly to support our c ustomers’ long-term sustained growth. Safeguarding Customer A ssets (Inc luding Information) 1 O ur custome rs entrust us with important assets suc h a s c ash a nd sec urities as we ll as information. The loss, le akage, or misuse of our c ustomers’ informa tion c an not only Chapter c ause serious damage to cust omer intere sts, but can also seriously undermine the trust a nd confidence in M UFG . We treat our customers’ financia l assets with the utmost ca re, and ensure that they are prope rly safegua rded at all times. We also protect the confide ntia lity a nd sec urity of customer informat ion Prote cting Customer Intere sts Properly We act w ith honesty a nd integrit y to ensure that our conduc t does not unjustly dama ge c ustomer inte re st s. Conduct c onducting business w ith customers, of Whe n w e are sensitive to the possibil ity of c onflicts of interest tha t ma y e xist betw een custome rs or betw een a customer and a Code Group entity. We a ct appropria tely at all times, in line w ith t he guidelines on managing conflicts of interest. About Pe rformance O bj ectives Ha ve you ever felt a c onflict of interest be twe en a chieving your targe ts and maintai ning the customer’s trust? As a company, we ha ve a responsibilit y to achieve our objective s. But the se must be ac hie ved by doing the right thing and e arning trust and reputation from our custome rs. If you ever fee l a ny confli ct be twee n a chieving a n objective a nd maintaining the c ustomer’s Introduction trust, alwa ys pri oritize the c ustomer’s trust above everything else. Remind yourself tha t achieving objec tive s is only mea ningful if it is a chieved by follow ing the correc t proc edures. 11
E nsuring Q uality To build lasting rela tionships of trust and c onfidence with our customers, we li ste n c are fully to w hat our customers are telling us, and ma inta in thoroughgoing quality control of all our products and se rvices, from pla nning and development to provision a nd subse quent revisions, with a view to further enhancing qua lity. Best Possible Products and Servic es for Custome rs In order to e arn trust from customers and build lasting positive business re lationships with them, i t is important to ma intain thorough quality control at a ll sta ge s in the development and delivery of our products and servic es. Q uality control me ans de ve loping and providing the best possible products and se rvice s for customers, and ensuring a ccura cy and safety in all our business dealings. T o t his end, it is important to alw ays kee p in mind the follow ing principles: 1 Clearly de fine the customer a nd their nee ds w he n planning a nd developing products. 2 E nsure that the risks assoc iated wi th our products and services are unde rstandable and acc eptable to the customer. 3 E nsure that produc ts a nd services propose d a nd provided to customers matc h their purposes, needs, knowle dge , e xperience , financial ca pa bilities, and other rele va nt c onditions. 4 Give cle ar a nd ac curat e expl anations that al low customers to understa nd the nature a nd risks of our products and se rvices. Be fair-minde d, courte ous, and since re in all dea lings with our custome rs. Unending Work to Improve Qual ity We regularly c onfirm that our products a nd servic es are me eting t he nee ds of our c ustomers, a nd work constantly to review a nd improve the qua lity of a ll our products and servic es. E nsuring Q uality Financial products and se rvices a re not visible or physical. Howe ver, quality control is importa nt, just like with any product, from the view point of suitability for c ustomers’ needs, ease of understa nding, a nd ea se of use . S pe cifically, effec tive ma na ge ment is base d on the li fe cyc le from product planni ng and de ve lopment to sa les and afte r-sales follow-up. If problems ari se , the y w ill a ppe ar in the voic e of the custome r or in the observation of someone else in the company. Be sensitive enough to notic e the m. 12
E xcee ding Customer Expecta tions 3 Cha pte r We a im to meet the diverse ne eds of our c ustomers w orldwide, and to provide services exce eding their expe ctations through the highest standards of professionalism, by leveraging our global netw ork and the c onsolidated stre ngths of the entire Group. Improvi ng Expertise 2 T o provide our c ustomers w ith the best possible products and servic es, e very one of us w orks to improve our professional know ledge and e xpertise. Chapter L everaging the Consolidate d S trengths of MU FG For our customers, M UFG is a single company. A nd we w ill continue to provide 1 se rvices that exce ed custome r expecta tions by bringing our strengths a nd capa biliti es togethe r and acting as an i nte grate d group. Chapter Using Our Global N etwork We use M UFG ’s globa l ne twork to provide outstanding produc ts and services that are truly world c lass. Conduc t of Code What is the Risk-ownershi p of the 1st line of defe nse ? The first-line-of-defense re fers to the Business Unit of business exec ution, suc h as sale s and marketing. T he re a re risks a ssocia ted with sales ac tivities, but some pe ople w ithin the first line of defense may have a false se nse that risk ma na ge me nt should be entruste d to the Risk M anagement O ffice, which is the second-line-of-defense, and tha t the y should concentrate on earning. The prima ry responsibility for managing risk associa ted w ith sa les act ivitie s rests with the first-line -of-defe nse , w hich is responsible for the conse que nc es of Introduction risk events. Risk-ow ne rship me ans bei ng prepa red for the c onsequence s of sa les-rela ted risks. St aff in the first-line should be a ware of risk ownership, identify risks in their day-to-day operations, a nd strive to control them as needed. 13
Chapte r 2. Re sponsibi lity a s a Corporate Citiz en A s we develop our business globally, we c omply with all the domestic and international laws a nd rule s that may apply. We do all we can to ma inta in sta bility and confidence in the globa l financial system, and c ontribute to the sound and he althy grow th of socie ty. A ware of the responsibility e ach of us ha s a s a me mbe r of M UFG , w e carry out fair and transpa re nt c orporate a ctivities with hone st y and integrity, in a ma nner that supports and strengthens t he trust and confi de nc e MU FG has ea rned from society over many ye ars. 14
A dhe renc e to L aw s a nd Rules 3 Chapter In addition to adheri ng stric tly to all domestic and inte rnational law s and rules, w e stri ve to do the right thing ba se d on our st rict c ode of e thic s. V iolations of la ws or rule s damage the vital socia l infra structure of the financia l system and lead to a loss of trust in M UFG . We strictly abide by a ll laws and rules relating to our busine ss, including the follow ing areas: 2 Prohibition of Inside r T rading Cha pte r Inside r trading is illegal in many c ountri es and is stri ctly regulated, re ga rdless of the amount of money involved. We manage mate ria l i nformation rigorously a nd have no involve me nt in ac tivit ies tha t use mat eria l nonpublic information to gain illegal profits. 1 Ba n on Unfa ir Trading P rac tices As a part icipant in a fair, transpare nt, a nd free c ompetitive market, we have no Cha pte r involveme nt w ith unfa ir trading pra ctice s (includi ng cartels, abuse of dominant positi on, and market manipula tion). We abide strictly with all the law s a nd rule s in place to prote ct fa ir trading, includi ng firew all re gula tions and the a rm’s le ngth rule. A ccura te Recording and A ppropriate D isclosure Records of our busine ss ac tivities, inc luding financia l information, are a ccurately re corded and prope rly maintained and mana ge d. To ensure that M UFG i s properly underst ood and e va lua ted in the w ide r society, it is Conduct incumbent on us to ensure that company information is disclosed in a time ly a nd of appropri ate manner, including fina ncial reports. Conce alment or nondisclosure of Code informat ion damages our trust and reputation. We are not involved in any inac cura te or inappropriate discl osure of information, or in a ny atte mpt to concea l information. L essons L earned Reports on corporate sca ndals appea r in the me dia almost on a da ily ba sis. You must never think that these scandals are some thing that doe sn’t concern us. Wha t ha s ha ppened at other c ompanies could ha ppen here too. Sca nda ls have a ffecte d M UFG companie s a s w ell. We must a na lyz e the re asons for these fa ilures, discuss w ays of ensuring they do not ha ppe n aga in, and the n implement these mea sures thoroughly. Be ing humble e nough to Introduction learn from our ow n mista ke s a nd those of ot he rs is a key part of what it ta ke s to build a good, strong compa ny. 15
P revention of Financial Crime We have ze ro tole ra nc e for financial c rime or any attempt to circ umvent the rule s a nd proce dures aimed at preventing financia l crime. We ta ke all re asona ble ste ps possible to prevent our products and service s be ing used by individuals or entities involve d in illegal or improper activitie s such as money launderi ng and terrorist fi na nc ing. Preventing Financia l Crimes and Misuse of Financia l Servic es We remain ale rt to the possibility t ha t the financial services provided by M UFG on a global basis may be misused to fac ilitate financial c rimes as per bel ow , a nd do e ve rything in our pow er to preve nt illic it activities involving our products and servic es. M oney launderi ng / Te rrorist Financing Provision of financia l se rvice s to the government a nd individuals subject to economic sa nctions Pa rtic ipa tion in or promotion of bribery a nd corruption Fa cilitation of tax evasion N o Re lationships with Criminal E lements A ll rela tionships with any c riminal ele me nt s a re strictly forbidden. A nd w e work closely wit h the police, legal c ounsel, and other rele va nt e xt ernal orga niz ations to protec t the sa fety of al l our sta ff. 16
Contri buting t o Socie ty 3 Chapter We respec t the history, culture s, and customs of different countries and regions around the w orld, a nd work to contribute to the de ve lopment of local a nd globa l communities and the prot ection of the environme nt throughout our corpora te act ivitie s and the social volunte er e fforts of our staff. 2 Giving Ba ck to Communities Cha pte r As a good corpora te citize n, M UFG is proa ctively engaged with loc al communitie s a nd contributes to the ir development. As members of regiona l communities and the global community, we volunte er a ctively to ta ke pa rt in activitie s that make a me aningful c ontribution to socie ty. 1 Commitment to the E nvironme nt Chapter We w ork to minimize the e nvironmental impact of our c orporate a ctivities, as we ll a s striving to develop a nd supply produc ts a nd services that contribute to envi ronme nta l conse rvation and prote ction, thus contributi ng to ma king a sust ainable society a re ality. Susta inable Grow th Ha ve you ever he ard of “E SG” or “SD Gs”? Conduc t E SG sta nds for “Environment, Soc ial and Governance ”; thre e essential ele ments for the of long-term grow th of a compa ny. SDG s (“Sustai na ble D evelopment Goals”) are the blueprint for coope ra tive inte rac tions betw een nationa l governme nts and private Code companies to ta ckle social issues, suc h as cl ean energy and economic grow th, to ac hie ve a be tter global future. Our customers and inve stors now have a strong tendency to vie w compa nies from such pe rspecti ve s. With the developme nt of the ‘informat ion society’, including the introduction of soc ial networking servic es, our socie ty has become a plac e where good and bad conduc t can be quic kly and easily re ve aled to the public. Increasingly, a company that engages in proper conduct a s a c orporate citize n ca n w in more trust from customers a nd re ceive positive evaluations from inve stors. However, the reverse is also true. With consideration of the public nature of financ ial servic es and our position in the industry, we must assume tha t Introduction socia l e xpe ctations tow ards M UFG a re very high and it is therefore essential that e ach membe r of staff a nd exec utive e ngage s in proper c onduct with an understanding of those expecta tions. 17
Chapte r 3. A ttitude s and Behaviors in the Workplace W e strive to respond a nd adapt prompt ly to the dive rsifying and e volving nee ds of our c ustomers a nd the ra pidly changing e nvironment in w hich we w ork. T he working environment at M UFG fosters mutual respe ct, enables individuals to ma ke the most of their abilities as profe ssionals, and ma ximiz es the pow er of te amwork ac ross regions a nd different are as of business, encoura ging all staff to embrac e new chall enge s. We w ork alwa ys to protec t a nd maintain the tangible and inta ngible assets a nd property that M UFG ha s a ccumul ated. 18
Chal lenge Ourselves to Grow 3 We strive to enhance our know ledge, expe rtise , a nd pote ntial and ma ximiz e the pow er Chapter of teamw ork. We be lieve that the changing busine ss environment re presents opportunity and a re a lways re ady to embra ce new c ha llenges in new fields. Personal G rowth 2 A s the nee ds and businesses of our customers c ontinue to e volve, it is essential Chapter tha t we too continue to grow professional ly so as to provide the best possible products and se rvice s for custome rs. We ende avor to i mprove our indivi dual skills, abilities, and potential, through our w ork a nd by t aking advantage of training a nd educational opportunitie s both inside and outside of M UFG . We proactive ly support t he e fforts of all M UFG sta ff tow ard personal grow th. 1 Chapter T eamw ork We share informa tion, skills, a nd expert ise within MU FG and continue to be committe d to maximizing the powe r of tea mw ork in pursuit of our busine ss. Openness to New Cha llenge s M onitoring developme nts in soc iety and c ha nge s in the business environment, we embrac e ne w challe nge s in the belief tha t change represents opportunity. We positively support and evaluate e mployees w ho ac tive ly ta ke on challe nges. Conduct of Code T here is no growth without challenges, and no suc cess without growth L earning and expe rie nc e are important aspects of how we grow as pe ople . But some time s challenges are necessa ry too. Particularly w hen ma jor changes are Introduction happening, a ccepting a challe nge w ithout fe ar of failure can lea d to major growt h. T his applies not only to individuals but to e ntire organiza tions. 19
3- Colla borative and Professional Worki ng Environment We re spe ct the human rights and diversity of all MU FG staff. We do not engage in or tolerate any form of discrimina tion or harassment or any other be ha vior tha t infringes these belie fs. Respect for Human Rights and D iversity As a global group, our w orkforce is highly dive rse in terms of race , skin color, nationa l origin, birth plac e, be lief, religion, gender, sexual orie nta tion, gender identity, age, and physical or mental disability. D ive rsity is one of M UFG ’s strengths. We do not tolera te discrimination or infringe me nt of the rights of a ny indi vidual, and respec t a diversity of va lues. O pen Communic ation We strive t o crea te an open and vibrant workplac e in w hi ch sta ff de al with one a nother with sincerity a nd hone st y, re gardless of position, helping and re spe cting e ach othe r. Prohibition of H arassment Ha ra ssment unde rmines the di gnity of the re cipient and se riousl y damages the smooth running of the organiz ation. We do not commit or tolera te any se xua l harassment, pow er harassment, or other threa tening or hostile behavior, including hara ssme nt from externa l sourc es. We do not tole ra te any harassment or bull ying within the company. Respect ea ch other Harassment, suc h as sexual harassment a nd power ha ra ssment, is an act that seriously harms people and w ill not be tolerated by M UF G, regardless of whether it is regulated by la w or not. In orde r for all exec utive s a nd employe es to respect e ach ot he r, it is importa nt to think a bout dive rsity and inclusiveness. 20
3-3 Protecting MU FG’s Assets and Property 3 Chapter We protect the ta ngible and intangi ble a ssets and property of MU FG and individual Group entities, and do not tolerate a ny behavior that might dama ge the se assets. We support the prope r protec tion and management of corpora te assets, and do not tolerate a ny personal misuse of these asset s. 2 Cha pter 1 Chapter Conduc t of Code Introduction 21
Re porting Proble m Si tua tions and Seeking Advi ce If you become aw are of conduct that c ontravenes the law, company regulations, or the provisions of this Code of Conduct, or any other proble m situat ions, you should promptly re port the ma tter a nd see k advice from a supe rvisor or issue a re port via MU FG’s w histleblow ing systems. If you suspect there is any proble m w ithin the company, you should promptly report the matte r to an a ppropriate person, for example a supe rvisor or senior manager, or you should use the various w histle blow ing arra ngeme nts in pla ce a cross the Group or othe r means availa ble loc ally. Whe the r the whistleblowi ng arrangements are used or not, the pe rson who rece ive s the report or information a bout any proble m w ill tre at it in the strictest confide nc e and M UF G is committe d to ensuring tha t reporting staff do not suffe r re taliat ion or other negative c onsequence s. T he MU FG Group Complia nc e He lpline N ishimura & A sahi (At tention: M UFG G roup Compliance H elpline) (Address) O temon T ower, 1-1-2 Otemac hi, Chiyoda -ku, T okyo 100-8124, Japan (E-ma il) mufgwhistleblow@jurists.co.jp (Web Addre ss) ht tp://w ww .jurists.co.j p/e n/ Ple ase note that the MU FG G roup Complia nce He lpl ine ma y not be a vailable in some c ountries or re gions due, for example, to data protection law. See your loca l Whistle blow ing Policy for de tails of the esca lation route s available to you. M UFG Audit Committee (Addre ss) 2-7-1, M arunouchi, Chiyoda-ku, Tokyo 100-8388, Ja pa n (E-mail) mufg-group-he lpline_kansaiinkai_PF@mufg.jp M UF G Audit Committee conta cts you through an external law offic e. Contac t i nformation for e ach region Asia Ple ase use the MU FG G roup Complia nce He lpl ine a bove, or your local helpline as set out in the local Whistleblowing Policy. Ame rica s w ww .MU FGAme rica sIntegri tyL ine.com EM EA F or MU FG Bank branches, subsidiaries and representative office s se e the EM EA homepage on FID ES a nd follow the Whistleblowing link: https://intranet .sps.emeares.local/ emea/Pa ge s/de fa ult.a spx For M US(EM EA ), M US(EU ) and the ir bra nc he s se e the EM EA homepage on CONN ECT and follow the Whi stle blow ing H otline link: http:/ /home.intra ne t.mfil.local/Pa ges/defa ult.a spx For M UT B a nd its subsidiaries, please report in acc ordance wit h your compa nie s’ whistle blowi ng syste m 22
S pe ak Up 3 If you ha ve conc erns or questions a bout conduct that you think might contravene the la w, Cha pt er company regulations, or this 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 within eac h M UFG compa ny. Ne ve r worry that you might be making a fuss a bout some thing minor. T rust your se nse t ha t something is w rong. T he re w ill ne ver be any re pe rcussions for re porting a matte r through the w histle bl ow ing 2 syste m. M anagement will be responsible for carrying out full and prope r investigation into the matter you ha ve brought to our a ttention. T he MU FG Group Complia nc e Hel pline has receive d ac creditation from the Japanese Chapter Consume r A ffairs A ge nc y that it mee ts the review c rite ria for ce rtification of the whistleblowing syste m. We have rece ive d public approval that our whistleblowing system appropria tely protects reporting personnel. 1 Chapter Conduc t of Code Introduction 23
M itsubishi U FJ F ina nc ial Group, Inc. Complia nce Division, Corporate Pla nning D ivision April.2020 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, Hironori Kamezawa, 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, 2020
/s/ Hironori Kamezawa
Name: Hironori Kamezawa
Title: President & Group Chief Executive Officer
CERTIFICATION
I, Tetsuya Yonehana, 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, 2020
/s/ Tetsuya Yonehana
Name: Tetsuya Yonehana
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, 2020 as filed with the US Securities and Exchange Commission
on the date hereof (the “Report”), I, Hironori Kamezawa, 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, 2020
/s/ Hironori Kamezawa
Name: Hironori Kamezawa
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, 2020 as filed with the US Securities and Exchange Commission
on the date hereof (the “Report”), I, Tetsuya Yonehana, 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, 2020
/s/ Tetsuya Yonehana
Name: Tetsuya Yonehana
Title: Group Chief Financial Officer
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-230590 on Form S-8 and
Registration Statement No. 333-229697 on Form F-3 of our reports dated July 10, 2020, relating to the financial
statements of Mitsubishi UFJ Financial Group, Inc. (“MUFG”) and the effectiveness of the MUFG’s internal
control over financial reporting appearing in the Annual Report on Form 20-F of MUFG for the year ended
March 31, 2020.
Exhibit 15(a)
/s/Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 10, 2020
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-230590 on Form S-8 and in
Registration Statement No. 333-229697 on Form F-3 of Mitsubishi UFJ Financial Group, Inc. of our reports
dated February 27, 2020, 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, 2019.
Exhibit 15(b)
/s/ Deloitte & Touche LLP
New York, New York
July 10, 2020
CAPITALIZATION AND INDEBTEDNESS
The following table presents our capitalization and indebtedness at March 31, 2020:
Total short-term borrowings(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit 99(a)
At March 31,
2020
(in millions)
¥55,968,940
Long-term debt:
Obligations under finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under loan securitization transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,186
22,368,276
4,751,567
797,592
(15,858)
Total long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,926,763
Shareholders’ equity:
Capital stock, with no stated value (common stock authorized: 33,000,000,000 shares;
common stock issued: 13,581,995,120 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings:
Appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost: 741,772,308 common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,090,270
5,533,520
239,571
8,079,530
(420,417)
(505,987)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,016,487
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
728,029
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,744,516
Total capitalization and indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥43,671,279
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, 2020 and net income before attribution of noncontrolling interests for the fiscal year ended March 31,
2020.
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, 2020
(in millions)
¥15,744,516
62,255
(16,108)
232,472
355,834
(13,310)
285,810
44,632
(6,476)
166,290
196,819
(8,881)
656,793
(644,441)
(200,467)
Net assets in accordance with Japanese GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥16,855,738
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, 2020
(in millions)
¥ 318,715
297,842
(1,848)
79,850
(2,242)
35,077
(175,201)
2,333
(1,571)
113,623
(15,827)
499
(37,634)
99,845
(104,917)
Net income before attribution of noncontrolling interests in accordance with Japanese
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 608,544
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 the identical or a 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.
‰ 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,282,862
(2,612,990)
(1,241,850)
2,093,758
588,107
(339,463)
(in millions)
¥ 89,091
908,789
8,818
(27,879)
(427,195)
(155,758)
¥ 1,371,953
(1,704,201)
(1,233,032)
2,065,879
160,912
(495,221)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (229,576)
¥ 395,866
¥
166,290
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
Total
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(41,764)
(49,754)
87,411
37,058
10,461
19,380
(in millions)
¥
(6,071)
176,500
655
(150)
13,139
(133,242)
¥ (47,835)
126,746
88,066
36,908
23,600
(113,862)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 62,792
¥ 50,831
¥ 113,623
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.